The external and internal environment - Lesson 3 Flashcards
External Factors - what does the PESTLE analysis stand for?
Political
Economical
Social
Technological
Legal
Environmental
Political factors are…
The way that the government influences the business. Political factors, taxation, tariffs on imports and exports making it difficult, public spending (government decides how much of taxation goes to the public sector)
Economical Factors are…
Interest rates on money saved or on borrowed money.
Exchange rates
Disposable income (money people have after taxes and essential living costs) if the economy increases, people will spend more as they will have more disposable income.
Business cycles
Inflation ( the percentage rise of prices over time)
What causes inflation? (2 causes) (ECONOMICAL)
1 - Demand-pull = when demand increases but business can’t meet this rise, so drives prices up.
2 - Cost-push = when the supply of goods decreases because of high production costs which pushes the cost up.
Social factors are…
Education, jobs, trends, religion, income levels, age.
Technological factors are…
Changes in communication through the internet, automatic production lines, websites, more choice of products for customers through the internet. Can monitor production remotely. Negative impacts include products becoming obsolete so need to be sold cheaper, fewer jobs if processes are automated.
Legal factors are…
Health & Safety law, National minimum wage, employment law, import/export law.
Environmental factors are…
Changes in the environment, sustainability
Inferior goods
cheaper goods where demand decreases as income rises
Normal goods
Demand increases as income increases and demand goes down if income decreases
4 stages of the business cycle
1 - Boom
2 - Downturn
3 - Recession
4 - Recovery
What would cause a shift to the RIGHT on a demand curve of a normal good?
An increase in the price of a substitute product
