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Business awareness > The external and internal environment > Flashcards

The external and internal environment Flashcards

1
Q

What is the way a business operates affect by ? P51

A
  • External factors - cannot control
  • assessement:
  • minimise negatvie
  • maximise positibe
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2
Q

What is PESTLE ? P51

A
  • Analysis technique - external factors on operations
  • positive and negative effect possible
  • Political
  • Economic
  • Social
  • Technological
  • Legal
  • Envrionmental
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3
Q

What are the policitcal factors that can affect a business concered with ? P51

Within PESTLE

A
  • Government influences the economy
  • policies & decision making affect operations
  • e.g. operating/ trading overseas = government stability & local regulations impact actions
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4
Q

What are some of the specific political factors tht affect the environemnt in which a busienss operates ? P51

A
  • Government policy
  • Taxation
  • imports and exports
  • public spending
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5
Q

How does government policies influence businesses ? P51

Within PESTLE

A
  • Influences operations
  • e.g. encourage overseas investments:
  • tax breaks / reduce taxation = encouragement
  • others = discouraage overseas invesmtnet
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6
Q

What is the taxation factor ?

Within PESTLE

A
  • Increase / decrease rates of taxation
  • e.g.
  • Corporation, VAT ,income
  • tax reduces - positive effect ( profits and disposable income increasing
  • tax increasing - negative effect (profits and disposable income decreasing)
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7
Q

What are tariff on imports / exports and why are they imposed ? P52

Within PESTLE

A
  • Trariffs imposed - tax for international trading
  • tariff on imports = reducing goods into country
  • domestic producer protection - undercut/ cheaper imports
  • consumers poruction - products cuasing harm
  • exporting goods - tarrifs of country exporting to
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8
Q

What is public spending and what are its effects ? p52

Within PESTLE

A
  • Public spending = expenditure in public sector by the government
  • government decision - allocation of taxation money - public sector areas
  • businesses providing to public sector businesses affected
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9
Q

What is a macro economy and how does this affect business operations ? P53

Within PESTLE

A
  • Macro economy - economy as a whole - affecting business operations
  • economy financial state of country/ global level affects consumer demand, growth of business & profitability
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10
Q

What are some of the key economic factors that may be relevant to a PESTLE analysis carried out by a business ? P53

A
  • Interests rates
  • exchange rates
  • disposable income
  • business cycles
  • inflation
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11
Q

What are interests rates ?

Economic factors within PESTLE

A
  • Costs of borrowing/ return on saved money
  • business loanee bank borrowing = higher repayments
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12
Q

What do higher interest rates result in ? P53

Economic factors of PESTLE

A
  • business less likely to borrow - less investment in growth
  • consumer - more saved money - less spent on goods/ services
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13
Q

What do low interest rates result in ? P53

Economic factors in PESTLE

A
  • Encourage busness to borrow more
  • Consumer less likely to save = more likely to spend money
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14
Q

What is the main characteristic of an exchnage rate ? P53

Economic factors within PESTLE

A

Fluctuate
weakening of pound/ fall = amout currency worth abroad falling
e.g.
£1: $1.45 to £1:$1.30 - 15 cents less

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15
Q

What does a weak pound mean ? P53

A
  • WPIDEC
  • Weaker Pound
  • Imports Dearer
  • Export Cheaper
  • Uk produced goods - cheaper for buyer
  • UK buying abroad:
  • not value for money
  • increased cost of production
  • passed to consumer
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16
Q

What does a stronger pound mean ? P53

A
  • S.P.I.C.E.D
  • Stronger Pound
  • Import Cheaper
  • Export Dearer (for the buyer)
  • UK goods bought by buyer abroad- more expensive for buyer - price decrease possible to stay competative
  • UK buying from abroad- costs less & more for money
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17
Q

What is disposable income ? P53

Economic factors within PESTLE

A
  • Money to spend post tax & living costs
  • economic growth = more goods, services, jobs, higher level of employment = disposable income increase
  • benefits business - disposable income on goods/ services
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18
Q

What happens to disposable income when economic growth decreases ? P54

Economic factors within PESTLE

A
  • Recession
  • Unemployment increase - less disposable income on goods/services
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19
Q

What are business cycles? P54

Economic factors within PESTLE

A
  • Rise and fall in goods & services produced
  • OR
  • cycle of change in business activity
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20
Q

