understanding that businesses operate within an external environment

Question 1

what are economical factors (PESTAL)

Answer 1

Political
Economic
Social
Technological
Legal
Environmental

Question 2

market condition features

Answer 2

• level of sales
• sales growth
• price levels
• no. + strength of rivals
• market position
• market share

Question 3

what is demand affected by

Answer 3

• price
• taste and fashion
• price of other goods
• marketing and advertising
• seasonal factors
• government action

Question 4

advantages of competition

Answer 4

• customers may receive lower prices and better quality
• firms improve efficiently
• firms become more cost effective
• quality of product and services

Question 5

disadvantages of competition

Answer 5

• if competition is price based, quality can fall
• aiming low for cost can compromise ethics
• resources such as marketing may not be spent in the most effective way
• can lead to business closures
• can lead to takeovers and mergers

Question 6

factors affecting competitiveness

Answer 6

• investment in new equipment
• improvements to operational procedures
• effectiveness of the marketing mix
• innovation through R+D
• financial planning + control
• incentive schemes for staff
• quality procedures
• staff skills, education and training
• enterprise

Question 7

what happens when income rise

Answer 7

branded goods will see sales rise

Question 8

what happens when income decrease

Answer 8

inferior goods will see sales rise

Question 9

definition of interest rates

Answer 9

the cost of borrowing money and return for lending/ saving it

Question 10

what happens to consumers when there is a low interest rate

Answer 10

• pay less money back on bank loans
• have more disposable income
• spend more on luxury items

Question 11

what happens to business when there is a low interest rate

Answer 11

• consumers buy more
• sales and profit goes up
• can take out loans + expand

Question 12

what happens to consumers when there is a high interest rate

Answer 12

• pay more money on loans so save money
• less disposable income
• spend less money on luxuries more on inferior goods

Question 13

what happens to business when there is a high interest rate

Answer 13

• cost more to take out loans so expand less
• consumers have less income so don’t buy anything
• sales + profit decrease

Question 14

what is demographics

Answer 14

the makeup of the UK economy. e.g. age, ethnic diversity, gender in certain roles