2.3.3 Business failure (External factors)

Question 1

External factors

Answer 1

factors beyond the control of a business that cause it to collapse

Question 2

4 external factors

Answer 2

• Economic conditions (recesion,interest rates, exchange rates)
• competitors
• Changes in consumer tastes
• changes in legislation

Question 3

How can an economic recession cause business failure

Answer 3

Can result in consumers having less money to spend

this can cause a fall in sales especially for products with income elasticity of demand

Question 4

other 2 Economic conditions - how do they lead to business failure.

Answer 4

Interest rates (sharp causes in interest rates can cause financial difficulty for businesses - due to borrowings & debts, & may change consumer spending)

Exchange rates - come back to later one done 2.5.1

Question 5

How can competition lead to business failure

Answer 5

your competitors may offer similar products at a lower price or offer more desirable products.

can lead to a lack of sales revenue from your product meaning a firm may not have enough to cover it’s costs

Question 6

How can changes in legislation lead to business failure

Answer 6

Changes in government legislation can lead to business failure

e.g the banning of smoking in public places decreased pub goers

Question 7

How can be changes in consumer tastes lead to business failure

Answer 7

its always changing

if customers suddenly stop wanting to purchase your products then it will cause a sudden drop of sales revenue