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Edexcel A Level Business Theme 3 Notes

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  • December 30, 2022
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3.1.4 - Impact of external influences

Pestle Analysis: This identifies the external factors a business might face and their impact on
business idiosyncrasy

Political
 Some parts of the world are politically volatile and special attention has to be paid if
business venture into politically unstable countries.
 However political factors can also influence business in stable and democratic countries.
o Members joining or leaving trading blocs such as the EU
o Issue of national security, some security measures may restrict the movement of
goods and services, people, and capital
o Pressure groups can lead to legislation and taxes which affects sales and demand
o Changes in government a government maybe pro-business and this may serve as an
opportunity for firms, where as another government may impose high business
rates
Economic
 The general state of the economic can have a huge impact on business activity.
 Since the financial crisis in 2008 several countries have suffered a recession which has made
trading conditions very difficult for many businesses. However, some specific examples may
include:
o Falling unemployment – negative multiplier effect
o Stable prices
o Stronger exchange rates
o Lower interest rates
o YED products are likely to suffer greatly during economic downturns


Social
 Over time there is likely going to be changes in the way society operates.
 Although social and cultural changes tend to be gradual, they can still have an impact:
o Increase in people going to uni – improved quality of human resources
o Ageing Populations
o Increased migration – greater available labour forces and consumer market
o Increase focus on health

Technological
 Business often welcome technological change as it allows for greater productivity and
efficiency allowing them to generate larger profit margins
o Can shorten product life cycles
o Replace labour with capital
 New tech allows for lower cost per unit
o Improved communication between seller and buyer as well as advertisement and
promotion opportunities
 Social media

Legal
 The government provides the legal framework in which business operate.
 However, it also directs legislation at business to protect vulnerable groups that might
otherwise get exploited
o Taxes

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