Unit 1.3- External environment

Question 1

What is the external environment?

Answer 1

External forces that can influence a business activities but the business has no control over.

Question 2

What are the positive factors of the external environment?

Answer 2

• A product becomes popular or fashionable, raising demand.
• A major competitor leaves a market.
• The number of consumers in a country increases.
• Interest rates fall, making it cheaper to borrow money to buy products.
• Consumers enjoy steadily rising incomes, increasing demand for products.

Question 3

What are the negative factors of the external environment?

Answer 3

• Consumers demand environmentally friendly products, increasing businesses’ costs.
• New businesses enter a market increasing the degree of competition.
• A market is oversupplied with products, depressing prices.
• More people become unemployed, reducing consumer incomes and spending.