External Enviroments

• Competition - can affect a business' costs/demands as the presence of competitors may reduce demand for a product

  It can also increase costs as they may spend more on promotion, advertisement or innovation to improve sales
• Market conditions - If a market is increasing, a business will need to compete with other competitors to secure its own share which can increase costs
• Consumer Income - If consumer incomes are decreasing, demand for luxury items like watches and cars may decrease as people stay away from high price purchases. This could cause a business to invest which can increase a business costs
• Interest rates - affects the consumers income and can reduce spending
• Demographic changes - such as an ageing population can affect demand for certain goods.

  Foreign population can cause an increase demand in cultural shops
• Environment - Consumer awareness of environmental and ethical factors can cause them to demand goods to be produced in a ethical and environmentally friendly way which could cause a increase in costs