hello welcome back to uh another video for a level business aqa um we're moving now on to 3.1.3 uh which is basically just pistol um in a bit more depth really um so that's what we're gonna go through uh today um so this is all to do with the external environment so things are outside of the control of the business and this crops up in lots of different areas throughout the the two year a level um but this is the main part of it but it does come up quite a bit in year 13 as well so um pestle analysis is the first topic you need to get your head around so there's obviously six parts of it so political economic social technological legal uh and either ethical or environmental um now we we can um look at where we're gonna look at all of these individually as we go through this because there's a fair bit of depth to each of them and actually that depth increases um as you go into year 13. so here's some things that um are likely to be within p within the political section of the politics pesticide things like competition policy you know are they uh does the the country have particular protection to stop um big businesses getting too big um you know how do they protect smaller businesses things like that is to do a competition policy industry regulation again things to protect certain businesses or protect certain situations with it within an industry what the government spending and taxation policies you know does the government spend a lot of money on things like infrastructure or do they not what's tax policies like is you know corporation tax really high or is it really low um what vat is that high is that low is it increasing over time is it decreasing over time uh business policy and incentives you know what is the the political standpoint on businesses how do they support them a lot are they left their own devices are there um things like subsidies available to the businesses to help them grow and help them improve businesses generally will be supported by government government will want to support businesses to grow and to do better because obviously then that creates things like employment it hopefully would enable them to make more of a profit which they the government can then obviously tax through corporation tax so in the next bit economics these are some of the some of the economic factors that will have an impact on a business again remember all six of these are outside of the control of a business a business can't control interest rates okay uh so interest rates then two ways um obviously uh a reward on savings so if a business has got lots of things like cash reserves if interest rates start to grow that can benefit them and then also interest rates is an additional amount that needs to be paid back uh for borrowed money um so obviously if interest rates start growing that might benefit a business with large cash reserves but it might you know make it more difficult for a business that's got a lot of debt uh and obviously that's vice versa as well if you're a business that uh if interest rates start to fall okay it might make it easier for you to borrow money because you've got less to pay back in essence um consumer spending and income you know what are our customers doing if they have money do they have high levels disposable income low levels disposable income uh exchange rates how does our currency compare with other countries is it favorable again it's going to depend on how much we trade with other countries how much we're impacted by exchange rates even a really like a uk business like a local cafe is still going to be impacted by exchange rates because they might be buying in coffee beans from abroad and things like that so although you might think oh it's a local business they still might be impacted um by exchange rates but they might be impacted less so uh than a company such as like amazon or something like like that um economic growth um is the growth of the economy uh is it growing in that country so a measurement of that is gdp which we'll come onto in a bit uh gross domestic products so we will look at that but basically within the country you know is there um output growing over a period of time is the economy doing well in that country up next is social then probably one of the more difficult ones to explain um but and sometimes you can refer to this as like social trends that might be a better way of remembering it um demographic change so what's going on with the demography within a country you know do you have a large aging population uh do you have a lot more uh female than men or men than women uh do you have maybe not so many young people um are they all sort of uh more sort of urbanized are they in more sort of city locations and things like what's going on in terms of the demography of the country uh impacts of pressure groups are how much pressure how much pressure how much like impact do they have on businesses do they have a lot of weight and power or do they not um consumer tastes and fashion will obviously change throughout years um so again that will be an impact on a business um changing lifestyles as people do things like work from home more often and work virtually and things like that that obviously has an impact on businesses um so that's something outside their control that might impact on them they might have to make some changes technological or technology so any disruptive technology so new technologies that are coming in that maybe change the way things have been done over a long period of time uh adoption of things like mobile tech so uh like the majority of my food shopping i will do um via the app on the phone um new production process or anything sort of new technology that comes into the industry that helps produce things in a better or more efficient way um big data and dynamic pricing obviously businesses being unable to understand data um and being able to adapt and change their processes to that an example of that is dynamic pricing changing their pricing strategies quickly uh up next is a legal or legislation