External Influences

What External Influences covers

External Influences is examined in all three written papers — the specification is assessed in full on every one of them, and they differ by the context questions are set in rather than by content. It covers the market, its size, growth and share, market structures and a firm's decision-making power, demand, supply and their determinants, equilibrium, shortages and surpluses, market forces and the dynamic market, physical and non-physical markets, competition, and barriers to entry and exit, market dominance and how it is regulated, globalisation and the forces driving it, multinationals, global strategy and global brands, international trade, its barriers and its practicalities, exchange rates and currency conversion, free trade, trading blocs and the European Union, emerging markets and the changing global environment, political factors and political stability, the business cycle and key economic indicators, taxation, government spending and subsidies, monetary, fiscal and supply-side policy, social factors and changing consumer lifestyles, technology in business and technological change, the digital revolution and the information age, business ethics and ethical trading, managing conflicts between ethical and other objectives, legislation, compliance and the cost of breaking it, environmental issues and environmental policy, sustainability in practice and reading the external environment and the cost of ignoring it.

The 27 subtopics

Each one has its own page.

• The market, its size, growth and shareRecall questions on what a market is, measuring market size by volume and value, calculating market growth and market share, why market size matters for capacity and niches, ways to increase market share including acquisition, the risks of price wars, and growth rate against current size.Open →
• Market structures and a firm's decision-making powerRecall questions on the features of monopoly, oligopoly and monopolistic competition, why oligopolists avoid price competition, calculating a four-firm concentration ratio, how market structure decides a firm's control over price, supplier bargaining power, the limits on a monopolist, and price takers.Open →
• Demand, supply and their determinantsRecall questions on demand and supply, why each curve slopes as it does, and the factors that shift them.Open →
• Equilibrium, shortages and surplusesRecall questions on market equilibrium, how the price mechanism clears surpluses, excess demand and shortages, the effect of shifts in demand and supply on equilibrium price and quantity, buffer stock, responses to persistent excess demand, heavy discounting, underpriced concert tickets, and why markets rarely rest at equilibrium.Open →
• Market forces and the dynamic marketRecall questions on market forces and how they reach employees, customers and suppliers, dynamic markets and the businesses suited to them, the exposure of high fixed costs, responding to temporary and permanent falls in demand, gaining from a rival's withdrawal, and reducing dependence on one market.Open →
• Physical and non-physical marketsRecall questions on physical and non-physical markets with examples, the cost advantages of online-only retail, why stores survive, multichannel retailers, how online selling widens a small firm's market and sharpens price competition, the drawbacks of selling only online, marketplace platforms, customer data and warehousing.Open →
• Competition, and barriers to entry and exitRecall questions on competition and non-price competition, its effects on margins, consumers and businesses, barriers to entry and exit, sunk costs, why firms enter and leave markets, and how competition differs at local, national and global level for independents and UK manufacturers.Open →
• Market dominance and how it is regulatedRecall questions on market dominance and monopoly, the 25% share test, mergers, acquisitions and organic growth, how dominant firms harm suppliers and rivals, predatory pricing and cartels, the Competition and Markets Authority, Ofgem and Ofwat, price caps, and whether regulation slows innovation.Open →
• Globalisation and the forces driving itRecall questions on globalisation and its drivers, including containerisation, the Internet, trade liberalisation, communication technology, e-commerce, foreign direct investment and air freight, which businesses are exposed to it, its effect on costs and supply chain risk, and its effects on consumers and the pay gap.Open →
• Multinationals, global strategy and global brandsRecall questions on multinational corporations and why businesses become one, what host countries gain and the criticisms made, globalisation against a global strategy, global brands and glocalisation, McDonald's in India, how small domestic firms compete, and the opportunities and threats globalisation brings UK businesses.Open →
• International trade, its barriers and its practicalitiesRecall questions on international trade, visible and invisible trade, comparative advantage, why businesses export, tariffs, quotas, embargoes and non-tariff barriers, researching foreign buyers, culture and language, logistics, Incoterms, and financial and non-financial export support including UK Export Finance.Open →
• Exchange rates and currency conversionRecall questions on exchange rates, appreciation and depreciation, the SPICED mnemonic, currency conversion calculations for exporters and importers, how a stronger or weaker pound affects importers, exporters and tour operators, volatility, forward contracts and matching, and who gains and loses when the pound falls.Open →
