3.1.3

• What are some factors outside a businesses control that can influence its activities and performance?


  Weather

  New trends

  Economic climate (growth/decline)

  New interest and exchange rates

  Competition (CMA)
• What does PESTLE stand for?


  Political, Economic, Social, Technological, Legal, Environmental
• Give some examples of politcal (external environment) factors affecting a business. (Pestle)


  Competition policy (CMA prevents anti-competitive decisions)

  Industry regulations (e.g emissions for car manufacturing)

  Business policy and incentives (e.g during pandemic small businesses given grants and cheap loans)

  Gov spending and tax policies
• Examples of economic factors (external environment) that affect a business (pEstle)


  Interest rates

  Consumer spending and income

  Exchange rates

  Economic growth (GDP)
• Why must businesses take into account the external environment in which they operate?


  To make effective decisions
• External environment: the most competitive____ change rather than ____to it.


  Anticipate, react
• What are some factors that influence cost and demand?

  Market conditions and competition

  Incomes

  Demographic factors

  Environmental issues and fair trade
• What is recession?


  6 months of negative economic growth in a row
• What is GDP?


  The value of goods and service demanded in the economy
• What is the level of demand in markets generally influenced by?


  The rate of economic growth
• Why might demand decrease during a recession?


  People try to save money in case they get made redundant
• What is a mature economy in the UK's long-term growth rate?


  2-3%
• A slow growing or declining market makes conditions ____ with as competitors fight for their share of weak _____.


  Tougher , Demand
• A fast-growing market will encourage new ____ as well as benefit _____ competitors.


  Entrants, existing
• What are market conditions?


  Features of a market such as the level of sales, price levels, number and strength of rivals
• What is demand?


  The amount of a particular good or service that consumer or organisations want and are able to afford to purchase

  
  

  Good determinant of how desirable a market is
• How will income levels rising impact demand for normal and luxury goods?


  Sales will rise
• How will demand for inferior goods change as consumers income rise?


  Demand fall
• What is inelastic demand? (Think toilet roll inelastic)


  Demand remains same regardless

  If few substitutes available (e.g toilet roll)

  Necessities

  Customer loyalty

  Product has little impact on consumers budget
• What is elastic demand?


  Demand will change

  Substitutes available

  Product is a luxury

  Product has large impact on consumers budget

  Customers not loyal