Understanding That Businesses Operate Within An External Environment

Question 1

Positive factors of external forces on a business’s costs and sales

Answer 1

A product becomes fashionable or popular, raising demand.
A major competitor leaves a market.
The number of consumers in a country increases.
Interest rates fall, making it cheaper to borrow money to buy products.
Consumers enjoy steadily rising incomes, increasing demand for products.

Question 2

Negative factors of external forces on a business’s costs and sales

Answer 2

Consumers demand environmentally friendly products, increasing businesses’ costs.
New businesses enter a market, increasing the degree of competition.
A market is over supplied with products
More people become become unemployed, reducing consumers incomes and spending.

Question 3

What factors can effect market conditions in the external environment

Answer 3

• Changing the conditions and/or the degree of competitors can impact negatively on both the level of demand or sales achieved by a business and also the costs that it incurs.