um so anything to do with laws this one can get slightly mixed up with politics sometimes but but slightly different uh so any laws or legislation that could impact on the business or any types of employment law um anything to do with things like minimum wage living wage increasing uh health and safety laws that you've got comply with environmental legislation you know things to do with making sure you're throwing away waste in the correct way all of that sort of stuff uh e then uh ethical and environmental um so we've got uh sustainability so you know a business being sustainable making sure they're you know not being incredibly bad for the environment and things like that acting in a way that is going to enable them to sort of keep going in the future and allow industry to keep going in the future tax practices as well making sure they're being ethical with that you know they're not shifting all their profits abroad to try and avoid paying our tax ethical sourcing so things like fair trade come into this bit so you know um thinking about our long supply chain and making sure we're not ripping people off just because we can and obviously stuff like pollution more of an obvious one for environmental and carbon emissions um making sure we're trying to reduce that over time and reduce our impact on the environment uh so then this as i said earlier i'll go on to a bit more depth on gdp so it's the value of output in the economy okay um and we can measure this and this will show uh economic growth okay so uh hopefully within a country or for the country will hope that the economic growth is growing over a period of time and the output of a country uh in terms of products and services value that should be growing over a period of time that would show that the the economy is doing well uh vice versa if it's declining and we've got negative gdp um that's obviously a sign of a recession and the country not doing so well from a financial point of view um demand is obviously how much do our consumers want of a good or service and obviously if demands higher that can lead to us being more creative with things like pricing strategies and we might be able to increase our price to those higher demands uh so what are real incomes and this is really topical at the moment um so real incomes basically measure the amount of disposable income consumers have it might be that wages have gone up by four percent but if um things like inflation have gone up by 10 or 11 in actual terms your disposable income has fallen so although you've got a four percent wage rise from your employer and you're delighted by that actually you're losing money because your money goes less far because things have become more expensive so it's well worth keeping an eye on inflation in the future because that compared to what your wage is changing buys is important to determine your real income and that's happening at the moment and we're seeing a lot of strikes because of that because real incomes are actually falling because inflation is growing faster than wage growth um so some key things then that will impact on your real incomes then so as i mentioned earlier just a minute ago price inflation uh things like wage growth obviously how fast your wages are growing in in an ideal world as an employee you want your wages to grow faster than inflation if it's not in essence um every year you're having a pay cut employment levels so what is the employment unemployment levels um uh you know are people in jobs out of a job uh interest rates obviously because obviously if interest rates grow you've got things like people that are on variable rate mortgages they're going to be paying back more each month and that chips into their disposable income reduces their real income and also any other government tax policies that they introduce or even take away household incomes are just one factor that affects spending then so there's a few more things that might impact on spending so real disposable income is what we just spoke about um what's your like employment and job security like if you feel like you're on the verge of losing your job um then again you're going to be spending less because you're going to be worried you're going to be saving money uh household wealth as well so obviously um uh like wages and salaries are just one way in which we uh can earn money so uh things like house prices increasing if people have got investments in shares if they grow that's one thing impact on spending as well um expectations so uh economic uncertainty so things like obviously the pandemic and things that had a big impact on economic uncertainty if people are uncertain they tend to save money rather than spend it and interest rates as well obviously i've kind of already talked about interest rates if interest rates start going up that makes borrowing more expensive um and that means that mortgages are more expensive and therefore it means less uh spending by consumers okay i've touched on interest rates already a couple of times but the two bits just to clarify road for saving and it's a cost of borrowing so it always works two ways okay so if interest rates go up you get a bigger reward for your saving but your borrowing becomes more expensive interest rates full you get less of a reward for your saving um and your cost of borrowing becomes cheaper because they've gone down now this is a kind of nice graph that shows uh the sort of last 20 30 years or so and interest rates so if we go back to sort of 1992 93 you can see interest rates are around about 10 so interest rates are really high at this point so in this situation you your best thing to do would actually be keep your money in your bank because obviously you'd be earning 10 interest on that at least because remember this is just uh base rate so um banks and things will usually offer um rates above this or in and around this rate so this is just sort of an average type look at things um so if it's 10 then obviously that is um really high for interest rates so in 1992 if you had