External Factors Flashcards
What are external factors?
Influences outwith the control of the organisation which will affect how it operates (outside the business)
What are the 6 external factors (PESTEC)
political
economic
social
technological
environmental
competitive
Political
Changes in government policies, legislation or taxes.
Legislation examples
National minimum wage act
national living wage
equality act
health and safety at work act
gdpr
Taxes examples
corporation tax
income tax
vat
policies examples
increase spending on schools
set envirnmental limits
build new roads
Explain examples for political
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.
Economic
Factors which encourage people to spend or save their money (e.g. unemployment, recession)
Unemployment
People of working age who are not currently employed, but are actively seeking employment.
Recession
A period of economic decline when trading slows and incomes decrease.
Inflation
An overall increase in prices for goods and services.
Interest rates
The percentage amount set by the bank of england as a minimum to be chnaged when borrowing money.
Exchange rates
The value of one currency against another.
Explain examples for economic
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.
Social
Changes in demographics, characteristics of the population, culture and values.
Examples of social changes
Continually changing trends in faashion
Changing food tastes (e.g. vegetarian, vegan, gluten-free)
UK’s ageing population
Explain examples for social
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)
Technological
Advancements in technology happening in an organisations’s industry. (This does not refer to technology currently available within an organisation)
Examples of technological developments
Increased use of social media.
Increased use of tablets, smartphones and apps.
Increased use of e-commerce by competitors and customers.
Explain examples for technological
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.
Environmental
Pressure from government/society to be more environmentaly friendly and the influence of adverse weather.
Pressure from government/society
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).
Adverse weather
Unexpected changes in weather patterns (e.g. heavy snow, flooding, high winds).
Explain examples for environmental
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.
Competitive
The actions of your competitors that affect your business.
Actions of competitors
Lowering their prices.
Launching new product/service.
Launching new marketing campaign.
Expanding to new locations.
Explain examples for competitive
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.
