The effect of the external environment on costs and demand - Business studies - AS level

The effect of the external environment on costs and demand - Business studies - AS level

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Publicated on Sep 22, 2015 - Give your opinion

In this revision sheet of business studies, it is question of the effect the external environment on costs and demand.

This course will help you understand how the external environment can affect costs and demand using methodologies reputed among scholars. Questions at the end will help you to assimilate these principles.

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Content of this document of Sciences > Business studies

PESTEL: Understanding the External Environment of a Business

The social factor constitutes all the components linked to cultural aspects (e.g. traditions and religions) and demographic trends – current and projected. Therefore, it includes a wide variety of elements which can have an impact on businesses – relevant elements might change from one firm to another. The important point to notice is that all of these factors could change over-time, and thus, need to be taken into consideration by directors when planning – the composition of demographics might change rapidly in terms of age, education or ethnicity for example.

The environmental section takes into account all the elements associated with ecological issues such as air pollution, water processing, fair treatment of animals and so on. It is greatly influenced by political and legal factors which can impose restrictions and quotas in regard to the impact of companies on the fauna and flora. While technological advancements provide new means to deal with the problems encountered, they also provide entrepreneurs with new market opportunities.

Effects on Costs and Demand

Business ethics is an internal factor that combines elements such as corporate values, corporate responsibility and beliefs. It establishes rules and moral codes for the conduct of its operations. This category is subject to different interpretations and could create tensions among stakeholders.

The effects of macroeconomic factors on businesses could be determining for its success or failure. Indeed, growing markets offer more opportunities to entrepreneurs while stagnating and receding markets could threaten most companies’ sustainability. On the other hand, environmental issues could have an adverse effect on the costs of a business. In fact, companies could be convicted by a court for wrongdoing their environment whether directly or indirectly. However, the emergence of “green” technologies provide with alternatives profitable to the environment and to investors.


Posted on Oct 21, 2016

Really usefull :)

Posted on Oct 16, 2016

Really loving this! :D

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