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
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
