Impact of External Influences (3.1.4) Flashcards
What is PESTLE analysis?
Examines the external factors that are likely to impact the activities and outcomes of a business
What does PESTLE stand for?
Political
Economic
Social
Technological
Legal
Environmental
What can PESTLE help a business to do?
Can help a business have effective decision-making and allows manager to understand the potential threats to the business performance and identify future difficulties so that action can be taken to avoid and eliminate their effects
What is the changing competitive environment?
The structure of the market in which a business operates is likely to change over time and so businesses have to respond to this changing competitive environment
What are some ways in which the structure of the markets change over time?
-Businesses leave and enter the market
-Changes in the regulatory framework (Legislation)
-Globalisation (Increased competition)
-Changes in consumer tastes and preferences
-Growth of the internet
What is Porter’s Five Forces?
-Framework to measure the impact of competition of a business
-The forces that will determine the profitability of a firm
What is Porter’s Five Forces and what is it used for?
Porter’s Five Forces is a framework used to analyze an industry’s competitive forces (Its ability to compete with rivals). It helps businesses evaluate their competitive environment, identify opportunities, and fortify their positions against threats.
What are Porter’s Five Forces?
-Barriers to entry
-Buyer power
-Supplier power
-Threat of substitutes
- Industry Rivalry
What are Barriers to entry?
How easy it is for new firms to enter a market
What is Buyer power? (Customers)
Buyers of goods and services want the lowest price per unit. When a business sells to a small number of customer they have significant power to negotiate prices and if have high number of customers have less power
What is supplier power?
Sellers of goods and services want the highest price per unit. Business has lots of choices over the suppliers from which it buys components
What is threat of substitutes?
The ease of which customers can move to an alternative
What is Industry rivalry?
The level of competition a business has as many competitors sell similar products which can reduce the power of a business
What are external influences? +eg.
Stuff that is out of your control. e.g PESTLE, Competition, Opportunities and Threats
What will the severity of Opportunities and Threats depend on?
-Product portfolio
-Workforce flexibility
-Liquidity
-Managerial expertise
What does the impact of External change depend on?
- Products firm sells
-Flexibility of workforce
-Liquidity/ resources firm has
-Debt form has
-Expertise of manager
