External Factors (PESTEC)

Question 1

What is External Factors?

Answer 1

Influences out with the control of the organisation which will affect how it operates (outside the business).

Question 2

What does each letter of PESTEC mean?

Answer 2

P - Political
E - Economic
S - Social
T - Technological
E - Environmental
C - Competitive

Question 3

What is Political?

Answer 3

Changes in government policies. legislation or taxes.

Question 4

What is Legislation?

Answer 4

National Minimum Wage Act
National Living Wage
Equality Act
Health and Safety at Work Act
GDPR

Question 5

What is Taxes?

Answer 5

Corporation Tax
Income Tax
VAT

Question 6

What is Policies?

Answer 6

Increase spending on schools
Set environmental limits
Build new roads

Question 7

What are 3 explain examples of Political?

Answer 7

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.

Question 8

What is Economic?

Answer 8

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

Question 9

What are the 5 examples of Economic?

Answer 9

Unemployment
Recession
Inflation
Interest Rates
Exchange Rates

Question 10

What is Unemployment?

Answer 10

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

Question 11

What is Recession?

Answer 11

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

Question 12

What is Inflation?

Answer 12

An overall increase in prices for goods and services.

Question 13

What is Interest Rates?

Answer 13

The percentage amount set by the Bank of England as a minimum to be charged when borrowing money.

Question 14

What is Exchange Rates?

Answer 14

The value of one currency against another.

Question 15

What are 3 explain examples?

Answer 15

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.

Question 16

What is Social?

Answer 16

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

Question 17

What are 3 examples of Social Changes?

Answer 17

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.

Question 18

What are 3 explain examples?

Answer 18

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).

Question 19

What is Technological?

Answer 19

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

Question 20

What are examples of Technological Developments?

Answer 20

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.

Question 21

What are 3 explain examples of Technological?

Answer 21

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.

Question 22

What is Environmental?

Answer 22

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

Question 23

How does the Government/Society ass pressure to businesses?

Answer 23

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 24

How does Adverse Weather effect businesses?

Answer 24

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

Question 25

What are 3 explain examples of Environmental?

Answer 25

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 26

What is Competitive?

Answer 26

The actions of your competitors that affect your business.

Question 27

What are the actions of competitors?

Answer 27

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.

Question 28

What are 3 explain examples of Competitive?

Answer 28

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.