Component 3 - PEST factors Flashcards

1
Q

Political - Explain : Political factors affect on business activity, including;

1) 3 types of Government Policy/Regulation
3) 3 types of Trade Policy
4 ) 2 types of Government Spending

A

1 - Government Policy/Regulation -
1 ) Impose taxes - Changes Cost of production
2 ) Environmental regulations - affect Market access
3 ) Labour laws - Change Employment practice

3 - Trade policies - Trade policies such as:
- Tariffs
- Import and Export quotas
- Trade agreements

4 - Government Spending - Government Contracts or Subsidies

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2
Q

Political - Explain : The 4 ways the government provides a good framework in which businesses can operate

A

The government plays an important role in providing a stable framework in which businesses operate, Including.

1) Creating laws and regulations

2) Providing infrastructure

3) Supporting economic growth

4) Taxation

By providing a stable framework for businesses to operate within, the government helps to create an environment in which businesses can thrive and contribute to economic growth.

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3
Q

Political - Explain : How Laws and Regulation provides a good Business framework.

A

Laws and Regulations - Rules that businesses must comply with, such as laws on;

1) Health and Safety
2 ) Employment practices
3 ) Environmental regulations

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4
Q

Political - Explain : How Providing Infrastructure provides a good Business framework.

A

Infrastructure, such as;

1) Roads
2) Railways
3) Communication networks

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5
Q

Political - Explain : Types of Tax

A

Income Tax
Corporation Tax
Value Added Tax

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6
Q

Political - Explain : How businesses are affected by taxation and subsidies

A

Taxation - The government can generate revenue and Influence economic behaviour.

  • Higher taxes decrease profits and limit
    investment,
  • Lower taxes provides Firms with more
    capital to invest in growth and expansion.

Subsidies - Financial grants provided to firms by the government, They can help businesses to reduce costs and make them more competitive, but they can also create distortions in the market.

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7
Q

Political - Explain : How fiscal and monetary policies affect businesses

A

.

Fiscal policies can affect businesses in several ways:

1) Taxation

2) Government spending

3) Inflation - If the government spends too much money, it can lead to inflation.

==========================================

Monetary Policy

1) Interest rates

2) Exchange rates

3) Credit availability

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8
Q

Political - Explain : Why governments legislate and regulate business activity

A

Legislation and regulation can take many forms, such as health and safety regulations, environmental regulations, consumer protection laws, employment regulations, and tax laws. By regulating businesses, the government can protect citizens from harm and ensure that businesses operate in a way that is beneficial to society as a whole.

In addition, governments may also legislate and regulate businesses to promote certain policies or values. For example, a government may pass laws and regulations to promote sustainable development, reduce inequality, or encourage innovation. By doing so, governments can help create an environment in which businesses can thrive and contribute to society in a positive way.

Overall, the government’s role in legislating and regulating business activity is to balance the interests of businesses and the wider society, and to promote economic growth and development in a responsible and sustainable way.

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9
Q

Political - Explain : The importance of the government as a purchaser of goods and services from the private sector

A

The government is a major purchaser of goods and services from the private sector, and this can have a significant impact on businesses. The government’s purchasing power can create opportunities for businesses to sell to the government, which can lead to increased revenue and profitability. Additionally, government contracts can provide a source of stable, long-term business relationships.

However, the government as a purchaser can also have significant implications for businesses in terms of competition and regulation. In many cases, the government sets stringent standards for products and services, which can be costly for businesses to meet. Furthermore, the government’s purchasing decisions can have an impact on the broader market, as businesses compete for government contracts and seek to comply with government regulations.

Overall, the government’s role as a purchaser of goods and services from the private sector can have both positive and negative effects on businesses, and it is important for businesses to be aware of the potential impacts and to adapt their strategies accordingly

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10
Q

Political - Evaluate : The relationship between government and businesses

A

The relationship between government and businesses is complex and multifaceted, and can have a significant impact on the success or failure of businesses.

On one hand, governments can create a stable framework in which businesses can operate by providing infrastructure, protecting property rights, and enforcing contracts. This can create a favorable environment for businesses to grow and thrive, and can help to attract investment from both domestic and foreign sources.

However, governments can also regulate and legislate business activity, which can create additional costs and administrative burdens for businesses. This can make it more difficult for businesses to compete and can limit their ability to innovate and grow. In addition, governments can also use their power as a purchaser of goods and services to influence the behavior of businesses, which can create both opportunities and challenges for businesses.

