Unit 3 - PEST Flashcards
What is PEST
This is the political, economic, social and technological enviroments that affect a business
Politcal Factors
- Instability
- National security
- Major trading partners
- Changes in goverment
- Pressure groups
Economic factors
- Exchange Rates
- Interest rates
- Inflation
- Fiscal policy
- Taxation
- Business Cycle
- Unemployment
Political factors
Instability
If a business operates or expands into a politically unstable country there would be risks to consider
Political Factors
National security
Restrictions on the movements of people, goods and capital
Political Factors
Major trading partners
Numerous countries and trade blocs are essential for businesses that operate internationally or multinational
Political Factors
Changes in goverment
Different goverments and political parties could have different veiws and attitudes about businesses
Political Factors
Pressure groups
Brings about political change
Economic Factors
Exchange rates
The price of one currency expressed in terms of another.
* SPICED
* WPIDEC
Economic Factors
Interest rates
The price paid for borrowing money. This also applies for saving money. More money on loans means less disposable income
Economic Factors
Fiscal Policy
The use of taxation and public spending expenditure as a means of controlling the level of activity withing economy.
Economic Factors
Inflation
The rate at which the general level of prices is rising. This is measured by CPI
* Demand pull inflation - The demand for a countries goods and services exceeds the ability to supply it. Prices increase to restrict demand
* Cost push inflation- Costs rise due to factors such as rising costs of raw materials and components
Economic Factors
Taxation
Part of any income earned by a business must be paid to the goverment
Economic Factors - Taxation
Direct
- Income- Paid by individuals, sole traders and partnerships
- Coropration- Paid by all business except sole traders
- National insurance- Paid by both employees and employers on a individual salary
- Capital gains- Paid based on the profit they generate from buying and selling assets
Economic Factors- Taxation
Indirect
- Value added tax- This is paid by consumers on the goods and services that they buy
- Excise/ Custom Duties- This tax is paid on goods exported out of/ bought into the UK from abroad
Economic Factors
Business cycle
- Boom- The level of economic activity is rising rapidly leading to higher inflation and increased imports. Wages can also rise
- Recession- Economic activity declines as the economy moves into recession production rises less quickly or declining and unemployment increasing. Wages remian static and prices may fall to encourages others to spend
- Slump- Demand falls unemployement is reletaivley high and there is low inflation. Business have to reduce prices and they will be reluctant to invest
- Recovery- The rate of growth of GDP begins to rise unemployment falls as businesses take on more workers
Economic Factors
Unemployment
- Structural- This occurs when there is a large change in patterns of demand or developments in technology
- Cyclical- Occurs with the business cycle. As an economy downturn unemployment increases and will peak during recession periods
- Frictional- Occurs when there is a delay in finding a job after losing a previously held job. Tends to be temporary.
Social Factors
Demographic
- Size of population
- Median age of popluation
- Migration
Social Factors
Lifestyle
- Economically active women
- Health conscious
- Behaviour of consumers
- Cultural changes
- Social+Fashion change
- Being enviormentally friendly
Techonological Factors
Automation
- Retailers- Helps with business efficiency
- Banks-Clerks being replaced with machines
- Warehousing- Staff are being replaced with robots
- Online services- Mathematical analysis on certain products
Techonlogical Factors
ICT
- Internet Marketing
- Web Based Marketing
- B2B
- Manufacturing resource planning
- Electronic point of sale systems