What are the four elements of a business cycle ? P54

A
  • Boom
  • downturn
  • recession
  • recovery
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21
Q

What is boom stage within the business cycles ? 54

economic factors - PESTLE

A
  • Low unemployment
  • Consumer demand high
  • high level of business profit
  • government collects high taxes
  • ‘win win’
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22
Q

What is downturn element within business cycles ? p54

Economic factors within PESTLE

A
  • begins to slow down
  • inflation & interests rates start to rise
  • businesses get nervous
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23
Q

What is the recession element in business cycles ? P54

A
  • starts to shrink
  • unemployment rises
  • business struggles = dmenad for products & service decreases
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24
Q

What is the recovery cycle in business cycles ? P54

A
  • post recession - interests rates lowered to stimulate economy
  • low interests rates - prompt business invesmnts
  • job creation
  • unemployment wull fall
  • diposable income increase & consumer spending
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25
Q

What must businesses do for each stage of the business cycle ? P54

A
  • Adapt operations
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26
Q

What is inflation ? p54

Economic factors within PESTLE

A
  • Percentage rise- prices overtime
  • money - doesn’t buy as much as previously did
  • e.g. Butter inflation rate - 5% over a year - 5% more on butter than year ago
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27
Q

What is a small amount of inflation (2%) considered to be ? P54

A
  • Customer buy sooner rather than later potential price drop
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28
Q

Why do businesses want to avoid high levels inflation ? P54/55

A
  • Rapid price increase
  • discourage purchasing more than essentials
  • negative impact - luxury, non essential items
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29
Q

What are the two key drivers of inflation ? P55

A
  • Demand-pull inflation
  • cost-push inflation
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30
Q

What is demand pull inflation ? P55

A
  • product/service demand increase
  • business cannot meet demand - drives price up
  • expanding economy/ government spending / growth trading oversease = demand pull inflation
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31
Q

What is cost push inflation ? P55

A
  • Increase in production costs -> Supply in goods/ services decreases > cost push inflation
  • scarcity of materials/ labour pushing prices up/ increase tax by government > increase in production costs
  • passed onto consumer i.e. inflation
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32
Q

What are the 8 social factors affecting a business ? P55

Within PESTLE

A
  • Factors relating society - operation of business
  • cultural and demographic aspects:
  • income levels
  • language and culture
  • religion
  • education
  • family structure
  • age
  • occupations
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33
Q

What levels will the social factors within PESTLE affect a business ? P56

A
  • Local/national/ international
  • e.g. highly skilled workforce - area with high level education
  • retail business - range of items specific branhes - local community
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34
Q

What are the three main social factors that busiensses must be aware of ? P56

A
  • Demographic changes
  • Trends
  • Unemployment
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35
Q

Why must a busienss monitor demographic chnages - changes in the structure of the population P56

A
  • Meeting wants and needs
  • increase in size = demands of products and services
  • increase in specific segement = specific tastes and spending power
  • older generation = higher disposable income = more luxuries
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36
Q

What are “trends” when looking into social factors of PESTLE? P56

A
  • More health conscious people - gym membership - healthy meal options needed
  • new takeaway coffee
  • monitor market - relevant and competative
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37
Q

What is “unemployment” within social factors ? P56

A
  • Social factor - location
  • Location high unemployment area - larger population draw workforce from
  • location in high unemployment area - local population - adapt (basic non expensive range )
38
Q

What are the positive impacts of technological influences on busiensses ? P57

Within PESTLE

A
  • Easier market access - sales and internet marketing
  • CAD - time reduction - idea for new product and production
  • automated production lines = labour reduction & increased productivity
  • automated production = improved safety
  • EPOS - warehouse to checkout - up-to-date info on inventory levels / consumer habits
  • more consumer choice via internet
39
Q

What are the negative impacts of technological influences on the businesss ? P57

A
  • Quick Obsolete products - old inventory cheap
  • more choice - supplier easily swithced
  • Automated processes = redundancy costs & staff unrest
40
Q

How can technology impact the structure of the business ? P58

A
  • global communication Support departments - customer service & finance overseas
  • reduction in costs
  • well trained staff - non reduction in quality of service
41
Q

How does technology help with outsourcing processes ? P58

A
  • Monitor production - reduction of quality issues and delays
42
Q

What are legal factors within PESTLE? P58

A
  • Comply with laws and regulations - trading country
  • depends on what does
43
Q

