Unit 1 - C&D Flashcards
What is PESTLE analysis?
A business tool that looks at how successful or not the business will be based on the external marker and factors
Why is PESTLE analysis used?
To review the external environment of a business
What doe PESTLE stand for?
P - political
E - economic
S - social
T - technological
L - legal
E - environmental
What does political mean?
Government support, grants or promotion, trading communities
What does economic mean?
Fiscal policy, tax, monetary policy, supply side policy, exchange rates
What does social mean?
Attitudes to savings, spending and debt, social responsibility requirements, change, tastes and preferences
What does technological mean?
Technological change, automation, improved communication, robots, social media
What does legal mean?
Laws and legislation must be followed or will be fined/punished
What does environmental mean?
Ethical, carbon emissions, waste, recycling, can benefit the business
What is meant by external environment?
How a business is doing compared to others, looking at the bigger picture
What is a trading community?
Related to retail, health, publishing, tourism, catering. Provides networking opportunities, advice, news and opportunities to buy or sell equipment, services, training
What is government support?
Monetary grants or promotions, encourage the increase or introduction of new businesses/markets
What is a trading bloc?
Gives creditability, seen as exclusive, pay to be in it
e.g. EU
What is a fiscal policy?
Government controlled policy, dictates levels of taxation based on the cost of the borrowing, how the government generates its income and decides its budget, changes can’t be ignored
What is the supply-side policy?
Aim to improve productivity and produce economic growth, controlled by the government, Bank of England and MPC
What is economic growth?
Striving to frow the economy so the UK doesn’t return to a recession, to take in more money than what’s going out, investing in areas to encourage growth
What are exchange rates?
Can fluctuate greatly, influence UK’s purchasing and selling power globally depending on other countries, inflation and stock exchange can change it
What is the monetary policy?
Value of currency and interest rates determined by the government, decisions on how to meet expectations are controlled by the Bank of England and Monetary policy committee
How can attitudes to saving affect the social environment?
Banks and government rely on people saving money which is used to boost the economy, interest rates are low so its difficult to save money
How can spending and debt affect the social environment?
Changes to spending habits influences the types of businesses that can start up and expand
No borrowing means businesses profits decreases which puts the economy down
What are social responsibility requirements?
Encouraged to consider ethical matters and consequences, be sustainable
e.g. charity shops are more popular now and help money last longer for people
What are demographics?
Identify customer needs of individuals
e.g. where you live, age, gender, house type, income, marital status
How can change affect the social environment?
Diversity of ethnicities can lead to new businesses due to trends changing
How can consumer tastes/preferences affect the social environment?
Customer needs changing and things becoming obsolete
e.g. food industry influenced by foreign foods/recipes
What is technological change?
Advancements and changes influence businesses and create opportunities for new ones. Improves e-commerce, digital communication, payment platforms. productivity
What is automation?
More productivity, less mistakes made, reduce costs quicker
How has communication changed because of technology?
Changed the way businesses operate and structure
e.g. working from home, long distances
What is the partnership act?
Can only be dissolved if one person retires or dies, can’t be fired or made redundant, equal share of profits/losses unless legal contracts are in place stating otherwise
What is the companies act?
Code of conduct for businesses to operate to protect the business and its operations, informs company policies and their operations e.g. forming and dissolving businesses
What is the charities act?
To protect the charity and its fundraising activities in line with business expectations, if more than £10,000 earned per year then must register as a charity and have trustees to ensure the charity is operating within the law
What is the competition act?
Prevents domination by any 1 business by addressing anti-competitive agreements, abuse of dominant market positions, reduces price wars which are illegal
What are the benefits to businesses of following laws?
- positive reputation
- ethical
- competitive advantage
What are the disadvantages of businesses following laws?
- can be forced out of business
- fines
- imprisonment
- easy to miss updates
- time consuming
What are carbon emissions and how can this affect the environment?
Pollution, carbon footprint, global warming
Negative reputation, not ethical, impacts business costs
What is waste and how can this affect the environment?
Household rubbish must be sorted, landfill sites are regulated, water and sewage disposed correctly
Costs to get rid of, reduce storage space
What is recycling and how can this affect the environment?
Business must comply with policies for zero waste
Seen as ethical, good reputation
What is pollution and how can this affect the environment?
Impacts, health, buildings, surroundings, demand for reduced pollution is forcing businesses to close
- Air, noise, water, traffic
What are the benefits to businesses protecting the environment?
Seen as environmentally friendly and ethical, monetary rewards, increased sales/profit, able to increase prices
What are the disadvantages to businesses protecting the environment?