• Free trade, trading blocs and the European UnionRecall questions on free trade and dumping, trading blocs such as the European Union, ASEAN and Mercosur, free trade areas, customs unions and the single market, trade diversion, EU enlargement, the eurozone, and the costs and benefits to UK businesses of the UK being outside the single market.Open →
• Emerging markets and the changing global environmentRecall questions on emerging markets and the BRICS economies, why businesses sell and produce in them, their risks, pricing for lower incomes, the growing middle class, joint ventures, tracking the global environment, responding to tariff rises, scenario planning, and why moving production overseas is hard to reverse.Open →
• Political factors and political stabilityRecall questions on the political factors that influence a business, political stability and uncertainty, elections and recruitment, instability abroad, economic sanctions, local council decisions, government spending and privatisation, lobbying, trade negotiations, and reducing political risk.Open →
• The business cycle and key economic indicatorsRecall questions on the economic indicators a business monitors, Gross Domestic Product, real and nominal GDP and GDP per capita, the four phases of the business cycle, recession, conditions in a boom and a slump, consumer confidence, input price inflation, and how a recession affects stakeholders.Open →
• Taxation, government spending and subsidiesRecall questions on the taxes a UK business pays or collects, direct and indirect taxation, corporation tax, VAT at 20%, excise duties, business rates and employer National Insurance, the main areas of government spending, transport infrastructure, and the benefits and risks of subsidies such as those on electric vehicles.Open →
• Monetary, fiscal and supply-side policyRecall questions on monetary policy and the Bank of England's 2% inflation target, fiscal and supply-side policy, how interest rates affect borrowers, house and car demand, the exchange rate and inflation, expansionary fiscal policy, corporation tax cuts, apprenticeship and immigration measures for skills shortages, fiscal against monetary tightening, and why supply-side policy works slowly.Open →
• Social factors and changing consumer lifestylesRecall questions on the social factors that influence a business, an ageing population, home and hybrid working, health consciousness, ethical consumerism, social media, single-person households, workforce diversity, urbanisation, education, changing attitudes to products, and social change affecting a business as an employer.Open →
• Technology in business and technological changeRecall questions on the technological factors that influence a business, computer-aided design and manufacture, electronic point of sale and customer relationship management systems, reducing unit costs, the drawbacks of technology investment and its effect on morale, obsolescence, lower barriers to entry, cyber security, and when to adopt.Open →
• The digital revolution and the information ageRecall questions on the digital revolution and the information age, analysing customer data, reaching customers directly, price transparency, which businesses digital disruption hits hardest, the opportunities and threats for businesses, financing investment, the effects on employees, customer service expectations, and fragile reputations.Open →
• Business ethics and ethical tradingRecall questions on law and ethics, legal but unethical behaviour, the ethical issues businesses face, codes of ethics, Fairtrade, ethical supply chains and supplier audits, improving an ethical profile, the advantages and costs of ethical behaviour, greenwashing, whistleblowing and bribery.Open →
• Managing conflicts between ethical and other objectivesRecall questions on conflicts between ethical objectives and profit, growth and low-cost strategies, paying above-market wages, shareholder and pressure group views, long-run benefits, handling a supplier breaching labour standards, ranking objectives, leadership, sales bonuses, shifting ethical standards and admitting failure.Open →
• Legislation, compliance and the cost of breaking itRecall questions on employment, equality and health and safety law, data protection, intellectual property and patents, consumer protection, contract law, planning permission, company law and financial conduct regulation, how a business ensures compliance, the conflict with cost minimisation, and the consequences of breaking the law.Open →
• Environmental issues and environmental policyRecall questions on the environmental issues that influence a business, carbon footprints, environmental policies and published targets, practical ways to cut impact and waste, ISO 14001, conflicts with profit, growth and cost control, pressure from large retailers, and how environmental regulation affects stakeholders.Open →
• Sustainability in practiceRecall questions on sustainability, the triple bottom line, renewable and non-renewable resources, the circular economy, sustainable product design and supply chains, net zero and carbon offsetting, the financial benefits of sustainability, investor interest, replacement sales, effects on employees, small businesses and evidencing claims.Open →
• Reading the external environment and the cost of ignoring itRecall questions on PESTLE analysis and its limitations, the external and internal environment, the consequences of ignoring external change including video rental chains, why market leaders are at risk, building early warning, interacting factors, opportunities and threats, contingency planning, and the effect on cash flow.Open →