What are the main laws and regulations within legal factors ? P58

Within PESTLE

A
  • Health and safety law
  • employment law
  • discrimination law
  • ntional minimum wage regulations
  • consumer protection
  • import/ export law
44
Q

How is health and safety law a legal factor to consider ? P58

A
  • Production deparments - regualtion - safe workplace
  • office workers
  • oversea workers
45
Q

How is employment law a legal factor for business ? P59

Within PESTLE

A
  • No simple ‘hire and fire’
  • fair treatment
  • working conditions
  • flexible working
  • maternity/ paternity
46
Q

How are discrimination laws a legal factor for businesses ? P59

A
  • Equality act 2010 - protected characteristics
  • age
  • disability
  • sex
  • race
  • religion
  • marital status and pregnancy
47
Q

How are national minimum wage regulations a legal factor for businesses ? P59

A
  • pay in UK = National minimum wage regulation UK
  • overseas workers = fair wage
48
Q

How is consumer protection a legal factor for busineeses ? P59

A
  • Detailed information products and services - consumer understanding
49
Q

How are imports and exports a legal factor for busnesses ? P59

A
  • Importing into UK - Comply imports laws and tariffs
  • exporting - importing law compilance importee country
50
Q

What must businesses be aware of after considering legal factors ? P59

A
  • current legislation and regulation may change
  • national minimum wage increases each yer
  • new laws and regulations - e.g. supermarkets with plastic bags
51
Q

What are the two issues that environmental factors can create for the business ? P60

A
  • Enviornmental change
  • sustainability
52
Q

How does environmental change cause an issue for businesses ? P60

A
  • Change in weather,increased pollution , availability of non-renewable resources - business operations
  • e.g. farming and weather
  • e.g. energy companies and renewable energy options
53
Q

How does sustainability cause issues for a business? P60

A
  • need for it:
  • business - self motivation
  • customer expectations
  • risk - customer goes elsewhere
54
Q

What is the takeaway summary from PESTLE ? P61

A
  • Assess external factors
  • factors outside control
  • identify ways - adapt to minimise risk & maximise opportunities
55
Q

What does the micro-economic environment look at ? P61

A
  • the factor affects pricing - between buyer and sellers
  • key factor - supply and demand
56
Q

What is the concept of supply and demand ? P61

A
  • Explanation - interaction between sellers and buyers
  • relation = price of product and service & inclination of individual to buy or sell it
  • law and what determine - separate & interact- arrives @ price & volume of goods & services
57
Q

What does the term ‘demand’ mean when looking at a micro economic environment, and what are the four types of goods this is concerned with ? P61

A
  • Quantity goods/ services - wants & willing to pay
  • more income = more puchasing
  • normal goods
  • inferior goods
  • necessity good
  • substitute products
58
Q

What is considered ‘normal goods’ within a micro economic environment ? P61

A
  • demand good services rises = income rises
  • demand for goods & services decreases = income decreases
59
Q

What are inferior goods in the context of micro economic environments ? P61

A
  • Demand for goods/services decreases = income increases
  • cheaper goods - affordable lower income
  • more expensive option - income rises
  • e.g. ‘own brand coffee -> more expensive coffee
60
Q

What are necessary goods when looking at micro economic environments ? P61

A
  • Buy - regardless of income changes
    e.g. utilities - power & water
61
Q

What a substitue products when looking at micro-economic products ? P61

A
  • Two or more goods, services - same purpose
  • e.g. coca cola & pepi
  • price of one product rises = increased demand for other
  • exceptions - preferred characteristics - taste of pepsi v coca cola
62
Q

What are ‘ complements’? P62

Supply and demand

A
  • two goods must be used together
  • vehicles and fuel
  • rise in price of one = fall in demand of other vice versa
63
Q

What is the demand curve ? P62

Supply and demand

A
  • price affects demand
  • price falls = expanded demand
  • price increases- contracted demand
  • shown on graph = demand curve
64
Q

How is demand, price , and quantity displayed on the demand curve graph ? P63

A

D = demand
P = price
Q = quantity

65
Q

What are straight lines on a demand curve graph referred to as ? P62

A

Demand curve

66
Q

What is supply in the conext of supply and demand ? P62

A
  • Quantity - willing and able to produce - given period of time
  • price - how much to supply
67
Q

