3.1.4 Impact of external influences Flashcards
What is a external influence?
External influences are factors outside a business that can affect its operation by influencing its activities and choices and determine its opportunities and risks.
What does PESTLE stand for?
Political Economic Social Technological Legal Environmental
What are some Political factors?
- Goverment policy
- Tax policy
- Trade restrictions
- Enviromental laws
What are some Economic factors?
- Econmic factors
- Intrest rates
- Exchange rates
- Inflation
- Disploable income of consumers
- Employment levels
What are some Social factors?
- Population growth
- Age distribution
- Change in trends and fashions
- Ethical concerns
- Enviromental concerns
What are some technological factors?
- New ways off producing goods and services
- New ways of distrusting goods
- New ways of communicating with target markets
- Development in computers and the internet
- Machines becoming to replace machines
What are some Legal factors?
- Health and safety
- Equal opportunities
- Advertising standards
- Consumer rights and laws
- Tax laws, VAT rules
What are some Environmental factors?
- Fair trade
2. Slavery acts
What are Porters five forces?
- Threat of new entrants to a market
- Bargaining power of suppliers
- Bargaining power of customers (“buyers”)
- Threat of substitute products
- Degree of competitive rivalry
What are some barriers to entry?
- Investment costs
- Economies of scale available for existing firms
- Product differentiation
- Access to suppliers
What is the bargaining power of suppliers?
If a firm’s suppliers have bargaining power they will:
- Exercise that power
- Sell their products at a higher price
- Squeeze industry profits
What is the Bargaining power of customers?
Powerful customers can exert pressure to drive down prices, or increase the required quality for the same price, and therefore reduce profits in an industry.
What is the Threat of substitutes?
A substitute product can be regarded as something that meets the same need
If there are many credible substitutes to a firm’s product, they will limit the price that can be charged and will reduce industry profits.
What is the rivalry between firms?
If there is intense rivalry in an industry, it will encourage businesses to engage in:
- Price wars (competitive price reductions),
- Investment in innovation & new products
- Intensive promotion (sales promotion and higher spending on advertising)
- All these activities are likely to increase costs and lower profits.
Factors that determine the bargaining power of customers
- Number of customers
- Their size of orders
- The cost of switching
- Number of firms supplying the product
