3.1.4 Impact of External Influences

Question 1

PESTLE Analysis

Answer 1

Analysing the external influences that impact businesses.

Question 2

What does PESTLE stand for?

Answer 2

Political
Economic
Social
Technological
Legal
Environmental

Question 3

Political

Answer 3

• Tax policy
• Trade policies
• BREXIT
• Political stability
• Government policy

Question 4

Economic

Answer 4

• Inflation rate
• Exchange rate
• Economic growth
• Interest rates
• Disposable income
• Unemployment rate

Question 5

Social

Answer 5

• Lifestyle attitudes
• Cultural barriers
• Demographic change
• Health consciousness

Question 6

Technological

Answer 6

• Automation
• New production processes
• Research & Development
• Level of innovation
• Online presence
• Technological change

Question 7

Legal

Answer 7

• Employment laws
• Discrimination laws
• Health and safety
• Copyright protection
• Consumer safety

Question 8

Environmental

Answer 8

• Changes in climate and weather
• Climate change
• Environmental policies
• Recycling
• Pollution
• Sustainability

Question 9

Why is the competitive environment changing?

Answer 9

1) New entrants
2) Legislation
3) Consumer tastes and preferences
4) Growth of the internet
5) Globalisation

Question 10

Porter’s Five Forces

Answer 10

The factors within a market that impact the ability of a business to compete with rivals.

1) Rivalry within the market
2) Barriers to entry
3) Buyer power
4) Supplier power
5) Threat of substitution

Question 11

Rivalry within the market

Answer 11

The level of competition between businesses within the market.

Question 12

Barriers to entry

Answer 12

How easy it is for new firms to enter the market.

Barriers of entry exist when:
- Customers are brand loyal to existing businesses.
- Levels of specialist knowledge and expertise in industry are high.

Businesses can:
- Innovate.
- Growth - economies of scale to keep prices low.

Question 13

Buyer power

Answer 13

The power buyers have to negotiate prices.

Buyer power is high if:
- Little difference between products offered by competitors.
- Customers buy in large quanitities on a regular basis.
- Small number of customers.

Question 14

Supplier power

Answer 14

The power suppliers have to negotiate prices.

Supplier power is high if:
- Few suppliers.
- Product is essential for production.
- Specialised component.

Question 15

Threat of substitution

Answer 15

Threat of substitution is high if:
- Alternative products exist.
- Alternative prices fall.
- Customers can easily switch.

Business may have to lower prices or develop a USP.