External environment influence

• Business costs


  Costs need to be managed not only for them to make profit but so that the selling price is appealing
• Selling price


  The price a business charges must reflect the cost of production; therefore, a profit margin should be added
• Factors that increase the price of production

  Can increase the selling price
• Factors influencing demand for a product

  • Price
  • Tastes and fashion
  • Price of other goods
  • Marketing and advertising
  • Seasonal factors
• Price


  If the price of a product is too high and there are the same products for a cheaper price, customers are more likely to purchase the cheaper product
• Average income of the audience


  Must be taken into account so that people purchase the product
• Substitute


  Goods and services that are an alternative to a particular product
• If the alternative is more expensive than the substitute

  The demand for the substitute will increase
• Marketing and advertising campaign

  Will increase interest and awareness of the product and therefore, increase in demand
• Seasonal factors


  Many products and services will have a seasonal demand, e.g. hats and scarves in the winter, and bikinis and sunglasses in the summer
• Complementary products used alongside (e.g. salt, vinegar or bread and butter), if the demand of one increases, so will the other and vice-versa