External Factors

Question 1

What are external factors?

Answer 1

Influences outwith the control of the organisation which will affect how it operates (outside the business)

Question 2

What are the 6 external factors (PESTEC)

Answer 2

political
economic
social
technological
environmental
competitive

Question 3

Political

Answer 3

Changes in government policies, legislation or taxes.

Question 4

Legislation examples

Answer 4

National minimum wage act
national living wage
equality act
health and safety at work act
gdpr

Question 5

Taxes examples

Answer 5

corporation tax
income tax
vat

Question 6

policies examples

Answer 6

increase spending on schools
set envirnmental limits
build new roads

Question 7

Explain examples for political

Answer 7

If the government increases the national minimum wage this will lead to business’ wage bill increasing.
If the government increases corporation tax it will lead to the business having less profit.
If the government improve local infrastructure it could mean the business becomes more accessible for customers.

Question 8

Economic

Answer 8

Factors which encourage people to spend or save their money (e.g. unemployment, recession)

Question 9

Unemployment

Answer 9

People of working age who are not currently employed, but are actively seeking employment.

Question 10

Recession

Answer 10

A period of economic decline when trading slows and incomes decrease.

Question 11

Inflation

Answer 11

An overall increase in prices for goods and services.

Question 12

Interest rates

Answer 12

The percentage amount set by the bank of england as a minimum to be chnaged when borrowing money.

Question 13

Exchange rates

Answer 13

The value of one currency against another.

Question 14

Explain examples for economic

Answer 14

If unemployment levels rise, people will have less money available to spend in your business.
If interest rates increase, it will beome more expensive for a business to borrow money from the bank.
If the pound (£) weakens against other currencies it may make it more expensive to purchase materials from other countries.

Question 15

Social

Answer 15

Changes in demographics, characteristics of the population, culture and values.

Question 16

Examples of social changes

Answer 16

Continually changing trends in faashion
Changing food tastes (e.g. vegetarian, vegan, gluten-free)
UK’s ageing population

Question 16

Explain examples for social

Answer 16

Changes in consumer tastes over time could lead to a decreased demand for your product/service.
The UK’s ageing population may lead to organisations having to design new products for older customer (e.g. mobile phone with bigger buttons).
Customers being more conscious about ethical/environmental issues may mean that you have to source your raw materials from particular suppliers (e.g. local supplier to reduce carbon footprint)

Question 17

Technological

Answer 17

Advancements in technology happening in an organisations’s industry. (This does not refer to technology currently available within an organisation)

Question 18

Examples of technological developments

Answer 18

Increased use of social media.
Increased use of tablets, smartphones and apps.
Increased use of e-commerce by competitors and customers.

Question 19

Explain examples for technological

Answer 19

Increased use of e-commerce by a business’ competitors may lead an organisation to decide to launch its own website with selling capability.
Increased availability of robotics may lead an organsation to invest in new machinery for production.

Question 20

Environmental

Answer 20

Pressure from government/society to be more environmentaly friendly and the influence of adverse weather.

Question 21

Pressure from government/society

Answer 21

Government may set environmental targets for businesses to achieve (e.g. reduce pollution).
Pressure from society to be more environmentally friendly (e.g. increase recycling).

Question 22

Adverse weather

Answer 22

Unexpected changes in weather patterns (e.g. heavy snow, flooding, high winds).

Question 23

Explain examples for environmental

Answer 23

Pressure from government to meet pollution targets could lead businesses to invest in new greener technology in production.
Unexpected heavy snow could prevent businesses from being able to deliver products to customers on time.

Question 24

Competitive

Answer 24

The actions of your competitors that affect your business.

Question 25

Actions of competitors

Answer 25

Lowering their prices.
Launching new product/service.
Launching new marketing campaign.
Expanding to new locations.

Question 26

Explain examples for competitive

Answer 26

If a competitor lowers its prices for a similar product it may lead a business to have to lower its prices too.
If a competitor launches a new product to market it may lead a business to bring forward its own plans for launching new products.
If a competitor opens up in new locations it may lead a business to have to offer special deals/promotions to prevent customers going to competitors.