The document discusses the internal and external factors impacting a business's performance. Internal factors include finance, staff capability, information availability, management abilities, and cost changes, while external factors encompass political, economic, social, technological, environmental, and competitive influences. Each factor outlines how they can affect decision-making, profitability, and operational strategies within firms.

1. INTERNAL AND
EXTERNAL BUSINESS
ENVIRONMENT

2. INTERNAL ENVIRONMENT
• These are factors from inside the finn that could
affect performance.
1. Finance Available — without money the firm
may
not be able to do what they wish.
2. Ability of Staff the more capable staff
are the more productive they
will be.
3. Information Available — the better

3. 4. ICT Availability — this can
influence the quality and quantity of
what is produced
5. Ability of Management — good
managers
will make good decisions
6. Changes in Costs — increases in
wages or raw materials can affect the
profitability of the firm

4. EXTERNAL ENVIRONMENT
• This is summarised
as:
• Political
• Economic
• Social
• Technological
• Environmental
• Competitive

5. POLITICAL
• Laws passed in the UK and the EU can affect the
what a business does.
• E.g. shops are not allowed to sell alcohol on
Sunday mornings or the smoking ban in public
places.
• Failure to follow laws will result in fines.
• Other ways the government can influence is
through setting taxation rates and investment in
infrastructure.

6. ECONOMIC
• This includes changes in interest rates,
exchange rates, inflation and the economic
cycle.
• If interest rates are high this could stop
firms from borrowing money also
customers are less likely to borrow or use
credit cards to make purchases.

7. • If the pound is high against other
currencies this makes it hard to export
goods abroad, reducing the number of
sales.
• If inflation is high, the prices of raw
materials can be expensive which
can reduce profits.
• If the economy is in recession, people
tend to be unemployed or worried about
losing their job, therefore not spending
money on luxury goods.

8. SOCIAL
• DEMOGRAPHIC CHANGES
• This is to do with the size and distribution of
the
population of a country.
• E.g. The UK has an ageing population, this has led
to a rise in products aimed at older people
(SAGA) and finns recruiting older workers
(B&Q)

9. • SOCIO-CULTURAL CHANGES
• This is about changes in lifestyle and attitude.
• E.g. More women working has seen a rise in ready
meal and later opening hours
• More concern about the environment,
forcing firms to maybe use recycled products.
• People have more leisure time, changes in attitude
to single mothers have also affected the types
of products offered.

10. TECHNOLOGICAL
• Firms need to keep up-to-date with the
latest
technology in order to remain competitive.
• Have seen a huge growth in e-commerce
(buying and
selling online)
• Use of machinery in the production
process — more efficient and cheaper.

11. ENVIRONMENTAL
• Firms are aware that they have to be
more environmentally friendly, not only
because that is what customers want, but
can be forced by the government to do so.
• It can also include storms, floods, noise.
All
these can affect how a business operates.

12. COMPETITIVE
• What the competition is doing can affect
how a business operates.
• Firms now not only face
domestic competition but also
foreign.
• Have to keep up or be better than
your competition to keep your
customers.