OCR A Level Business: External Influences Facing Businesses — Revision Notes

Condensed for the final weeks. For the full explanation, use the External Influences Facing Businesses study guide.

Markets

Market — where buyers and sellers exchange a good or service. Market size = total value or volume of sales in a market; market growth = the rate of change in that size over time. A business grows its market share by taking sales from competitors (pricing, product differentiation, marketing) or by growing the whole market.

Structure	Number of firms	Pricing power
Monopoly	One dominant firm	High
Oligopoly	Few large firms	Interdependent, moderate-high
Monopolistic competition	Many firms, differentiated products	Low-moderate

Treat these as points on a spectrum of competitive intensity and decision-making power, not four fixed boxes — a real firm’s position on that spectrum, not just its category label, is what an evaluative answer should identify.

Demand and supply: demand curve slopes down (price ↑, quantity demanded ↓); supply curve slopes up (price ↑, quantity supplied ↑). Equilibrium is where they cross. A shift in a determinant (income, tastes, cost of production, number of firms) moves the whole curve, causing a shortage or excess at the old price until a new equilibrium is reached. Practise sketching the shift, not just naming the determinant.

Market forces and competition

Physical vs. non-physical markets: physical = traditional shops/premises; non-physical = online/digital — firms weigh lower overheads and wider reach (digital) against lower footfall/trust barriers (physical), often operating in both.

Market dominance can arise from organic growth, mergers or acquisitions. The UK regulates dominance to protect competition and consumers (e.g. blocking or conditioning mergers that would harm competition) — dominance is about decision-making power over price/output relative to rivals, not simply being a large firm; a large firm in a highly contestable market may have little real dominance.

Firms enter a market where profit opportunity and low barriers exist, and exit where losses persist or barriers to survival rise — the strength of competition directly affects both decisions.

The global context

Globalisation — the growing interconnectedness of economies, markets and cultures — is driven by: the internet and communication technologies, e-commerce, trade liberalisation, transport infrastructure, and multinationals expanding across borders.

International trade: free trade (no/low barriers) vs. protectionism (tariffs, quotas — barriers to trade). Businesses trading internationally must weigh exchange rates and currency conversion, trading blocs (preferential access within, barriers without), and practical factors: language, culture, logistics, currency.

EU/Eurozone membership — advantages for a UK business include tariff-free access and regulatory alignment; disadvantages include loss of independent monetary/trade policy and compliance costs — always argue both sides for a UK business specifically, not the EU in the abstract.

Emerging markets offer growth opportunity but carry higher political/currency risk — evaluate opportunity against risk for the specific business in the question, not generically.

PESTLE-style factors

Factor	Core content
Political	Stability/uncertainty; government policy — local, national, EU, international
Economic	Key indicators, taxation, government spending, subsidies, monetary/fiscal/supply-side policy, GDP, the business cycle
Social	Demographic and attitude change affecting demand and labour supply
Technological	The digital revolution and the information age — treat as its own factor, not folded into “technological” generally
Ethical	A business choice — distinct from law
Legal	Compulsory — employment, equality, company/partnership structure, health and safety, data protection, IP, planning, environment, consumer protection, contract, financial conduct
Environmental	Sustainability pressures and regulation

Ethical ≠ legal. Law is compulsory and enforceable; ethics is a business choice beyond the legal minimum. Exam questions test this distinction directly — do not treat the two as interchangeable.

Worked link: connecting factors, not listing them

A UK manufacturer faces rising import costs after a currency depreciation. Link: exchange rate movement (global context) → higher cost of imported raw materials (economic factor) → squeezed margins or higher prices (business impact). A strong answer traces this chain for the named business, rather than separately describing “economic factors” and “the global context” as unconnected checklist items — OCR weights evaluation and analysis as heavily as knowledge.

How Topic 2 links to Topic 1

Topic 1 (Business Objectives and Strategic Decisions) covers what a business decides internally; Topic 2 covers the market and environmental forces a business must respond to but cannot fully control. A strong exam answer treats these as connected – for example, a firm’s strategic objectives (Topic 1) should adapt when market forces or PESTLE factors (Topic 2) shift significantly, rather than staying fixed regardless of the external environment. Examiners reward candidates who can trace this link explicitly: naming which external influence has changed, and then explaining how a specific strategic decision should respond, rather than discussing the two topics as entirely separate bodies of content.

Common mistakes to avoid

• Listing PESTLE factors generically instead of applying a named factor to the named business in the question.
• Treating globalisation as purely positive — always weigh the added exposure to competition, currency shocks and international shocks.
• Equating firm size with market dominance.
• Blurring ethical and legal factors together.
• Discussing “technological factors” without separately crediting the digital revolution’s own distinct opportunities and threats.

Quick self-test

• State the difference between market size and market growth.
• Explain why market structures should be treated as a spectrum, not four fixed types.
• Give two facilitators of globalisation.
• Name one advantage and one disadvantage of EU/Eurozone membership for a UK business.
• Define the difference between an ethical and a legal factor, in one sentence each.

Related resources

External Influences Facing Businesses study guide | External Influences Facing Businesses practice questions

Official syllabus

OCR, AS and A Level Business H031/H431 Specification, Area of Study 2, External influences facing businesses, https://pastpapers.co/ocr/A-Level/Business-H031-H431/Specifications/170837-specification-accredited-a-level-gce-business-h431.pdf, fetched and verified in full 2026-09-02.