Businesses and the external environment Flashcards
How might political factors affect demand for a business?
- If demand is low in an economy government will use policies to increase spendding
- If demand is too high goverment will use policies to reduce spending
- Government can influence the demand for certain products through policies
How might Labour supply affect costs for a business?
- High unemployment results in low wages and higher productivity to keep jobs
- Low unemployment - Shortage of labour
- Training labour that is available is a cost
How might Incomes and economic factors affect demand for a business?
- Recession business needs to cut costs and make redundancies wages may be cut causing lower incomes causing lower demand
- Economic boom increases wages causes an increase in production costs but higher incomes will cause a higher demand for products
- depends on income elasticity of demand
How might seasonal demand and supply affect a business? (seasonality)
- The weather and holidays change the demand for certain products
- Affects the supply and costs of food that grows in certain weather
- Strategies to deal with it, cutting prices to boost demand after holidays or weather
- Preserving food can help meet demand
How can competition affect demand?
- When a new competitor enters the market it will reduce demand for the business
- The business might react by increasing marketing costs, improving or diversifying products or cutting costs.
What are the different types of competition in a market?
- Perfect competition - firms compete on an equal basis
- firms have similar products, prices. they keep prices low and quality high for demand
- Oligopoly
- Monopoly
What type of competition is perfect competition?
- firms compete on an equal basis firms have similar products, prices. they keep prices low and quality high for demand
What type of competition is in an oligopoly?
- A small number of large firms dominating
- Prices will be simliar
- Focus on marketing and brand image increasing cost of marketing
What type of competition is a monopoly
- One business has comlete controll
- The firm has very inelastic price elasticity of demand
- Keep marketing costs down
How do intrest rates effect demand?
- High intrest rates will decrease consumer spending as the cost of borrwoing will increase and there is a greter reward for saving
How might differtn types of proudts be affected by a chnage in the intrest rate?
- demand for products that require lots of borrowing are more sensativ eto intrest rates
- Firms diversify away from these producst to cheaper ones as a result
What sort of business have increased in demand from deomgraphich chnage in the UK?
- Retriment accounts, medical - cuse of an aging population
- Children services - as more working parents
- Exotic ingediants becuse of a growing ethnic diversity becuse of imigrtaion.
What cosnumer tatses have chnaged over time?
Increase in demand for male cosmetics
thefore companies have bgun to make a new product ranges of cosmetic lines targeted at men
How can chnages in the demographic of labour affect production costs?
Aging population will result in a decrease in supply of labour causing business to increase wages
Increase in immigration will cause an increase in the supply of labour which can casue wages to decrease
How has consumeres becoming concerned about the envirment affected bsuineses?
- Goverment legislation
- Pollution permits
- Measure pollution
- failure = large fines
- Increased costs as a result of sustainable practices such as packaging, recycling, renewable enrgy to minimise envriometnal imapct to improve brand image
- Business can save money through carbon trust to increase competativness through being eco friendly.