Expensive, time consuming, can be a big change for people/reluctant to change, need more training
What is corporate culture?
How a business wants to be seen by customers and how they treat their staff
What is corporate social responsibility (CSR)?
Sets out what they are trying to be like, policies set out
E.g. if staff need training then will it be done
What are ethics?
How the business is seen to be doing the right thing, acting with good intentions
Whistle blowing policy - report something that’s wrong
What are examples of ethical behaviour?
Recycling, fair treatment of people, following legislation, ethical suppliers
Whys should a business be ethical?
Positive reputation, loyal customers, able to offer higher prices
What are the problems of being ethical?
Expensive, time consuming, may need training
What are the benefits of being ethical?
Employee retention, shows good CSR
What are the benefits of developing a culture?
Teamwork and productivity improves, lower staff turnover
What is a competitor?
Another business that offers something similar to your business
What is a competitive advantage?
Having something better/over another business
Different ways a business can have a competitive advantage?
- differentiation
- pricing
- market leadership
- reputation
- market share
- cost control
- technology
What types of competitors can a business have?
- local
- national
- international
Advantages of a competitive advantage?
Cost control, retaining customers, job security
What is differentiation?
Having different products to competitors
What is a market chare?
Most part of the market
What can affect a businesses competitive advantage?
- suppliers/logistics
- employees
- untrained staff
Define market structure?
How much power each competitor has and how many there is
What are the 2 types of markets?
Perfect and imperfect competitor
What features make up perfect competition?
- sell identical products
- price takers
- small market share
- buyers know the nature of product
- freedom of entry and exit
What features make up imperfect competition?
- price giver
- number of customers buying is more
- not identical products
- different prices
Define perfect competition
Provide exact same product at same price
- price takers
Define imperfect competition
Less competitors in market, lines aren’t identical, determine own prices
What does number of firms mean?
Number of businesses operating in a market
What does freedom of entry mean?
Have the choice to enter or leave the market due to number of buyers or sellers
What does nature of product mean?
What they are selling won’t vary
- perfect will be identical
- imperfect is different
Examples of perfect competition
- newspapers
- magazines
- Fairtrade producers
- milk
- bread
What does pricing power mean?
How much can be charged, if can set own prices or not
- perfect can’t
- imperfect can set prices
What does substitute products mean?
Other options available
- imperfect has more options
- perefect has les options
Examples of imperfect competition
- rings/jewellery
- clothes
- food
Define demand
How much customers want from a business
List 5 factors that impact demand
- affordability
- competition
- availability of substitutes
- gross domestic product level (GDP)
- needs and aspirations of consumers
Define gross domestic product (GDP)
output - value of goods/services from sample
expenditure - value purchased by business, government and individuals
income - value of money generated through wages and profit
Define supply
How much they can make and produce
Define price
How much is charged to buy a product/service
Define affordability
How much customers are willing to pay and whether they can afford it
Define availability
Other businesses have similar products which lowers demand
Explain how needs and aspirations of consumers can influence demand
Customer needs changing could increase or decrease demand
Explain how competition can influence demand
Low - high demand
high - low demand
Explain how affordability can influence demand
low price - more demand
high price - less demand
Explain how availability of substitutes can influence demand
low substitutes/availability - high demand
high substitutes/ availability - low demand
Explain how GDP can influence demand
income high - high demand
income low - less demand
high output - high demand
low output - low demand
List 5 influences of supply
- availability of raw materials
- logistics
- ability to produce profitability
- competition for raw materials
- government support
Explain how availability of raw materials can influence demand
easy - high supply
hard - low supply
Explain how logistics can influence demand
easy - increase supply
difficult - decrease supply
Explain how to produce profitability can influence demand
high - high supply
low - low supply
Explain how competition for raw materials can influence demand
more competition - low supply
low/no competition - high supply
Explain how government support can influence demand
more support - high supply
less support - lower supply
What is price elasticity of demand?
Response to price change
elastic - demand decrease from price increase
inelastic - demand stays the same when price changes
What is the equation for price elasticity of demand?
%change in quantity demanded / % change in price
Define output decisions
Economist term relating to maximising profit
List 3 factors that impact pricing and output decisions
- cost of production
- environment
- market power
Define loss leader
When a business sells product/service for less than the cost
Benefits of using loss leader
Increases demand, clear excess stock, attract customers, customers may buy other/more product as well
Disadvantages of using loss leader
Reduces profitability, impacts reputation/quality
Define price
How much is charged to buy a product/service
Give examples of loss leader products/services
- buy 1 get 1 free
- happy hour
- estate agents
