UB - External Factors

Question 1

Name the 6 External factors that can affect a business

Answer 1

• political
• economic
• social
• technological
• environmental
• competitive

(REMEMBER PESTEC!!)

Question 2

Explain how external political factors could affect a business

Answer 2

Involves decisions and laws the government make:

Tax: Government can raise or lower corporation tax or VAT on products

Laws: National Minimum Wage → impacts profits and employee rights, Health and Safety legislation → business would have to pay for training

(THIS IS BASED ON HOW A BUSINESS WILL ADAPT/REACT)

Question 3

Explain how external Economic factors could affect a business
(3 ways)

Answer 3

Recession: amount of money being spent on goods and services gets low and sales decrease.
* leads to unemployment.

Unemployment: High unemployment → businesses have more workers to choose from
* keeps wages down

Interest rates: amount charged by the bank to borrow money.
* High rates? = businesses borrow less.

(THIS IS BASED ON HOW A BUSINESS WILL ADAPT/REACT)

Question 4

Explain how external Social factors could affect a business

Answer 4

Social influences shape opinions, habits, and customer spending

Demographics- birth rate, immigration, ‘ageing population’
Lifestyles- health conscious, veganism, electronics, tastes and trends

(THIS IS BASED ON HOW A BUSINESS WILL ADAPT/REACT)

Question 5

Explain how external Technological factors could affect a business

Answer 5

• How NEW DEVELOPMENTS in practices and equipment affect a business

ICT: Makes processes and equipment more efficient

Automation: Machines replacing people e.g. self service machines

E-commerce: Sell 24/7 worldwide

(THIS IS BASED ON HOW A BUSINESS WILL ADAPT/REACT)

Question 6

Explain how external Environmental factors could affect a business

Answer 6

Climate change:
* reducing the business’s carbon footprint

Weather:
* Seasonal changes impact sales
* Bad weather or Natural disaster? = disruption to supplies and production

(THIS IS BASED ON HOW A BUSINESS WILL ADAPT/REACT)

Question 7

Explain how external Competitive factors could affect a business

Answer 7

• Competitor = another business that offers similar products or services.

A competitor may:
* Sell at a lower price
* Offer better quality/USP

The business may respond by
* Lowering prices
* Opening for longer hours

(THIS IS BASED ON HOW A BUSINESS WILL ADAPT/REACT)