External and Internal Environment

Question 1

What is PESTLE and what does it stand for?

Answer 1

PESTLE is an analysis technique which is used to help a business understand the impact of external factors on its operation.

Political
Economic
Social
Technology
Legal
Environmental

Question 2

Name some factors of Political section within Pestle?

Answer 2

Government Policy
Taxation
Imports and exports
Public spending

Question 3

Explain government policy?

Answer 3

A government’s policy may influence the way a business spends for example, some governments may encourage overseas investment by offering them reduced taxation.

Question 4

Explain taxation in pestle?

Answer 4

Government can increase and decrease rates of tax ie increase corporation tax will reduce profits

Question 5

Explain imports and exports?

Answer 5

Government include imposing tarrifs to portect business by being undercut by cheaper imports

Question 6

Explain Economic factors in pestle?

Answer 6

Interest rates
Exchange rates
Disposable income
Business cycles
Inflation

Question 7

Explain Interest rates?

Answer 7

If interest rates are high businesses will need to repay more money on their loans. If interest rates are low businesses will borrow more money and customers are more likely to spend their money.

Question 8

Explain Exchange rates?

Answer 8

A weak pound will mean that anything produced in the UK and sold abroad will be cheaper for the buyer meaning that business’ will need to buy raw materials from abroad resulting in production costs increasing. Meaning higher prices for customers

A strong pound will allow businesses production costs to be cheaper, meaning goods purchased from abroad will cost the buyer more meaning the business may reduce its prices to not lose business

Question 9

Explain 4 features of a business cycle?

Answer 9

Boom - When the economy is growing, unemployemnt is low and demand is high
Downturn - inflation and interest rates starts to slowly rise, economy begins to slow down
Recession - Economy slows down so much it starts to shrink, unemployment will rise and business struggle.
Recovery - Follows a recession, interest rates are lowered to try and stimulate the economy, may prompt businesses to reinvest creating new jobs.

Question 10

What are the two drivers of inflation?

Answer 10

Demand-Pull inflation - Demand for products and services increase, business cant meet the demand, driving the price up.
Cost-Push Inflation - Goods and services decreases because of an increase in production costs, due to a scaracity of raw materials.Increase prices for consumers.

Question 11

Name a few social factors in PESTLE?

Answer 11

Income levels
Language, Culture and relgion
Unemployment
Trends
Demographic Changes.

Question 12

Explain technological factors in PESTLE? Both positive and negative factors?

Answer 12

Positive:
Easier access for consumers
Automated production lines reducing labour costs
CAD Design for new products

Negative:
Products become obsolete quickly
More choice for customers

Question 13

How can technology affect structure?

Answer 13

Global communication meant businesses can relocate overseas resulting in reduction costs.

Question 14

Explain any legal factors in pestle?

Answer 14

Businesses will have to follow many laws and regs such as: Health and safety, employment law, discrimination law, national wage regulations.

Question 15

Name two factors of environmental in PESTLE?

Answer 15

Environmental Change - availability of non renewable resources, pollution policies
to act sustainably - increases reputation and customers more likely to buy from a ‘green’ company.

Question 16

What is the defintion of demand?

Answer 16

Demand is the quantity of a product which consumers are willing and able to buy at a given price over a certain time period.

Question 17

Explain the demand graph?

Answer 17

Quantity increases as price decreases, slopes downwards from left to right.

Question 18

Explain extension and contraction for the demand graph?

Answer 18

Extension - Increase in quantity demanded because price has fallen.

Contraction - Decrease in quantity demanded because price has risen.

Question 19

Name 5 types of goods?

Answer 19

Normal good
Inferior good
Necessity good
Substitute good
Complementary goods

Question 20

If there is a rise in demand which way does the line shift on the demand graph?

Answer 20

Shift to the right

Question 21

What is supply?

Answer 21

Supply is the quantity of a good or service which suppliers are willing to and able to produce in a given period

Question 22

Explain the supply curve?

Answer 22

Slopes upwards from left to right. As quantity increases so does price.

Question 23

Explain extension and contraction for the supply graph?

Answer 23

Extension of supply - Increase in quantity because price has risen

Contraction of supply - Decrease in quantity because price has fallen.

Question 24

What is equilibrium price?

Answer 24

Price at which quantity demanded and quantity supplied will be equal.

Question 25

How is competition influenced in a micro economic environment?

Answer 25

Product features - more modern products can be sold at a premium, differentiate products
Sellers and buyers - more sellers more competitive environment
Barriers to enrty - set up costs, brand loyalty
Location - good transport links to shops
Availability of information - If there are lots of information avaulable then customers will compare prices and see which is best value for money.

Question 26

What is the general rule for demand and supply?

Answer 26

Demand - As price decreases, quantity increases
Supply - As price increases so does quanitity

Question 27

If there is a decrease in demand , how will the graph shift?

Answer 27

To the left

Question 28

If there is reduced supply, which way will the graph shift?

Answer 28

Shift to the left