3.1.4 Impact Of External Influences

Question 1

Define external influence

Answer 1

Any factor outside of the business that impacts on normal trading

Question 2

What factors can be used to assess the impacts of external influences?

Answer 2

- PESTLE
- Poter’s 5 forces
- The changing competitive environment

Question 3

What does PESTLE stand for?

Answer 3

Political
Economic
Social
Technological
Legal
Environmental

Question 4

How can political factors affect businesses?

Answer 4

The government could introduce taxes on unhealthy products (cigarettes, alcohol) to try and improve the health of the nation, however this may reduce profits for businesses.

Question 5

Examples of economic influences

Answer 5

- changes in consumer spending
- interest rates
- exchange rates
- economic growth

Question 6

How can social factors affect businesses?

Answer 6

Social trends and population changes cause changes in demand

Question 7

How can technological factors affect businesses?

Answer 7

Technological changes can influence business decision making, as new technology is expensive and firms need to decide whether to invest in it.

Question 8

How can legal factors affect businesses?

Answer 8

Changes in the law impact business activities, for example environmental laws on pollution

Question 9

How do environmental factors affect businesses?

Answer 9

Businesses will make changes to reduce their environmental impacts to ensure they don’t lose customers

Question 10

What are Porter’s 5 forces?

Answer 10

1. Bargaining power of suppliers
2. Bargaining power of customers
3. Threat of new entrants
4. Threat of substitutes
5. Rivalry among existing businesses