3. The external & internal environment Flashcards
What does PESTLE stand for?
Political
Economic
Social
Technological
Legal
Environmental
What are political factors?
-the extent to which the government influences the economy
-government polices and tax
-imports and exports
-public spending
How does government polices influence business?
-some may encourage overseas investment and will offer them tax breaks
-others may have polices to make it harder to operate in other countries
How can taxation influence business?
-increase or decrease of rates
-tax paid on their profit
-VAT charged on services or products
How can imports and exports influence business?
-tariffs = form of tax
-often impose tariffs on imports to reduce it
How can public spending influence business?
-government decides how much of the money collected by tax should be allocated to various sectors
What is the macro economy?
-the economy as a whole and will have a direct impact on the way in which business operates
What are 7 economic factors?
- interest rates
- exchange rates
- disposable income
- business cycles
- inflation
- demand pull
- cost push
What are 3 political factors?
- tax
- government polices
- public spending
How do interest rates affect business?
high = save more, spend less
low = encourage borrowing, spend more
How do exchange rates affect business?
a fall = weak pound = anything sold and produced in UK and sold away will be cheaper for buyers
strong = might have to reduce prices
What is the business cycle?
-amount of goods and services that are produced doesn’t rise at a constant rate
What are the 4 elements of the business cycle?
- boom
- downturn
- recession
- recovery
- Boom
-economy is growing
-consumer demand is high
- Downturn
-inflation rises
-economy starts to slow
- recession
-economy starts to shrink
-unemployment rises
- recovery
-interest rates may be reduced to stimulate economy
How does inflation affect business?
-percentage rise in prices over time
What causes inflation?
- demand pull
- cost push
What is demand-pull inflation?
-demand for products increases and business can’t reach this demand
-drives prices up
-increase in government spending contributes to this
What is cost-push inflation?
-supply of goods decreases because of an increase in production costs
What are 9 social factors?
- income levels
- language and culture
- religion
- education
- family structure
- age
- occupations
- demographic changes
- trends
What are some positive impacts of technology on business?
-easier access to market
-computer aided design
-automated production lines
-better safety
-EPOS
-more choice for consumers via internet
What are some negative impacts of technology on business?
-products becoming obsolete more quickly
-more choice online = can switch supplier
-automated production = redundancy
