external factors - political

Question 1

what are the external factors?

Answer 1

PESTEC
- political
- economic
- social
- technological
- environmental
- competitive

Question 2

what are political factors that can impact businesses?

Answer 2

• governments can increase value-added tax on products or business rates
• governments can implement new laws like the national minimum wage
• governments can introduce new health and safety legislation
• brexit will have an impact on the way UK firms trade with the EU single market

Question 3

POLITICAL what is the impact of increasing value-added tax on products or business rates?

Answer 3

this can impact profits, if the rate of VAT is raised a company will need to increase their selling price which may reduce sales

Question 4

POLITICAL what is the impact of new laws like the national minimum wage?

Answer 4

impacts on profits as the wage costs of the business will rise

Question 5

POLITICAL what is the impact of new health and safety legislation?

Answer 5

means that a business may have to change the way it works, for example by training its staff or upgrading its machinery or safety equipment

Question 6

POLITICAL what is the impact of brexit?

Answer 6

the impact may be negative (a loss of trade with EU customers) or positive (less restrictions placed on firms by EU lawmakers)

Question 7

what is the main aim of the competition policy?

Answer 7

to ensure that there is fair competition in the market

Question 8

how can competition policy impact a business?

Answer 8

• by preventing businesses colluding with other organisations to fix prices (known as a cartel), businesses may be fined if they are found to be partaking in a cartel, may also be forced to change their prices
• by preventing mergers or takeovers that would lead to a considerable decrease in competition in the market, businesses may be forced to sell off branches or divisions to ensure that enough competion remains in the market
• by preventing businesses from making agreements with other firms when tendering for projects, if they are found to be doing this they may be fined for anti-competitive behaviour
• by preventing monopolies form occuring, a monopoly occurs if there is only one supplier of a particular product or service

Question 9

what is economic policy?

Answer 9

the behaviour of the government in influencing the economic performance of the country

Question 10

what are the two areas that economic policy covers?

Answer 10

• fiscal policy: this area deals with tax rates and the level of government spending
• monetary policy: this area deals with setting interest rates and controlling the supply of money in the economy