Analysing the external environment to assess opportunities and threats (A Level) flashcards

Topic 9: Analysing the external environment to assess opportunities and threats

PESTLE

Political, economic, social, technological, legal and environmental factors in the external environment. It gives a structured outward look and early warning and feeds the O and T of SWOT, but dates quickly and does not rank the factors.

Appreciation vs depreciation of the home currency

Appreciation makes exports dearer abroad and imports cheaper at home. Depreciation does the reverse. Volatility is unpredictability, not direction, and makes costing and planning harder.

The rate moves from £1 = ₹108 to £1 = ₹100. A component costs ₹27,000. Find its cost in pounds at each rate.

27,000 ÷ 108 = £250; 27,000 ÷ 100 = £270: an 8% rise. The pound has depreciated (it buys fewer rupees).

A product sells for £60. The rate moves from £1 = CHF1.10 to £1 = CHF1.04. Find the Swiss franc price at each rate.

60 × 1.10 = CHF66.00; 60 × 1.04 = CHF62.40: a fall of 3.60 ÷ 66 × 100 = 5.45%, so it is cheaper for Swiss buyers.

A price index rises from 140 to 147. What is the inflation rate?

(147 − 140) ÷ 140 × 100 = 5%. Divide by the earlier index value, not by 100.

Lower inflation vs deflation; slower growth vs recession

A lower inflation rate means prices are still rising, only more slowly; deflation means the price index falls. Slower growth means GDP still rises; in a recession GDP falls.

Tariff vs quota vs trade regulation

Tariff: a tax on imports. Quota: a limit on the quantity imported. Trade regulation: standards, licences or paperwork. All are forms of protectionism.

Income tax vs sales tax vs corporation tax: effect on a business

Income tax: affects disposable income and take-home pay. Sales tax: affects the shelf price (for example £24 + 20% = £28.80). Corporation tax: affects profit after tax, and so funds for dividends and investment.

Digital vs disruptive technology

Digital technology improves how firms work. Disruptive technology creates a new product or business model that displaces established ones, often starting as a cheaper, simpler offer.

Shareholder concept vs stakeholder concept

Shareholder concept: the firm exists mainly to maximise owners’ returns. Stakeholder concept: the firm should balance the interests of everyone it affects.

CSR: arguments for and against

For: reputation, loyalty, recruitment, investor support, lower long-term risk. Against: cost and lower short-term profit, benefits hard to measure, risk that claims do not match conduct.

A firm has £500,000 outstanding on a loan. The interest rate rises from 4% to 5.5%. Find the change in annual interest.

500,000 × 0.04 = £20,000; 500,000 × 0.055 = £27,500. Annual interest rises by £7,500. Use the outstanding balance, not the original loan.