P5- Explain the external factors that influence a selected business considering
trading internationally.
I will first talk about PESTLE and state what it is as well as talk about what it
involves below. PESTLE analysis is very important because it plays a very
important role within the extension and growth of a business. It is the key into
planning and making strategies for a businesses set up or next move.
Businesses are operating in a world that is always changing, because of this
There are external factors that can impact a business when trading
internationally. These factors can sometimes be positive and at times can also
be negative. External factors are something a business cannot control but a
business can react to these factors and make certain decisions to keep them as
successful as they can. Global factors can influence a business are social,
Political, legal technological, economic, and environmental. (PESTLE)
External influences
Political Factors
Political factors involve the decisions and laws that governments make. These
include: Tax, Law, and political Stability.
If the government raise or lower corporation tax, this will impact on profits of a
company. They can also affect businesses by increasing value-added tax on
certain products or business rates.
The government can bring in new laws such as the “national minimum wage”,
This impacts on profits and the employment rights. Governments can also
implement new legislation on health and safety, meaning that a company has
to change the way it operates by training its employees, for example.
The vote to leave the European Union, also known as Brexit, may have an
effect on the way UK companies trade in the single market of the EU. The
impact may be negative (loss of trade with EU customers) or positive (less
restrictions placed on firms by EU lawmakers). Scottish fishermen, for instance,
hope that leaving the EU will help boost their market. On the other hand Some
UK-based car manufacturers are worried about losing out on free access to
wealthy customers in France and Germany.
Vietnam and china are both communist states, so this means that trading and
doing business with them will be much more challenging than other countries
,and will potentially have more restrictions. Most countries around the world
are democrats rather than communist. However, even these countries are
influenced by different political viewpoints with regard to international trade.
Some governments may aim to protect employment in their economies and,
therefore may be less positive about international businesses coming into their
countries.
Economic Factors
Economic factors can include Economic growth, interest rates, unemployment,
inflation and exchange rates.
International enterprises are also affected by the economic conditions of the
country in which they operate in. Economic conditions can have a huge impact
on the ability of customers to buy products in that country and on the business
as a whole. These factors involve changes in the global economy. A rise in living
Standards would ultimately imply an increase in demand for products thereby
providing greater opportunities for businesses to make profits an economy
witness's fluctuations in economic activities this would imply that in case of a
rise in economic activity the demand of the product will increase and hence
the price will increase in case of reduction in demand the prices will go down
business strategies should be developed keeping in mind these fluctuations.
Other economic changes affecting business include changes in interest rates,
wage rates and inflation rates. In the event of low interest rates and an
increase in demand, companies will be encouraged to expand and take risks.
Business strategies should therefore have room for such fluctuations IR can
affect international businesses as interest rates affect the amount of money
borrowed by a company and also the amount of money left by potential
customers after they have paid high IR bills for loans and mortgages, and this
affects spending power.
Social factors
Social factors of things that affect the habits and spending of customers. These
include: Demographics, lifestyles, tastes and trends. Social factors, such as
education, awareness and trends and the status of people in society, influence
consumer behaviour in the purchase of various products and services. The
social environment and culture, such as customs, lifestyles, and values, also
vary from country to country, that further directly affects international
business.
, Demographic changes are most widely used to describe changes in population,
such as birth rate, life expectancy and immigration levels. For example,
statistical evidence shows that the population of the United Kingdom is getting
older. This demographic data is helpful for firms that provide products and
services to older people and is an indicator of the strength of the "grey
pound." (money that elder people, as a group, have available to spend).
Lifestyles are also changing. We are more healthy-conscious, so healthy eating
and eating habits have become more important to our customers. Food
packaging lists the nutrition information. More smart devices such as
pedometers and fitness trackers are used.
Tastes and trends are also changing constantly, for example the shoe “Jordan
1” has become very popular and is now a shoe with a huge demand by its
customers globally. We can say this is a current trend because more and more
people had decided to start wearing these shoes in the last year. The previous
trend in the UK was the shoe “Air max” when it was first released it was selling
fast in many retail stores and kept getting sold out but when the “Jordan 1”
was released the demand for the “Air max” died down by a significant amount.
Technological Factors
Technological factors refer to the ways new practices and equipment can
affect business and these include the following. Information communication
Technology also known as (ICT) can make business processes and
communication better and more efficient. Firms also have to keep their
hardware and software up to date. If they do not, they risk being seen as old
fashioned by consumers and also in danger of becoming obsolete.
Research and development
Research and development refers to the steps businesses take in the
innovation of new products, systems and services. In recent years research and
development has led to the introduction of 3D printers, smart phones, tablets
and a multitude of apps. Innovations could have a major impact on companies
and can destroy a traditional company sometimes. Kodak used to produce and
sell 80% of the world's films for cameras, for instance. But the innovation of
digital cameras has caused a sharp shrinkage in the camera film market.
trading internationally.
