1.3.1 - External Environment

Question 1

What is meant by the term external factors?

Answer 1

Circumstances outside of a businesses direct control that can influence its success or failure

Question 2

What external factors might impact a businesses actions?

Answer 2

• Economic
• Social
• Political
• Technological
• Environmental
• Competition

Question 3

How do external factors impact a business?

Answer 3

• Influencing their costs, demand and operations

Question 4

What are the 7 sectors of external environment?

Answer 4

• Political
• Economical
• Social
• Technological
• Envornmental/ethical
• Legilsation
• Competition

Question 5

What are some examples of economic external factors?

Answer 5

• Consumers incomes
• The level of interest rates

Question 6

What are some examples of demographic external factors?

Answer 6

• Changes in migration
• Changes in birth and death rates

Question 7

What are some examples of market external factors?

Answer 7

• Changes in the power of competitors
• Growth in sales within a market

Question 8

What are some examples of environmental and social external factors?

Answer 8

• Consumers prefer environmentally friendly products
• Growth in popularity of fair trade products

Question 9

How does the government try to increase demand in the economy?

Answer 9

• Lower taxes
• Work with BoE (Bank of England) to lower interest rates
  and vice versa if demand is too high

Question 10

What does Unemployment mean?

Answer 10

People who are willing and able to workout cannot find employment

Question 11

What are some reasons people become unemployed?

Answer 11

• Made redundant - last job ended because there was no more work available or no further needed for their role
• Dismissed - people whose last job ended because they broke their contract of employment
• Left school, college or university

Question 12

How does unemployment impact a business?

Answer 12

• Less consumer spending due to less disposable income
• Gives businesses more options to employ people

Question 13

What is market capitalization?

Answer 13

The value of a company that is traded on the stock market

Question 14

How is market capitalization calculated?

Answer 14

Total number of shares X share price

Question 15

Give 3 factors that impact share value of a PLC?

Answer 15

• New leadership
• Risks taken
• Market trends
• Consumer trends
• New products
• Actions of competitors

Question 16

What is meant by liquidation?

Answer 16

The process of turning assets into cash

Question 17

What is meant by the term insolvency?

Answer 17

A financial state where a company or individual is unable to pay off their debts when they are due

Question 18

What is the difference between the terms payables and receivables?

Answer 18

• Receivables is the cash coming into the business owed to it from its debtors (people who owe them money)
• Payables if the cash owed to creditors by the business is paid out

Question 19

What is the difference between corporate objectives and financial objectives?

Answer 19

• Corporate are related to the business as a whole
• Financial is a specific goal or target of relating to the financial performance, resources and structure of a business