some spare cash you'd stick it in the bank and you'd want to be saving it in 1992 if you wanted to buy a car okay i would be advising you not to borrow money to buy that car because your interest rate might be like 15 or something so you're gonna be paying back a huge amount extra on that borrowing fast forward to 2022 and i know as you can hopefully see on the graph it's slightly increased recently we're at one percent at this moment in time now one percent interest rate if you compare it to the last 20 30 years that is historically low that's unbelievably low okay so when interest rates are low if we are saving money we're going to get much less of a reward for that so at the minute having money in a savings account is a little bit pointless um but if we're borrowing money it means borrowing money is very very cheap so if you're going to buy a car um you can you know get um a loan very cheaply and you won't have to pay back too much interest and also it means that mortgages if you're on a variable rate you're going to be paying less for your mortgage each month uh which hopefully again encourages people to have money spend money so i've kind of gone through all of this already so i'll just whizz through this but what happens when interest rates fall uh cost of servicing loans that's reduced consumer confidence should increase lend uh leading to more spending uh because consumer confidence is going to be higher more effective disposable incomes because obviously with low mortgage costs people have got more money business investment should be boosted uh housing market is impacted as well and exchange rates and exports are also impacted uh cheaper currency will increase exports uh so demography then our demographics um is concerned with the size and composition of our population uh changes in population dynamics occur slowly but can be significant for businesses okay so let's have a brief look at age for the uk and if we have a look at this you can see that we've got generally quite an even spread um and then uh we've got a population elderly so if you go past sort of 60 64. um it starts to obviously decline as we get older but there is a big chunk if you're looking around 55 up to sort of 69 you've got a lot of people there okay and therefore that has an impact on the economy because obviously these are the sort of people that are likely to be retiring likely to be starting to claim from the government uh they might be spending more time in hospitals and things like that so it you know that has its problems it also creates opportunities for businesses as well so this is also another graph you don't need to learn these graphs off by heart or anything but they're useful to look at here because obviously you're going to have graphs to look at in the case study and it's important you can interpret them and understand them and also it gives some context to what we're talking about um so as you can see here if we were to stick for the time being about the main forecast you can see that the population growth for the united kingdom is going to significantly grow over the next sort of 20 or so years now that will have an impact in good and bad ways okay increased demand good for businesses um but increasing growth that quickly you know what about the impact on things like um you know the nhs and schools and things like that more difficult another graph to have a little look at here if we look at the gray bars net migration uh all net migration is just when we look at all the people coming into our country take away all the people that go out of our country uh to go and work or whatever it might be and as you can see it's probably about on average maybe 250 000 something like that each year um and we can read from that that you know we've got significant inward migration more people coming into the country again good and bad points more people coming into the country to work should stimulate the economy spending money um but again it will have a strain on infrastructure or on nhs schools um you know all of that sort of stuff okay we're pretty much done now uh so some key environmental issues for businesses then uh they need to think about sustainability about not this race for the bottom you know we want to be able to run our business in a way that it can run for the next one to 100 years uh not just burning loads of fossil fuels and emitting loads of co2 emissions it's not very sustainable a green supply chain so a lot of businesses are trying to reduce the distances their suppliers are traveling supermarkets are trying to sell more local produce and things like that again sticking with supermarkets minimizing uh packaging you know increasing the amount of stuff that's recyclable or biodegradable um promoting environmental policies so when businesses are being environmentally friendly they usually tell us about it and then you know if you're a bit cynical like me uh they're doing that for one reason that's to make you think that they're maybe a better business and you buy with them uh make sure we comply with any environmental laws um carbon emissions obviously keeping them down and we'll have a set number of carbon emissions that we can go up to so we really need to stay beneath that otherwise we'll have financial penalties and making sure we're disposing waste in the correct way okay i think this is my final slide so some business uh benefits environmentally friendly actions so if we are environmentally friendly this is what we might benefit from so we might have lower raw material costs and waste disposal charges longer life of assets that are recycled or repaired there might be more trading opportunities with other environmentally friendly suppliers that might only deal with us if we operate in an environmentally friendly way and we might get improved customer goodwill as well because we are being environmentally friendly and that might give us maybe a competitive advantage over other businesses that are not so much right that's the end of this section thank you very much foreign