The external environment covers the range of factors which may affect a business but are outside the business' control.
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How does the External Environment affect a Business?
External environmental factors can affect a business’ costs and demands.
Businesses must understand the external environment factors so that they can respond to changes
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How does Competition affect a business?
- Presence of competitors may reduce demand for a business' products
- Potentially increase a business' costs as it needs to spend more on promotion
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How can Market Conditions affect a business?
- If a market is increasing, a business must compete to secure its own share
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How can Consumer Income affect a business?
- If consumer incomes are decreasing, demand for luxury items will decrease
- Businesses may also invest in promotion to try to increase demand
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How can Interest Rates affect a business?
- Increasing interest rates increase the cost of business' borrowing whilst reducing the amount spent by customers
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How can Demographic Changes affect a business?
- Changes such as an ageing population can affect demand for items such as holiday packages and cruises
- Changes such as migration increasing can cause a higher demand for cultural shops
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How can Environmental and Ethical Factors affect a business?
- As consumer awareness for environmental and ethical factors increase, demand for environmentally friendly products increases.
- Demand for Vegan food and artificial meat has increased
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Other cards in this set
Card 2
Front
How does the External Environment affect a Business?
Back
External environmental factors can affect a business’ costs and demands.
Businesses must understand the external environment factors so that they can respond to changes
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