External Factors (PESTEC) Flashcards
What is External Factors?
Influences out with the control of the organisation which will affect how it operates (outside the business).
What does each letter of PESTEC mean?
P - Political
E - Economic
S - Social
T - Technological
E - Environmental
C - Competitive
What is Political?
Changes in government policies. legislation or taxes.
What is Legislation?
National Minimum Wage Act
National Living Wage
Equality Act
Health and Safety at Work Act
GDPR
What is Taxes?
Corporation Tax
Income Tax
VAT
What is Policies?
Increase spending on schools
Set environmental limits
Build new roads
What are 3 explain examples of Political?
If the government increases the National Minimum Wage this will lead to the 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 your business becomes more accessible for customers.
What is Economic?
Factors which encourage people to spend or save their money (e.g. unemployment, recession).
What are the 5 examples of Economic?
Unemployment
Recession
Inflation
Interest Rates
Exchange Rates
What is Unemployment?
People of working age who are not currently employed, but are actively seeking employment.
What is Recession?
A period of economic decline when trading slows and incomes decrease.
What is Inflation?
An overall increase in prices for goods and services.
What is Interest Rates?
The percentage amount set by the Bank of England as a minimum to be charged when borrowing money.
What is Exchange Rates?
The value of one currency against another.
What are 3 explain examples?
If unemployment levels rise, people will have less money available to spend in your business.
If interest rates increase, it will become 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.
What is Social?
Changes in demographics, characteristics of the population, culture and values.
What are 3 examples of Social Changes?
Continually changing trends in fashion.
Changing food tastes (e.g. vegetarian, vegan, gluten-free).
Customers becoming more conscious about ethical and environmental issues.
Changing wok-life balance (e.g. working from home, condensed hours).
UK’s ageing population.
What are 3 explain examples?
Changes in consumers tastes over time could lead to a decrease demand for your product/service.
The UK’s ageing population may lead to organisation having to design ne products for older customers (e.g. mobile phones with big buttons).
Customers being more conscious about ethical/environment issues may mean that you have to sources your raw materials from particular suppliers (e.g. local suppliers to reduce carbon footprint).
What is Technological?
Advancements in technology happening in a organisation’s industry. (This does not refer to technology currently available within an organisation).
What are examples of Technological Developments?
Increased use of e-commerce by competitors and customers.
Increase use of social media.
Increased use of cloud computing for data storage.
Increases use of tablets, smartphones and apps.
Increase use and availability of robotics for production.
What are 3 explain examples of 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 use of social media by potential customers may lead an organisation to decide its own social media platform for marketing purposes.
Increased availability of robotics may lead an organisation to invest in new machinery for production.
What is Environmental?
Pressure the government/society to be more environmentally friendly and the influence of adverse weather.
How does the Government/Society ass pressure to businesses?
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).
How does Adverse Weather effect businesses?
Unexpected changes in weather patterns (e.g.heavy snow, flooding, high winds).
What are 3 explain examples of 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.
What is Competitive?
The actions of your competitors that affect your business.
What are the actions of competitors?
Lowering their prices.
Launching a new product/service.
Launching a new marketing campaign.
Expanding into new locations.
Investing heavily in new technology.
Forming new partnerships with charities/initiatives.
What are 3 explain examples of Competitive?
If a competitor lowers its price for a similar product it may lead a business to have to lower its price too.
If a competitor launches a new product to market it may lead a business to have to bring forward its own plains for launching new products.
If a competitor opens up in new locations it may lead to business to have to offer special deals/promotions to prevent customers going to competitors.
