Theme 3 - 3.1.4 - Impact Of External Infulences Flashcards
Whats an external influence ?
• An external influence is any factor outside of the business that has an impact on normal trading
Whats PESTLE analysis ?
It’s a business analysis tool that aims to look at external factors and how they may have an impact on the business
This helps strategic and tactical decision making, objective setting and helps a business reach its goals
What does PESTLE stand for ?
Political
Economic
Social
Technological
Legal
Environmental
Whats political explained ?
Political - A business may be affected by the politics in the UK or even politics across the world - as this is an external factor - it affects the business and its not inside the business but it can have big impacts such as a rise in minimum wage could make you loose money as you have to pay more money for wages
Some of the largest political impacts are:
- A change in gov
- Gov laws such as minimum wage
- Brexit and trading blocks post-brexit as you will have less ways to trade with other countries and this could cut off your suppliers etc
- tax rates
- tariffs ( when importing into the UK )
Whats Economic explained?
A business should analyse how they may be affected by:
- An increase in interest rates - as if the interest rates go up then that means the business looses more money and this is an external factor as it happens outside of the business and they can’t do anything about it
- An increase in inflation - how much money is worth - if you
- Unemployment rates - this affects the business because there would be less people able to work therefore your would have to increase wages in order to attract more people and this would decrease your profits
- Recession - if the economy is beginning to grow then the business might hire more workers and therefore they will gain more money and then they will have to pay taxes and they also have more disposable income to spend on goods and therefore the economy grows and this means more money for the business as more sales
- The business cycle - because when there is a boom then they will get more sales but when there is a recession then there will be more unemployment as businesses will have to delayer etc and their business will be switching their business objectives to more survival
What is Social ?
A business should analyse how they may be affected by changes in social factors such as:
- A change in demographics and its impacts on products produced and markets - like a demographic of people like from easetern Europe used to come and help famers but now they can’t because of brexit therefore the demographic changed and therefore farmers are struggling as they can’t gather as much yield because there is no people that want to do manual labour
- Culture mix changes - therefore if there is different cultures then there will be different types of products that they would want and therefore this might shift the demand to different products therefore some buisness may suffer
- Social trends - If there are different trends then the markets will become more dynamic and this means more changes in demand and therefore for example show companies will keep on having to develop new products to keep up with the popular products and demands or create new products to make the new trends etc
What are the technological external factors?
A business could examine the impact of new technologies on their operations for eg:
- Automation , new robotics could improve productivity and efficiency - this is only good for business as there will be less money spent on recruitment etc however lots of jobs will become redundant and therefore unemployment rates increase and therefore less people could buy the products produced by the AI etc or automated stuff and therefore the living standard will go down and therefore more depression -> homelessness etc etc
- Innovations in the industry
- Research and development in the industry
- New computer systems - faster output, more efficient
- Trading online - this could be very positive as you can reach more people —> more sales