Overall, the relationship between government and businesses is an important one, and both parties need to work together to ensure that the economy is healthy and that businesses can succeed. This requires ongoing communication and collaboration, and a willingness to find common ground and work towards shared goals. It also requires a recognition that the needs and priorities of businesses and governments may sometimes conflict, and that there may be trade-offs that need to be made in order to create a sustainable and prosperous economy.

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11
Q

Economic - Explain : How economic factors affect business activity

A

Economic factors are those aspects of the broader economy that impact business activity. These factors include a range of issues such as interest rates, inflation, economic growth, exchange rates, and government policies. Economic factors can have a significant impact on the success of a business, influencing everything from sales and marketing to operations and finances.

For example, changes in interest rates can impact the cost of borrowing for businesses, making it more or less expensive to finance operations or investments. Inflation can also have an impact on businesses, with rising prices affecting both the cost of production and consumer purchasing power. Economic growth and consumer confidence can also affect business activity, with strong economic conditions generally leading to increased demand for goods and services.

Exchange rates can also play a role, particularly for businesses that operate in multiple countries or engage in international trade. Changes in the value of a country’s currency can impact the cost of importing or exporting goods, influencing everything from pricing to profits.

Overall, businesses must be aware of the economic factors that may impact their operations and plan accordingly. This may involve developing strategies to mitigate risks associated with economic volatility, identifying opportunities for growth in strong economic conditions, and adjusting operations or investments in response to changes in economic conditions.

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12
Q

Economic - Explain : What is meant by economic growth, the business cycle and their measurement (GDP)

A

Economic growth refers to the increase in the production of goods and services in an economy over a period of time. It is an important measure of the overall health of an economy, as it indicates an increase in the standard of living and the availability of goods and services.

The business cycle refers to the cyclical pattern of economic activity, including periods of expansion, contraction, and recovery. It is characterized by changes in output, employment, and other economic indicators.

Gross Domestic Product (GDP) is a widely used measure of economic activity that represents the total value of goods and services produced in an economy over a specific time period. It is typically used as an indicator of economic growth and is calculated by adding up the value of all final goods and services produced in an economy. GDP can be measured in different ways, such as nominal GDP (which measures the value of goods and services at current prices) and real GDP (which adjusts for changes in the price level over time).

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13
Q

Economic - Explain : What is meant by inflation including its measurement
and causes

A

Inflation refers to the persistent increase in the general price level of goods and services over a period of time. It is typically measured using an inflation index, such as the Consumer Price Index (CPI) or the Retail Price Index (RPI), which tracks the prices of a representative basket of goods and services.

Inflation can be caused by a variety of factors, including:

Demand-pull inflation: This occurs when there is excess demand for goods and services relative to their supply, leading to an increase in prices.

Cost-push inflation: This occurs when the cost of production increases, leading to an increase in prices. For example, an increase in the price of raw materials or labour can lead to cost-push inflation.

Structural inflation: This occurs when there are long-term structural imbalances in the economy, such as supply shortages or bottlenecks, leading to persistent inflation.

Imported inflation: This occurs when inflation in other countries leads to an increase in the price of imported goods.

Inflation can have a significant impact on businesses, as it affects their costs, revenues, and profitability. When prices are rising, businesses may need to pay more for raw materials, labour, and other inputs, leading to higher production costs. This can reduce their profit margins and make them less competitive. In addition, inflation can erode the value of money, making it more difficult for businesses to plan for the future and invest in long-term projects. As a result, businesses need to monitor inflation closely and take steps to mitigate its impact on their operations.

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14
Q

Economic - Explain : What is meant by interest rates

A

Interest rates refer to the cost of borrowing money, and the return on lending money, usually expressed as a percentage. In the context of the economy, interest rates are set by the central bank of a country, and play a significant role in influencing economic activity, particularly investment and consumption.

When the central bank lowers interest rates, it makes borrowing cheaper, which encourages investment and consumption, leading to economic growth. Lower interest rates can also lead to increased inflation, as more people are able to borrow and spend. On the other hand, when the central bank raises interest rates, it makes borrowing more expensive, which can lead to lower investment and consumption, and slower economic growth. However, higher interest rates can also help to control inflation, as it reduces borrowing and spending.

Interest rates can also impact the financial performance of businesses, as changes in interest rates can affect the cost of borrowing for businesses, impacting their profitability and investment decisions.

