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A-LEVEL Business Paper 2 > 3.1.4 Impact of External Influences > Flashcards

3.1.4 Impact of External Influences Flashcards

1
Q

What is a PESTLE Analysis?

A
  • Examines the external factors that are likely to impact the activites & outcomes of a business
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1
Q

What does the PESTLE acronym stand for?

A
  • Political
  • Economic
  • Social
  • Technological
  • Legal
  • Environmental
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2
Q

What is the Political factor within PESTLE?

A
  • The extent to which local & national government is expected to influence the business including:
  • Governement stability & relationships w key trading partners
  • Tax regulations
  • Trade restrictions
  • Investment in public services

e.g. The UK’s decision to leave the EU in 2016 has led to the reintroduction of trading restrictions for businesses importing goods from suppliers in Europe

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3
Q

What is the Economic factor within PESTLE?

A
  • Extent to which economic indicators are expected to directly impact business performance including:
  • Inflation, Exchange rates, cost of living,unemployment levels,stage of business cycle & GDP growth
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4
Q

What are the Social factors within PESLTE?

A
  • Extent to which personal attitudes & values, culture & demographic change are expected to affect the business including:
  • Social Mobility, Education,Ethics & Religion, Migration, Health profile,Population growth & demographic structure
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5
Q

What are the technological factors within PESTLE?

A
  • Extent to which technological change & innovation are expected to impact business including:
  • Research & development,Production & distribution, processes & efficiency, quality & new materials,technology used in communicatio, online prescence
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6
Q

What are the Legal factors within PESTLE?

A
  • Extent to which changes in Law & regulations are expected to impact business including:
  • Taxation,employment, advertising, health & safety,

e.g. Changes to the level of tax levied on high sugar products (sodas) in the UK increased selling prices and prompted some businesses to redevelop their product to reduce the sugar content

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7
Q

What are the environmental factors of PESTLE?

A
  • Extent to which changes in attitudes & government policy towards environemental protections as well as impact of global warming expected to impact business including:
  • Changing in infranstructure, e.g. in favour of green transport networks, Energy avaliability & cost, disposal of materials, changes in climate & weather patterns, air quality
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8
Q

When using PESTLE analysis what must you focus on?

A
  • Must focus on each factors impact on business activity rather than its origin
  • The cause is not so important but impact of factor is what needs to be considered.
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9
Q

What reasons/ factors are there for the change in market structure?

A
  • Businesses leave & enter the market integration
  • Changes in the regulatory frame work
  • Globalisation
  • Changes in consumer tastes & preferences
  • Growth of the internet
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10
Q

Why may businesses entering & leaving the market cause change in market structure?

A
  • Can make market more competitive
  • Mergers & takeovers can occur
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11
Q

Why may the change in legislation/laws change the market structure?

A
  • Change may lead to fewer barriers to entry for new businesses
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12
Q

How may the growth of the internet cause changes to the business market?

A
  • Increased the number of competitors businesses face in the majority of markets
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13
Q

How may the change in consumer tastes & preferences changing lead to a change in market structure?

A
  • Tastes & preferences are changing more rapidly leading to short product lifecycles & a requirement for businesses to innovate to compete
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14
Q

How may globalisation cause changes in market structure?

A
  • Increases competition from rivals around the world
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15
Q

What do Porters 5 forces identify?

A
  • Identifies the key pressures on an industry that impact the ability of a business to compete with rivals
16
Q

What are Porters 5 forces?

A
  • Industry Rivalry
  • Threat of new entry
  • Threat of substituation
  • Buyer Power
  • Supplier Power
17
Q

What did Porter argue will happen to a business if they follow his 5 forces?

A
  • They will be able to achieve & sustain a competitive advantage

This will then increase their chance of success

18
Q

What is industry rivalry?

A
  • When there are many competitors selling similar products, the business will have little power
  • Customers will have more choice to shop around
  • Many rivals are trying to gain a more signficant share of the market
  • When a business offers products in an industry with little or no competition it has more power, can use premium pricing & dominate market
19
Q

What is threat of new entry?

A
  • If new competitors can enter an industry quickly & without investing a lot of money, then barriers to entry is low & threat of new entrants is high
  • Market is likely to contain a large number of rival businesses
  • Where barriers to entry are too high for a business to gain a foothold & compete in market threat of nw entrants is low
20
Q

What is Buyer Power?

A
  • When a business sells to a small number of customers, those customers have significant power to negotiate lower prices
  • Business may have to price & sell products according to customer demand
  • Where a business has high number of customers those customers have less power
  • Likely to be able to charge a high price for a product that is relatively inexpensive to produce
21
Q

What is Supplier Power?

A
  • Where a business has a lot of choices over the suppliers from which it buys components
  • S’s likely to be able to shop around for a lower price
  • Where a supplier has significant power over a business as a result of offering a specialised component or where there is a small number of suppliers in the market
  • Business has little choice over the source of its suppliers
  • Likely to have to pay high prices for its components & accept suppliers terms and conditions
22
Q

What is threat of substitution?

A
  • Where customers can easily swap a businesses product for those of a rival the business has little power.
  • The business is likely to have to compete on price or invest heavily on developing a USP.
  • Where substituation is unlikely a business has significant market power.
  • It is likely to be able to charge a high price for its products & may be less inclined to innovate.

A-LEVEL Business Paper 2 (22 decks)

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