I will first talk about PESTLE and state what it is as well as talk about what it
involves below. PESTLE analysis is very important because it plays a very
important role within the extension and growth of a business. It is the key into
planning and making strategies for a businesses set up or next move.
Businesses are operating in a world that is always changing, because of this
There are external factors that can impact a business when trading
internationally. These factors can sometimes be positive and at times can also
be negative. External factors are something a business cannot control but a
business can react to these factors and make certain decisions to keep them as
successful as they can. Global factors can influence a business are social,
Political, legal technological, economic, and environmental. (PESTLE)
External influences
Political Factors
Political factors involve the decisions and laws that governments make. These
include: Tax, Law, and political Stability.
If the government raise or lower corporation tax, this will impact on profits of a
company. They can also affect businesses by increasing value-added tax on
certain products or business rates.
The government can bring in new laws such as the “national minimum wage”,
This impacts on profits and the employment rights. Governments can also
implement new legislation on health and safety, meaning that a company has
to change the way it operates by training its employees, for example.
The vote to leave the European Union, also known as Brexit, may have an
effect on the way UK companies trade in the single market of the EU. The
impact may be negative (loss of trade with EU customers) or positive (less
restrictions placed on firms by EU lawmakers). Scottish fishermen, for instance,
hope that leaving the EU will help boost their market. On the other hand Some
UK-based car manufacturers are worried about losing out on free access to
wealthy customers in France and Germany.
Vietnam and china are both communist states, so this means that trading and
doing business with them will be much more challenging than other countries
,and will potentially have more restrictions. Most countries around the world
are democrats rather than communist. However, even these countries are
influenced by different political viewpoints with regard to international trade.
Some governments may aim to protect employment in their economies and,
therefore may be less positive about international businesses coming into their
countries.
Economic Factors
Economic factors can include Economic growth, interest rates, unemployment,
inflation and exchange rates.
International enterprises are also affected by the economic conditions of the
country in which they operate in. Economic conditions can have a huge impact
on the ability of customers to buy products in that country and on the business
as a whole. These factors involve changes in the global economy. A rise in living
Standards would ultimately imply an increase in demand for products thereby
providing greater opportunities for businesses to make profits an economy
witness's fluctuations in economic activities this would imply that in case of a
rise in economic activity the demand of the product will increase and hence
the price will increase in case of reduction in demand the prices will go down
business strategies should be developed keeping in mind these fluctuations.
Other economic changes affecting business include changes in interest rates,
wage rates and inflation rates. In the event of low interest rates and an
increase in demand, companies will be encouraged to expand and take risks.
Business strategies should therefore have room for such fluctuations IR can
affect international businesses as interest rates affect the amount of money
borrowed by a company and also the amount of money left by potential
customers after they have paid high IR bills for loans and mortgages, and this
affects spending power.
Social factors
Social factors of things that affect the habits and spending of customers. These
include: Demographics, lifestyles, tastes and trends. Social factors, such as
education, awareness and trends and the status of people in society, influence
consumer behaviour in the purchase of various products and services. The
social environment and culture, such as customs, lifestyles, and values, also
vary from country to country, that further directly affects international
business.
, Demographic changes are most widely used to describe changes in population,
such as birth rate, life expectancy and immigration levels. For example,
statistical evidence shows that the population of the United Kingdom is getting
older. This demographic data is helpful for firms that provide products and
services to older people and is an indicator of the strength of the "grey
pound." (money that elder people, as a group, have available to spend).
Lifestyles are also changing. We are more healthy-conscious, so healthy eating
and eating habits have become more important to our customers. Food
packaging lists the nutrition information. More smart devices such as
pedometers and fitness trackers are used.
Tastes and trends are also changing constantly, for example the shoe “Jordan
1” has become very popular and is now a shoe with a huge demand by its
customers globally. We can say this is a current trend because more and more
people had decided to start wearing these shoes in the last year. The previous
trend in the UK was the shoe “Air max” when it was first released it was selling
fast in many retail stores and kept getting sold out but when the “Jordan 1”
was released the demand for the “Air max” died down by a significant amount.
Technological Factors
Technological factors refer to the ways new practices and equipment can
affect business and these include the following. Information communication
Technology also known as (ICT) can make business processes and
communication better and more efficient. Firms also have to keep their
hardware and software up to date. If they do not, they risk being seen as old
fashioned by consumers and also in danger of becoming obsolete.
Research and development
Research and development refers to the steps businesses take in the
innovation of new products, systems and services. In recent years research and
development has led to the introduction of 3D printers, smart phones, tablets
and a multitude of apps. Innovations could have a major impact on companies
and can destroy a traditional company sometimes. Kodak used to produce and
sell 80% of the world's films for cameras, for instance. But the innovation of
digital cameras has caused a sharp shrinkage in the camera film market.