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15
Q

Economic - Explain : What is meant by exchange rates

A

Economic - Explain : What is meant by exchange rates

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16
Q

Economic - Explain : What is meant by unemployment

A

Exchange rate is the value of one country’s currency in relation to another country’s currency. It is the rate at which one currency can be exchanged for another. Exchange rates play an important role in international trade and investment as they affect the cost of goods and services in different countries, and the profitability of businesses that operate in multiple countries.

Exchange rates are influenced by a variety of factors, including the supply and demand of each currency, political and economic factors in each country, and the overall market sentiment. In a floating exchange rate system, the exchange rate is determined by market forces, whereas in a fixed exchange rate system, the exchange rate is set by the government or central bank.

Changes in exchange rates can have a significant impact on businesses. A stronger domestic currency can make exports more expensive and less competitive in foreign markets, while a weaker domestic currency can make imports more expensive, driving up costs for businesses that rely on foreign suppliers. Businesses that operate in multiple countries must also contend with currency fluctuations, which can impact revenue and profits.

In order to manage the risks associated with exchange rate fluctuations, businesses may engage in various hedging strategies, such as using currency options or futures contracts, or adjusting their supply chains and operations to minimize the impact of currency fluctuations.

17
Q

Economic - Evaluate : The impact of

  • The business cycle
  • Inflation
  • Interest rates
  • Exchange rates
  • Unemployment

on businesses and their stakeholders

A
18
Q

Social - Explain : What is meant by demographic change

A

Demographic change refers to changes in the size, structure, and distribution of a population over time. It can include changes in factors such as birth rates, death rates, migration, and age distribution. Demographic change can have a significant impact on business activity as it can affect the size and characteristics of a business’s target market, the supply and demand of labor, and the availability of resources. For example, an aging population may lead to increased demand for health care services and decreased demand for certain products, while a growing population of young people may create opportunities for businesses that cater to their needs and interests.

19
Q

Social- Explain : How demographic change and other social factors such as
changes in

  • Consumer tastes
  • Lifestyle
  • Cultural changes
  • Affect business activity
A

Demographic change and other social factors can have a significant impact on business activity. Changes in consumer tastes, lifestyle, and culture can directly influence the demand for goods and services that businesses produce. For example, a shift in consumer preferences towards healthier food options has resulted in increased demand for organic food, gluten-free products, and other healthier options. Similarly, changes in lifestyle, such as the rise of remote work, have led to increased demand for products and services related to home office setup, video conferencing software, and home delivery services.

Cultural changes can also impact businesses in various ways, such as through changes in marketing strategies or the need to adapt to changing social norms. For instance, the #MeToo movement has put increased pressure on businesses to address issues of sexual harassment and gender equality in the workplace.

Furthermore, demographic change, such as an aging population or changes in immigration patterns, can also affect businesses. An aging population may lead to increased demand for healthcare services, while changes in immigration patterns may affect the availability of workers in certain sectors.

Overall, businesses need to be aware of and adapt to social changes to remain competitive and meet the evolving needs of their customers.

20
Q

Social - Evaluate : The impact of demographic change on businesses
and their stakeholders”

A
21
Q

social - Evaluate : The impact of other social factors on businesses
and their stakeholders

A
22
Q

Technological - Explain : How technological factors, including automation and
communication technology affect business activity

A

Technological factors have a significant impact on business activity. The development of new technologies such as automation and communication technology has led to increased productivity, improved efficiency, and increased competition in many industries.

Automation technology, such as robotics and artificial intelligence, has led to improved production processes, lower costs, and faster delivery times. This has allowed businesses to increase their output and remain competitive in the global marketplace. Automation has also led to the creation of new industries and the elimination of some traditional jobs.

Communication technology, such as the internet and mobile devices, has transformed the way businesses operate. These technologies have facilitated the emergence of e-commerce, which has allowed businesses to sell their products and services online to a global audience. Communication technology has also led to the emergence of remote work, enabling employees to work from any location, improving work-life balance, and reducing commuting costs.

Other technological advancements, such as 3D printing and blockchain technology, have the potential to revolutionize supply chain management and change the way businesses operate.

In summary, technological factors play a critical role in shaping business activity, creating new opportunities, and challenges for businesses. It is important for businesses to keep up with the latest technological advancements and adopt the most appropriate technologies to remain competitive.