The external & internal environment

Question 1

What does PESTLE stand for?

Answer 1

Political
Economic
Social
Technological
Legal
Environmental

Question 2

What are political factors?

Answer 2

-the extent to which the government influences the economy
-government polices and tax
-imports and exports
-public spending

Question 3

How does government polices influence business?

Answer 3

-some may encourage overseas investment and will offer them tax breaks
-others may have polices to make it harder to operate in other countries

Question 4

How can taxation influence business?

Answer 4

-increase or decrease of rates
-tax paid on their profit
-VAT charged on services or products

Question 5

How can imports and exports influence business?

Answer 5

-tariffs = form of tax
-often impose tariffs on imports to reduce it

Question 6

How can public spending influence business?

Answer 6

-government decides how much of the money collected by tax should be allocated to various sectors

Question 7

What is the macro economy?

Answer 7

-the economy as a whole and will have a direct impact on the way in which business operates

Question 8

What are 7 economic factors?

Answer 8

1. interest rates
2. exchange rates
3. disposable income
4. business cycles
5. inflation
6. demand pull
7. cost push

Question 9

What are 3 political factors?

Answer 9

1. tax
2. government polices
3. public spending

Question 10

How do interest rates affect business?

Answer 10

high = save more, spend less
low = encourage borrowing, spend more

Question 11

How do exchange rates affect business?

Answer 11

a fall = weak pound = anything sold and produced in UK and sold away will be cheaper for buyers
strong = might have to reduce prices

Question 12

What is the business cycle?

Answer 12

-amount of goods and services that are produced doesn’t rise at a constant rate

Question 13

What are the 4 elements of the business cycle?

Answer 13

1. boom
2. downturn
3. recession
4. recovery

Question 14

1. Boom

Answer 14

-economy is growing
-consumer demand is high

Question 15

2. Downturn

Answer 15

-inflation rises
-economy starts to slow

Question 16

3. recession

Answer 16

-economy starts to shrink
-unemployment rises

Question 17

4. recovery

Answer 17

-interest rates may be reduced to stimulate economy

Question 18

How does inflation affect business?

Answer 18

-percentage rise in prices over time

Question 19

What causes inflation?

Answer 19

1. demand pull
2. cost push

Question 20

What is demand-pull inflation?

Answer 20

-demand for products increases and business can’t reach this demand
-drives prices up
-increase in government spending contributes to this

Question 21

What is cost-push inflation?

Answer 21

-supply of goods decreases because of an increase in production costs

Question 22

What are 9 social factors?

Answer 22

1. income levels
2. language and culture
3. religion
4. education
5. family structure
6. age
7. occupations
8. demographic changes
9. trends

Question 23

What are some positive impacts of technology on business?

Answer 23

-easier access to market
-computer aided design
-automated production lines
-better safety
-EPOS
-more choice for consumers via internet

Question 24

What are some negative impacts of technology on business?

Answer 24

-products becoming obsolete more quickly
-more choice online = can switch supplier
-automated production = redundancy

Question 25

How can technology impact the structure of business?

Answer 25

-global comms
-locate support departments overseas
-can see reduction in costs

Question 26

What are the 6 major laws?

Answer 26

1. health and safety
2. employment
3. discrimination
4. national minimum wage
5. consumer protection
6. import/exports

Question 27

How does the impacts of environmental change impact business?

Answer 27

-climate change, pollution and availability of renewable resources
-farming has to change methods
-spending on renewable energy options

Question 28

How does sustainability affect business?

Answer 28

-motivated to act sustainably
-customer expectations

Question 29

What is demand?

Answer 29

-the quantity of goods or services which consumers want and are willing to pay for it

Question 30

What are normal goods?

Answer 30

income rises = demand rises

Question 31

What are inferior goods?

Answer 31

income rises = demand decreases

Question 32

What are necessity goods?

Answer 32

-type of normal good that consumers will buy regardless

Question 33

What are substitute products?

Answer 33

-carry out the same purpose for the consumer

Question 34

What are complement goods?

Answer 34

-goods that must be used together

Question 35

Demand curve

Answer 35

-Quantity is always on x-axis
-Price is always on y-axis
-left to right
-increase in demand = shift to right

Question 36

What is supply?

Answer 36

-the quantity of a good or service which suppliers are willing and able to produce in a given time period

Question 37

Supply curve

Answer 37

-right to left

Question 38

What are some factors that affect competition?

Answer 38

-product features
-number of sellers and buyers
-barriers to entry
-location
-availability of information

Question 39

What is a monopoly?

Answer 39

-when one major supplier controls most of, if not the whole market

Question 40

What are barriers to entry?

Answer 40

-the costs or other obstacles that prevent new competitors from easily entering the market

Question 41

What are 4 types of barriers to entry?

Answer 41

1. legal barriers
2. set up costs
3. brand loyalty
4. expertise

Question 42

What is a price mechanism?

Answer 42

-the way the market fins the equilibrium price through the forces of demand and supply