Impact of external Influences

• PESTLE analysis?


  examines the external factors that are likely to impact the activities/outcomes of a business
• • Political
  • Economic
  • Social
  • Technology
  • Legal
  • Environment
• political?


  the extent to which local and national government is expected to influence business
• economic?


  the extend to which economic indicators are expected to directly impact business perfomrance
• social?


  the extend to which personal attitudes and values, culture and demographic change are expected to affect the business
• technological?


  to extend to which technological change and innovation are expected to impact the business
• legal?


  to extend to which changes in law and regulations are expected to impact the business
• environmental?


  the extend to which changes in attitudes and government policy towards environmental protections as well as the impact of global warming expected to impact business
• changes in market structure:


  • new business may enter market
  • existing business may integrate with others
  • legislation may change - fewer barriers to entry
  • growth of internet has increased
  • consumer tastes/preference change
  • globalisation has increased competition
• porter's five?


  identifies key pressures in an industry that impact the ability of a business to compete with rivals
• porter's five:


  • industry rivals
  • threat of new entry
  • buyer power
  • threat of substitution
  • supplier power
• what is threat of substitution?


  • where customers can easily swap products for those of a rival - business must develop a USP or compete with price
  • where substitution is unlikely a business has market power - can charge high and be less inclined to innovate
• what is industry rivals?


  • competitors selling similar products - many rivals trying to get a more market share
  • where business dominates market by premium pricing since products that have no/little competition
• what is supplier power?


  • where businesses have choices to buy supply's from
  • suppliers has power since they're offering a specialised components or where there is a small number of suppliers in market - business has little choice over source of supplier + have to pay high price for its components and accept suppliers term and conditions
• what is buyer power?


  • businesses sell to small number of customers, customers have power to lower prices. business will have to sell product according to customer demands
  • where business has a high number of customers - customers have less power. business can charge high prices
• what is threat of new entry?


  • barriers to entry is low and threat of new entrant is high if business enters industry without investing a lot of money - market contains a large number of rival businesses
  • where barriers to entry are high and threat of new entrants is low