Chapter 3 / External Environment Flashcards
Businesses need to take into account what?
They should account for their external environment, which they have no control over. Better to anticipate change than react to it.
What is PESTLE?
P - Political
E - Economic
S - Social
T - Technological
L - Legal
E - Ethical / Environmental
What is an example of political influence?
Tax policy, trade restrictions, tariffs.
What is an example of Economic influence?
Interest, exchange, inflation of wage rates
What is an example of Social influence?
Cultural norms and expectations, population growth, age distribution.
What is an example of Technological influence?
Advancements in technology, robots.
What is an example of Legal influence?
Changes to employment legislation, and access to materials.
What is an example of Environmental influence?
Global warming - switch to sustainable resources.
What are the two key market indicators?
GDP - The level of demand in most markets is influenced by the rate of economic growth.
Market demand - more demand = new competitors + more profit /. low demand = fight for a share of a weaker market.
What makes the external market tougher?
1) input of disruptive technologies.
2) surplus capacity in the market.
3) investment in innovation and new product development by competitors.
What is real income?
Real incomes measure the amount of disposable income available to consumers
What affects real income?
Employment levels/wage growth / interest rates
What is an interest rate?
An interest rate is a reward for saving and the cost of borrowing expressed as a percentage of the money saved or borrowed
What happens when interest rates fall?
Cost of debt is reduced / consumer confidence increases = more spending. / More demand for housing and higher property prices.
How do demographics impact business?
Demography is the size and composition of a population, changes in dynamics can affect a business.
