3.1.4 impact of external influences Flashcards
what is pestle?
it examines the external factors that are likely to impact the activities and outcomes of a business
what does PESTLE stand for?
Political
Economic
Social
Technological
Legal
Environmental
political examples
tax, trade restrictions, government relationships with other countries etc
economic examples
inflation, exchange rates, unemployment levels, economic climate
social examples
social mobility, education, ethics & religion, population growth, consumer tastes changing
technological examples
research and development, production strategies, e-commerce etc
legal examples
tax, employment, wages, health & safety
environmental examples
changes in infrastructure, changes in climate and weather patterns
what is porter’s 5 forces?
identifies the key pressures on an industry that impact the ability of a business to compete with its rivals
what is included in porter’s 5 forces?
- threat of new entry
- buyer power
- supplier power
- threat of substitution
- industry rivalry
what is industry rivalry?
if there are many competitors selling similar products, the business will have little power, if there is little/no competition, they have more power. (premium prices can be charges as costs can be higher)
what is threat of new entry?
if barriers to entry are low, threat of new entrants is high
(vise versa) - this determines how much power each competitor has
what is buyer power?
when a business sells to a small number of customers, customers have more power, however if customer base is large, businesses have more power.
what is supplier power?
when a business has a lot of choices over the suppliers from which it buys components, they have a lot of bargaining power (vise versa)
what is threat of substitution?
when customers can easily swap businesses for a rivals product, business’ has little power (vise versa)
