External Factors

Question 1

What are external factors?

Answer 1

Things that affect the business from outside.they are outside the control of them but aim to reduce their impact.

Question 2

Political

Answer 2

Changes in local and national government that affect organisations.

Question 3

Economic

Answer 3

The state of the economy will impact on the success of any organisation

Question 4

Social

Answer 4

Changes in the population will result in changes in demand for goods and services.

Question 5

Technological.

Answer 5

Dealing with advances and changes in technology, includes the rapid automation of factory and industrial work, or the worldwide increase of retailing online, e-commerce. If the business doesn’t stay up-to-date it affects competitiveness.

Question 6

Environmental

Answer 6

This includes the impact of the planet on the business, mainly concerned with the business being sustainable and ethical. It’s about environmental awareness and extreme weather.

Question 7

Competition

Answer 7

This includes other businesses influencing the business such as pricing strategies, better quality products, etc.

Question 8

Explain the impact of economic factors on business.

Answer 8

• high Inflation (example of economic factor) causing rise in prices (impact) resulting in low sales (further impact)
• rise in unemployment means people don’t have good income resulting in less spending therefore less sales. Vice versa
• low interest rates means cheaper to borrow so business can fund growth
• low economic growth means a lack of demand therefore lower sales. Business may seek to cut jobs in order to survive.
• weak pound means it’s more expensive to buy abroad so higher cost of raw materials leading to lower profit.

Question 9

Explain the impact of political factors on business.

Answer 9

• corporation tax charged on business profits. The government could lower tax which could mean less money is taken from the business and given to the government, which would increase profits. Vice versa
• income tax charged on consumer income. The government could lower it which would give customers a higher disposable income, meaning they will be more likely to spend money on a business’ products, increasing sales. Vice versa
• government could increase minimum wage resulting in business having higher wage costs , resulting in lower profit of the year.
• Government could lower VAT, tax on goods and services. Making products more affordable for customers, increasing sales. Vice versa

Question 10

Explain the impact of social factors on business.

Answer 10

• the UKs ageing population would require extensive research which costs time and money.
• more women will take maternity leave causing the business having to consider flexible working arrangement like part time, etc. Resulting in organisation having to spend time recruiting and training replacement staff. Vice versa
• business can cater for the latest fashion trends and offer products customers want, increasing sales. However, business have to spend time and money researching and developing new products.
• flexible working arrangements eg working part time, or from home. Resulting in improved quality as staff are able to work hours that suit them therefore raising morale. Also saves money on office space.

Question 11

Explain the impact of technological factors on business.

Answer 11

• social media allows organisations to keep in touch with customers and raise profile to a potential world wide market. However, it could result in bad reviews by customers which result in bad reputation and losing customers to competitors.
• e-commerce IE buying and selling online. Results in saving costs, don’t have the ongoing cost of running a shop.
• wi-if is likely to attract customers who wish to sue for work or personal reasons. However, there is a financial cost of setting it up and maintaining it.

Question 12

Explain the impact of environmental factors on business.

Answer 12

• weather such as heavy snowfall will affect number sales due to number of people not going out as often. However, favourable weather such as prolonged sunny weather could impact ice cream shops through increased revenue due to high demand for product.
• natural disasters could cause supplies getting ruined therefore high costs for repairs and less revenue.
• reduce carbon footprint by utilising renewable energy will save costs on fuel bills. However this could also increase costs when investing in renewable energy like solar panels, wind turbines, etc.

Question 13

Explain the impact of competition factors on business.

Answer 13

• a competitor opening in same street can steal customer s
• competitors could decrease prices therefore less sales
• better quality products