3.1.4 - Impact of external influences Flashcards
What is an external influence
- An external influence is any factor outside of the business that has an impact on normal trading
What is 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
- This aids strategic and tactical decision making, objective setting and helps a business to reach its goals.
- Political, Economic, Social, Technological, legal and environmental
What is political in PESTLE Analysis
- A business may be affected by politics in the UK or even politics across the world, here are a few of the largest impacts;
- A change in government, BBC article here
- Government laws; minimum wage
- Brexit and new trading blocs post-Brexit
- Tax rates (e.g. increase in VAT here)
- Tariffs (when importing into the UK)
What is economic in PESTLE Analysis
*A business should analyse how they may be affected by
* An increase in interest rates here
* An increase in inflation
*Unemployment rates video here
* Recession
* The business cycle
What is Social in PESTLE Analysis
*A business should analyse how they may be affected by changes in social factors
*A change in demographics and its impact on
products produced and markets, here
*Culture mix changes in the UK, here
*Social trends e.g. Vaping here
What is Technological in PESTLE Analysis
- A business could examine the impact of new technologies on their operations, for example;
- Automation, new robotics and how it can improve productivity
- Innovations in the industry
- Research and development in the industry
- New computer systems
- Trading online
What is Legal l in PESTLE Analysis
*A business should assess how they may be impacted by changes in legislation for example;
*Health and safety at work act in terms of PPE and regulations, Guardian article here
*Data protection Act, article here
* Sale of Goods Act
* Sex Discrimination Act
What is Environmental in PESTLE Analysis
*A business could analyse their environmental challenges that may face the business;
*Climate change, caused by farming, see article here
*Weather (e.g. in farming and tourism)
*Sustainable production and CSR
*Disappearance of wildlife, article here
What are Porters 5 Forces
*In 1985 Porter argued that there were 5 forces (or factors) which determine the profitability of an industry.
1. Bargaining power of suppliers
2. Bargaining power of customers
3. Threat of new entrants
4. Threat of substitutes
5. Rivalry among existing businesses
What is Bargaining power of suppliers and customers
- Bargaining power of suppliers;
- Limit power of suppliers by looking for new suppliers
- Backward vertical integration and merge or takeover the supplier
- Bargaining power of customers;
- Make it too expensive for a
customer to switch - Forward vertically integrate
What is Threat of new entrants and substitutes
- Threat of new entrants;
- Create barriers to entry to prevent new entrants
- Heavily advertise to build strong brands
- Threat of substitutes;
- Continuously invest in R&D and develop patents
- Buy up patents of rivals and shelve to prevent product production
What is Rivalry amongst existing firms in the industry
In a very competitive market place there may be a great deal of rivalry, example might be UK supermarkets, retail clothing companies.
The intensity of this rivalry will have an impact on the business that is trying to trade, it may mean:
- 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
