The Business Environment

Analyse political, legal, economic, social, technological, environmental and competitive forces and apply them to business decisions.

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Use this sheet in the last ten minutes before a practice attempt.

• Government influences business as law-maker, customer, employer, investor and infrastructure provider.
• Process personal data lawfully, fairly, transparently and securely; minimise and retain it only as needed.

Every examinable point in this chapter, in order.

1PESTEL classifies external signals by their source; effects frequently cross categories.
2Political choices become legal obligations when enacted and enforceable.
3Data protection governs appropriate processing; security protects confidentiality, integrity and availability.
4Macroeconomic objectives include growth, price stability, employment and external balance.
5Fiscal policy uses tax and spending; monetary policy uses interest rates, money and credit.
6Own-price changes cause movement along demand or supply; other determinants shift curves.
7Elasticity predicts the sensitivity of quantity and the likely revenue effect of price changes.
8Competition depends on entry, buyers, suppliers, substitutes and rivalry.
9Social, technological and environmental change create opportunities and risks simultaneously.
10Credible sustainability claims are bounded, measurable, transparent and evidence-based.

Underline the source of the change before selecting a PESTEL category.
For economic-policy questions, identify the instrument first and only then predict the effect.
For demand and supply, ask whether the product's own price changed; if not, look for a curve shift.
In two-answer questions, test each statement independently and select exactly two.
Treat absolute words such as 'always', 'eliminates' and 'guarantees' with caution.
In scenarios, link the fact to the model and then to the organisational consequence.

External environment: Forces outside an organisation that affect its choices, operations and performance.
PESTEL: A framework for analysing political, economic, social, technological, environmental and legal influences.
Fiscal policy: Government decisions about taxation, public spending and borrowing.
Monetary policy: Management of interest rates, money and credit, normally by a central bank.
Inflation: A sustained rise in the general price level, reducing the purchasing power of money.
Economic growth: An increase in an economy's real output over time.
Demand: The quantity consumers are willing and able to buy at each price over a period.
Supply: The quantity producers are willing and able to sell at each price over a period.
Price elasticity of demand: The responsiveness of quantity demanded to a change in price.
Sustainability: Meeting present needs without compromising the ability of future generations to meet theirs.
Substitute: An alternative product or service that satisfies a similar customer need.
Barrier to entry: A factor that makes it difficult or costly for a new competitor to enter a market.

Political vs legal: Government priorities and choices versus binding rights and obligations.
Data protection vs security: Appropriate personal-data processing versus confidentiality, integrity and availability.
Disinflation vs deflation: Slower price growth versus a falling general price level.
Fiscal vs monetary: Tax/spending versus interest, money and credit.
Movement vs shift: Own-price change versus another demand or supply determinant.
Competitor vs substitute: Same-category rival versus a different solution to the same need.
Compliance vs sustainability: Minimum legal duty versus broader long-term resilience and responsibility.