Impacts of external influences

• PESTLE = Political, Economic, Social, Technological, Legal and Environmental
• Porters five forces = bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitutes and Intensity of competition rivalry.
• The Changing Competitive Environment:

  • New businesses may enter the market and existing businesses may leave or integrate with others
  • The legislation (laws) may change likely leading to fewer barriers to entry for new businesses
  • The growth of the Internet has increased the number of competitors businesses face in the majority of markets
  • Consumer tastes and preferences are changing more rapidly leading to short product life cycles and a requirement for businesses to innovate to compete
  • Globalisation has increased competition with rivals from around the world
• Porters five forces: Industrial Rivalry

  • When there are many competitors selling similar products, the business will have little power
  • Many rivals are trying to get a more significant share of the market 
  • When a business offers products in an industry with little or no competition it has more power, can use premium pricing and dominate the market 
• Porters five forces: Threat of new entrants

  • If new competitors can enter an industry quickly and without investing a lot of money, then the barriers to entry is low and the threat of new entrants is high
  • Where the barriers to entry are too high for new businesses to gain a foothold and compete in the market the threat of new entrants is low 
• Porters five forces: Buyer Power

  • When a business sells to a small number of customers those customers have significant power to negotiate lower prices 
  • Where a business has a high number of customers those customers have less power 
• Porters five forces: Supplier Power

  • Where a business has a lot of choices over the suppliers from which it buys components
  • It is likely to be able to shop around for lower price
  • 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
• Porters five forces: Threat of new substitutes

  • Where customers can easily swap a businesses products for those of a rival the business has little power
  • Where substitution is unlikely a business has significant market power