3.1.4 Impact of external influences Flashcards
What is an external influence?
Any factor outside of the business that has an impact on trading.
What is a PESTLE analysis?
This is a business analysis tool that aims to look at external factors and how they may have an impact on the business. (Political, Economical, Social, Technological, Legal and Environmental)
How may politics affect a business?
-Change in government
-Brexit + new trading blocs
-Tax rates
-Tariffs
-Government laws
How does economics affect a business?
-An ^ in interest rates
-An ^ in inflation
-Unemployment rates
-Recession
-The business cycle
How may social factors affect a business?
-A change in demographics and it’s impact on products produced + markets.
-Culture mix changes
-Social trends
How may technological factors affect a business?
-New robotics may ^ productivity
-Innovations in the industry
-R+D in the industry
-New computer systems
-Trading online
How would legal factors affect a business?
-Health + safety at work
-Data protection Act
-Sale of Goods Act
-Sex Discrimination Act
How our environmental factors affect a business?
-Climate change
-Sustainable product + CSR
-Disappearance of wild life
What are the 5 forces that Porter defines as determining the profitability of a business?
1.) Bargaining power of suppliers
2.) Bargaining power of customers
3.) Threat of new entrants
4.) Threat of substitutes
5.) Rivalry among existing businesses
How can a business reduce the bargaining power of suppliers?
By looking for new suppliers.
How can a business reduce the bargaining power of customers?
By making it too expensive for a customer to switch.
How can a business reduce threats of new entrants?
-Create barriers to entry to prevent new entrants.
How can a business reduce the threat of substitutes?
Continuously invest in R+D and develop patents.
How may rivalry affect a business?
-Larger businesses trying to buy up rivals through horizontal integration.
-Businesses continuously introducing new products to the market.
-Businesses in the market having to heavily advertise to maintain market share.