What is a supply curve ? P63

A
  • Depends on price
  • price increase = supply increase
  • sell more = price going up
  • sloping upwards
68
Q

How is supply, price , and quantity displayed on a supply curve graph ? P63

A

S = Supply
P = Price
Q= Quantity

69
Q

What is the price mechanism ? P63

A
  • Consumer - lowest price possible
  • Supplier - charge as much as possible
  • compromise needed - demand & supplier curve meet - determines price
  • difficult - price affects demand & supply (vice versa)
  • price found = meeting equilibruim price
  • price mechanism ( supply & demand) determines price
70
Q

What causes a shift in demand curve rather than expansion / contraction ? P64

A

all changes exlcuding price

71
Q

What does an increase or rise in demand, for anything other than price , cause the demand curve to do ? P64

A
  • Shift to the right
  • increase at same price
  • e.g. celebrity use of product - causes demands
72
Q

What happens to the demand curve when the demand for the product decreases, for a factor other than price ? p64

A

curve shifts to left

73
Q

What happens to the supplier curve if theres a price change? P65

A
  • Movement along supplier curve
  • price increase = supply increases
  • price decreases = supply decrease
74
Q

What happens to the supply curve if there’s a chnage in something other than price ? P65

A

Shift

75
Q

Whats an exmaple of something causing the supply curve to shift to the left ? P65

A
  • scarcity of raw material - costs increase
  • producer focuses other products
  • shifts to left
76
Q

Whatv woudl cause a supply curve to shift to the riight ? p65

A
  • Cost production change = decrease
  • automated production process
  • costs of machinery > costs of labour
  • shift to right
77
Q

What are the affects of supplier numbers on competition levels ? P66

A
  • Surplus suppliers - attract customers - quality goods, services
  • scarce competitotrs - complancey danger - high prices & low quality
78
Q

What are the five things affecting competition in a micro-economic environment ? P66

A
  • Product features
  • number of seller and buyers
  • barriers to entry
  • location
  • availability of information
79
Q

How do product features affect competition ? P66

A
  • Choose product over other - particular feature
  • more differences = fewer competitors
  • less differences = more competition (e.g. milk & toothpaste)
80
Q

How do the number of sellers affect competition ? P66

A
  • Monopoly - one supplier controlling market
  • markets difficult to enter
  • no close substitutes = higher price
  • legislation to avoid
  • e.g. pharmaceutical companies
81
Q

How do fewer buyers in the market affect competition ? P67

A

fewer buyers = more competative sellers
e.g. reducing prices or improving quality
e.g. supermarkerts dictating prices to farmers - no where else 2go

82
Q

What is a barrier to entry defined as ? P67

A
  • Costs / other obstacles
  • prevent/ deter new competitors
  • entering markert for product/ service
83
Q

What are the 4 main barriers to entry ? P67

A
  • Legal barriers
  • set-up costs
  • bran loyalty
  • expertise
84
Q

What is a legal barrier to entry ? P67

A
  • Obtain licenses - certain markets
  • standards and regulation adherence
  • e.g. health and safety - restaurant
85
Q

What are set up costs in barriers to entry ? P67

A
  • Costs to set up - prohibitive
  • markerting, capital expenditure , purchases of inventory , employmnet of staff
86
Q

What is brand loyalty in barriers to entry ? P67

A
  • difficulty entry to established market
  • Customer - existing favourity brand
  • e.g. burger chain - McDonalds & Burger King
  • impossible to penetrate markert
87
Q

How are expertise a barrier to entry ? P68

A
  • Previous expertise likley
  • Industries - significant knowledge barrier e.g. new computer software busienss
  • owner - technological knowlegde and expertise / sufficient funds ( hire someone)
88
Q

How does location affect competition ? P68

A
  • Location of raw materials and customers - level of competition and location of busienss
89
Q

What are examples of how location can affect competition ? P68

A
  • Frozen food processing plants - crops are grown & fishes are caught
  • retailers - customers/ good transport links & parking
  • distribution companies centrally located - good transport links - quick and efficient delivery
  • technology industry business - where can recruit staff
90
Q

What is meant by avability of information ? P68

A
  • Difficulty consumer compare prices of products
  • easy to find - level of competition increases
  • not easy to find - competition will decrease
  • e.g. cafe menus on window - more competition
  • cafe no menu on window - less/ no competition

Business awareness (4 decks)

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