What you need to know

Answer each one before you reveal it.

Take External Influences further

The same content, four other ways.

Commonly confused

Pairs that lose marks when they are blurred together.

• Movement along a demand curve vs Shift of the demand curve

  Movement along a demand curve: a change in the quantity bought caused only by a change in the price of the good itself. Shift of the demand curve: a change in the quantity bought at every price, caused by a determinant other than the good's own price, such as income or advertising.

• Free trade area vs Customs union

  Free trade area: a group of countries that remove tariffs between themselves while each keeps its own tariffs on goods from outside. Customs union: a group of countries that remove tariffs between themselves and also apply one common tariff to goods from outside.

• Direct tax vs Indirect tax

  Direct tax: a charge on the income, profit or wealth of the person or business that pays it. Indirect tax: a charge on spending, added to the price of goods and collected by the seller on the government's behalf.

Questions from this topic

Each one with the model answer underneath.

1. 1

   What is meant by a market?

   Model answer

   A market is any arrangement that brings buyers and sellers together so that a good or service can be exchanged at an agreed price.

2. 2

   Distinguish between measuring the size of a market by volume and by value.

   Model answer

   Volume measures the number of units bought and sold in the market, while value measures the total revenue those sales are worth.

3. 3

   A market sells 4 million units a year at an average price of £6. Calculate its size by value.

   Model answer

   The market is worth £24 million a year, because 4 million multiplied by £6 gives £24 million.

4. 4

   What is meant by market growth?

   Model answer

   Market growth is the change in the size of a market over a period, usually stated as a percentage of the size it started at.

5. 5

   The value of a market rises from £250 million to £275 million in a year. Calculate the rate of market growth.

   Model answer

   Market growth is 10%, because the £25 million increase divided by the original £250 million gives 0.1.

6. 6

   Why does the size of its market matter to a business deciding how much capacity to build?

   Model answer

   Market size sets the maximum sales realistically available, so it shows whether the output planned could ever be sold and whether the scale needed for low unit costs is achievable.

What is inside Levo

Six ways to work the same material.

External Influences revision questions

What does External Influences cover in OCR A-Level Business (H431)?

27 subtopics: the market, its size, growth and share, market structures and a firm's decision-making power, demand, supply and their determinants, equilibrium, shortages and surpluses, market forces and the dynamic market, physical and non-physical markets, competition, and barriers to entry and exit, market dominance and how it is regulated, globalisation and the forces driving it, multinationals, global strategy and global brands, international trade, its barriers and its practicalities, exchange rates and currency conversion, free trade, trading blocs and the european union, emerging markets and the changing global environment, political factors and political stability, the business cycle and key economic indicators, taxation, government spending and subsidies, monetary, fiscal and supply-side policy, social factors and changing consumer lifestyles, technology in business and technological change, the digital revolution and the information age, business ethics and ethical trading, managing conflicts between ethical and other objectives, legislation, compliance and the cost of breaking it, environmental issues and environmental policy, sustainability in practice and reading the external environment and the cost of ignoring it. Each one has its own page with questions and model answers.

How is External Influences organised?

By the OCR H431 specification, subtopic by subtopic, so it matches the order you are taught it in.