External Factors That Affect Businesses

Businesses
Allbusinesseswillbeaffectedbythingsthathappen
outsidethebusinessthattheycannotcontrol
ThesearecalledEXTERNALfactors
Thereareanumberofthesefactors,oftenreferredto
asSLEPTAnalysis
Thisacronymstandsfor:
Social
Legal
Economic
Political
Technological

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Social Factors
Factors
Thereare2typesofsocialfactorsthataffect
businesses
SocialFactors
InternalAffects
Demographics

Lifestyle

ExternalAffects
SocialCost&
Benefits

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Demographics
Demographics
Demographyisthestudyofthepopulation
Thereare2areasthatbusinessesareconcernedwith:
TheWorkingPopulation
Peopleagedbetween16and65,whoareabletowork.
Thisisimportanttofirmssinceitwilldeterminethenumberof
workersavailabletothem.

ThePopulationStructure
Differentagegroupsbuydifferentproductssochangesinthe
populationaffectthedemandforproductsthatfirmsmake.

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Changes in the UK Population

Population
ThestructureoftheUK
populationhaschanged
considerablyinthelast40
years
Thiscanhaveamajor
influenceonbusinesses
E.g.closureofmiddleschools

Usethepopulationpyramid
giventolistbusinessesthat
will(a)dowelland(b)suffer
becauseofthecurrent
structureoftheUK
population
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Lifestyle
Lifestyle
Thisisconcernedwith3factors
Fashionsandtrends
Tasteschange,sobusinessesmustbeabletoreactquickly
E.gMcDonaldsofferingmorehealthymeals

Beliefsandattitudes
Whatsocietyseesasacceptablechanges
E.g.theneedformorechildcareprovision

Ethics
Customersaremuchmoreawareoftheenvironmentandare
againstexploitation
E.g.Nikehashadtojustifythewagesandconditionsofthe
workersinsomeofitsfactories

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Social Costs and Social Benefits

Benefits
Whenafirmmakesdecisionstheywillhave2effects:
PrivateCostsandPrivateBenefits
thesearethecosts/profitsthefirmhas

ExternalCostsandExternalBenefits
thesearethecosts/benefitsobtainedbypeople
outsidethebusiness

So:

Social Costs

= Private Costs + External Costs

and

Social
Benefits

Private
Benefits

External
Benefits
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The Role of Government

Government
Wehavelittlecontroloverlocalbusinessesdecisions
Withoutgovernmenttheycoulddowhattheywant
So,oneofthegovernmentsrolesistomakesurethat:
socialcosts<socialbenefits
Forexample:
WhenWolvesredevelopedtheirstadiumtheyincurredthe
financialcosts,andnowbenefitfromincreasedrevenues.
However,theirdecisionwouldalsoaffectthelocalresidents,
whohadtoendurethenoiseanddustofthebuildingwork!
Presumablythesocialcostswerelessthanthesocialbenefits
sotheyweregivenpermissiontodoit!

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The Role of Pressure Groups

Groups
APressuregroupisagroupofpeoplewhohave
similarviewsandbeliefs
TypesofPressureGroups
Local
E.g.
Wolverhampton
AirportAction
Group

National
E.g.Which
(TheConsumers
Association)

International
E.g.Greenpeace

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What Do Pressure Groups Do?

Do?
Knowingthatbusinessesdonotlikeittheywilltryto
causeasmuchbadpublicityaspossibleusing:
Advertising/Leaflets/Posters
PublicMeetings
Petitions
LobbyingMPs
Boycottingproducts
Organisingdemonstrationsorsitins

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