External Factors PDF

1 13.External Factors Business decisions are affected by a range of external factors ……………………………………………………………………………………………., e.g. the UK vote to leave the European Union trading bloc The response of the business …………………………………………………………......

1 13.External Factors Business decisions are affected by a range of external factors ……………………………………………………………………………………………., e.g. the UK vote to leave the European Union trading bloc The response of the business …………………………………………………………... Businesses may adapt the products they sell or re-organize the workplace to ensure they meet the challenges and opportunities presented Business decisions can be affected by political, environmental, social, or technological factors (PEST) Political Factors that Impact Business Political pressure come from …………………………………………………………… ……………………………………………………………………………………….. Environmental groups such as Greenpeace have publicized environmental damage caused by businesses, affecting their reputation Government decisions influence business activity in a variety of ways Political Factor Explanation In stable regions, businesses can plan their activities and invest in the knowledge that political factors are unlikely to have an ……………………… unexpected impact ……………………… ……………………… If governments make trade agreements with other countries or join trade blocs businesses may benefit from easier trade of goods and services Tax rates can be raised or lowered according to government priorities E.g. Carbon taxes encourage manufacturing and energy businesses to reduce emissions …………………….. Tax loopholes can be closed to increase tax revenues and improve fairness in the tax system E.g. From 2024, the UK government will require online marketplaces such as E-bay to report sellers' revenues so that Resources: Edexcel IGCSE (9-1) Text Book & Internet  2 individuals earning more than a modest amount can be taxed on earnings Governments restrict the sale of some products to buyers in other countries E.g. Arms manufacturers are usually prohibited from selling weapons to unstable foreign regimes …………………………. Protectionist measures such as the application of tariffs and quotas can be applied to imported goods E.g. The US government applies tariffs to most Chinese manufactured goods Governments set budgets for key public services, including education, healthcare, transport and national security E.g. The Portuguese government prioritises spending on infrastructure and to grow its economy ………………………… Spending on public services has risen while labour costs have fallen Exports have risen and increased foreign direct investment is taking place in the growing economy Environmental Factors that Impact Business Both changing consumer ………………………………………………………………. …………………………………………………………….. impact business operations in several ways. ……………………………………………… Many governments are taking steps to make public transport more environmentally friendly, reduce vehicle usage and encourage the use of electric vehicles o Businesses may need to upgrade to electric vehicle fleets, increasing costs in the short term o Improved public transport may increase the accessibility of businesses for workers and customers ……………………………………………… Strict regulations dictate the way businesses dispose of manufacturing waste to avoid pollution Resources: Edexcel IGCSE (9-1) Text Book & Internet  3 o Higher charges for disposal, as well as limits on the volume of permitted waste, increase business costs o Some businesses may identify ways to increase the amount of waste they recycle or reuse ……………………………………………… Some governments have prioritized the switch from fossil fuels to green energy production, such as solar and wind power o In the long term, this should mean that businesses are likely to enjoy lower and more consistent energy costs ……………………………………………… Global warming is set to cause permanent changes to the world's climate o Businesses in high-risk areas face more frequent disruption due to floods or intense heat conditions o Insurance premiums may rise, increasing business costs o Some businesses may relocate to less exposed regions or take advantage of changed climates in previously unsuitable areas Business impact on the environment can be controlled by governments, which can legislate or take enforcement action against those that break environmental laws Governments Control and the Environment Legislation Fines Limits Curb business activities that cause Change laws to make Impose financial penalties on environmental environmentally-damaging businesses that break damage practices illegal environmental regulations E.g. Pollution E.g. Ban hazardous materials in and order them to clean up environmental damage permits allow manufacturing processes businesses to pollute up to a certain limit ……………………………………………… This means people should satisfy their basic needs and enjoy improved living standards without compromising the quality of life of future generation. Resources: Edexcel IGCSE (9-1) Text Book & Internet  4 To help reduce resources depletion business could - Design packaging that can be reused or recycled - Use more energy-efficient equipment or renewable energy sources. Social Factors that Impact Business Social factors include ………………………………………………………………………… ……………………………………………………………………………………………………….. As societies change, businesses need to carry out ongoing research to ensure that they continue to meet stakeholder needs Social Factor Explanation Education can change the level of skills in an economy A better educated workforce may mean that the economy can move from a primary dominant sector to a secondary sector o Higher levels of education open up well-paid employment opportunities ………………… Knowledgeable, skilled employees help develop innovative products o E.g. India's young and well-educated population is highly skilled in IT, leading to many multinationals locating support services in the country Some countries have seen significant movement of populations towards cities (urbanisation) o This provides increased labour and creates new markets for businesses operating in cities ……………… In some countries, the lack of availability of lower-skilled labour has caused significant problems o E.g. UK food producers have struggled to recruit domestic seasonal workers to pick and process crops since 2016 Consumers are better informed about global issues than ………………… ever before ………………...o E.g. Indonesia, Vietnam and the Philippines have ………………… customers that are more eco-friendly than the global average Resources: Edexcel IGCSE (9-1) Text Book & Internet  5 Businesses need to meet these consumer needs by providing goods and services that allow them to shop locally, be environmentally friendly and be ethical Ageing populations as a result of reduced mortality and low birth rates create new markets for businesses o E.g. Businesses such as Arts Abroad offer focused trips ……………….. targeted at single, mature travellers ………………. Individuals live healthy lives for longer due to improved healthcare and remain in work for longer o Businesses may benefit from the loyalty of older workers but may need to offer more flexible contracts Groups such as women and those with disabilities increasingly work, increasing labour supply for businesses o E.g. Insurance company Allianz operates a positive disability discrimination policy, offers a range of flexible working ……………….. options and runs an internal network for employees with ……………….. disabilities Businesses may need to consider access arrangements and vary working contracts to attract these workers Technological Factors that Impact Business Advances in technology can have a significant positive impact on business operations IT technology can improve communication and support administrative functions Ways IT can be used to Improve Business Functions Email & Messaging Bespoke finance Databases Online technologies Apps programs These allow These allow for e- efficient and These are used to commerce activity, online This technology speeds convenient process transactions marketing and the rapid up communication storage and quickly and sharing of data processes interrogation of accurately data Resources: Edexcel IGCSE (9-1) Text Book & Internet  6 The use of robots and automation in manufacturing and agriculture has increased productivity, reduced costs and improved worker safety o Some industries now employ very few workers in production roles, reducing wage costs o In other industries, these technologies have helped to solve the problem of worker shortages Electronic banking has reduced the need for cash- handling, which improves security and reduces costs o Businesses hold less physical money on their premises, reducing the need for expensive security arrangements o In-person banking takes time and may be less accurate than digital banking Keeping up with new technology can increase businesses' capital expenditure costs and may require external finance Resources: Edexcel IGCSE (9-1) Text Book & Internet