WHAT IS A BUSINESS?: Businesses in an External Environment


Looking at the external environment of a business, we must consider 'PESTLE' factors: political, economic, social, technological, legal and environmental.

Political Factors:

- government economic policies

- government social policies

- extent of government intervention

Economic Factors

- business cycle

- income levels + interest rates

- exchange rates / level of inflation

- level of employment

- membership of the EU

Social Factors

- demographic factors

- ethical issues

- impact of pressure groups

Technological Factors

- new products and processes

- impact and cost of changes

Legal Factors

- legalisation

Environmental Factors

- environmental issues and fair trade.

Influencing business costs and demand of goods and services is controlled by several factors:

- Competition

- Whether the economy is growing

- Impact of changes in interest rates

- Changes in demographics

- How environmental issues affect the type of products demanded and the way they're produced.

- Costs: if they wish to improve profit, cost of products should be largely considered.

Factors affecting demand:

- price of product

- tastes and fashion changing over time

- price of other goods: substitutes and complementary products

- marketing and advertising

- seasonal factors (e.g. demand for suncream decreases in winter months)

- government…


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