external factors

• external factors


  uncontrollable things outside a business that will have an impact on its success
• types of external factors

  political, economic, social, technological, environmental, competitive
• value added tax

  political factor - if VAT is increased then selling price must be increased which may reduce sales made
• national minimum wage


  political factor - wage costs will rise, reducing profits
• health and safety legislations


  political factor - system may be changed, such as training staff or replacing equipment
• brexit


  political factor - loss of trade with EU customers, but less restrictions placed on firms by EU laws, fishing industry may be boosted, but UK based car manufacturers lose free access to EU
• economic growth

  economic factor - increased economic growth means more jobs created, more tax paid, more spending on goods and services
• unemployment


  economic factor - firms have more potential workers to choose from, easier for a business to keep wages down
• interest rates


  economic factor - businesses borrow and invest less when high, businesses borrow and invest more when low
• inflation


  economic factor - customers stop buying luxury goods and focus on essentials when high
• exchange rates


  economic factor - weak pound makes goods cheaper to sell abroad
• demographics


  social factor - birth rate, life expectancy, levels of immigration, ageing population ‘grey pound’
• lifestyles


  social factor - society is more health-conscious
• tastes and trends


  social factor - changing constantly
• ethics


  social factor - pressure on businesses to operate ethically
• ICT


  technological factor - make processes and communication quicker
• research and development


  technological factor - innovation of new products, systems and services
• automation


  technological factor - self-scan checkouts, driverless cars, deliveries by drone
• e-commerce


  technological factor - widens number of customers, but highly competitive
• weather


  environmental factor - many products and services are seasonal, bad weather can cause disruption to deliveries
• recycling


  environmental factor - attract customers who want to buy from companies that are environmentally friendly
• imitators


  competitive factor - when a successful product is introduced, rival organisations respond by producing cheaper alternatives affecting sales of the existing company
• product differentiation


  competitive factor - establishing a brand identity, making a USP