UB: external factors

Question 1

what are the external factors?

Answer 1

Political
Economic
Social
Technological
Environmental
Competitive

Question 2

how can political factors impact a business?

Answer 2

• governments can lower or raise corporation tax which will impact profits
• new laws like the national minimum wage can be brought in which will impact profits and employee rights
• governments can also introduce new health and safety legislation meaning that a business has to change the way they run for example by training its staff
• the vote for brexit will impact the way UK firms trade with the EU, there may be a loss of EU customers or less restrictions placed on firms by EU lawmakers

Question 3

how can economic factors impact a business?

Answer 3

• if there is economic growth then more jobs will be created and more tax will be paid
• if unemployment is high then firms have more potential workers to chose from, more competition for jobs means that its easier for businesses to keep wages down
• when inflation is high prices rise and customers may stop buying luxury goods and focus on essentials

Question 4

how can social factors impact a business?

Answer 4

• demographic changes for example the UKs ageing population is useful for firms who provide products and services for older people
• people becoming more health-conscious is causing healthy foods and habits to become more important to customers and more electronic products such as treadmills and fitness trackers are being bought and used
• tastes and trends eg loom bands in 2014 then fidget spinners in 2017

Question 5

how can technological factors impact a business?

Answer 5

• ICT can make processes and communication within a business quicker and more convenient but if firms dont keep software and hardware up to date they may be seen as old fashioned and are in danger of becoming obsolete
• the introduction of automation such as self-scan checkouts mean that fewer employees are needed for tills
• more and more firms are online which widens customer numbers and lowers production costs but is highlt competitive

Question 6

how can environmental factors impact a business?

Answer 6

• climate change/weather: fizzy drinks and sun tan peaks in the summer months
• natural disasters can easily wipe out organisations
• firms that recycle goods/work to minimize carbon footprint will attract customers who want to buy from environmentally friendly companys

Question 7

how can competitive factors impact a business?

Answer 7

• imitators: when a successful product is introduced rival organisations will often respond with cheaper alternative versions
• price wars: companys may start price wars to gain customers and increase market, prices can drop so low that neither pf the organisations make much profit from the goods
• product differentiation: businesses can become more competitive by making products that stand out in terms of price and quality
  this can be done by: establishing a strong brand image for a good or service, making the USP of a good or service clear for example ‘quality items under a pount’ , other competitive factors such as having better location, design, appearance or price