Impact of external influences 3.1.4 Flashcards
What is PESTLE analysis?
A framework for assessing the key features of the external environment facing a business that are likely to impact activities and outcomes.
PESTLE is an acronym for:
Political
Economic
Social
Technological
Legal
Environmental
Political examples
- competition policy
- industry regulations
- govt. spending and tax policies
- business policy and incentives
Economic examples
- interest rates
- consumer spending and incomes
- exchange rates
- business cycle
Social examples
- demographic change
- the impact of pressure groups
- consumer tastes and fashions
-changing lifestyles
Technological examples
- disruptive technology
-adoption of mobile technology - new production processes
-big data and dynamic pricing
Legal examples
- employment law
-minimum wage
-health and safety laws - environmental legislation
Ethical and Environmental examples
- sustainability
-tax practices
-ethical sourcing - pollution and carbon emissions
Changing competitive environment
The structure of the market is likely to change over time and the business will have to respond.
-New business enter & existing exit/integrate
-Laws may change
- Growth of the internet
- Changing tastes and preferences
- Globalistion
What are Porter’s five forces?
A framework for analysing the nature of competition within an industry.
Industry Rivalry
When there are many competitors selling similar products, the business will have little power.
Threat of new entry
If new competitors can enter an industry quickly and without investing a lot of money, then the barriers to entry are low and the threat of new entrants is high.
Barriers include brand loyalty, reputation, expertise and economies of scale.
Buyer Power
When a business sells to a small number of customers those customers have significant power to negotiate lower prices.
Supplier Power
Where a supplier has significant power over a business as a result of offering a specialised component or where there is a small number of suppliers in the market.
Threat of substitution
Where customers can easily swap a businesses products for those of a rival the business has little power.
