1.5 External Ifluences on business Flashcards
(24 cards)
Shareholders and owners
In a public limited company (PLC), these are people who influence the business’ aims, objectives and strategic activities. In a limited company (LTD), these are people who make business decisions but need to agree them with the other shareholders. Shareholders are part owners of a private or public limited company
shareholders and owners want to ensure the business is successful and are interested in
how much profit the business can make
Shareholders and owners may decide to grow the business and authorise opening new stores. They will expect to see sales increase over time. However, opening a new store will cost money, which may affect profits in the short term and could affect the amount of dividends they will receive
Managers
Staff who are responsible for implementing the decisions made by the owners and overseeing the work that is required
managers want a good salary and opportunities for further career progression
Managers take on additional responsibilities and set new targets. They may have opportunities for career progression, and they could become demotivated if they are not given such opportunities.
Employees
Staff who Cary out the day to day work of the business
employees want good levels of pay, job satisfaction and job security, and may also be interested in career progression
Employees have increased job security
as a business grows. They could also have opportunities for promotion to new roles. Some employees could feel resentful if they are not offered opportunities.
Customers
People who buy products or services from the business
customers want good quality and a range of products at reasonable prices
Customers will benefit from having more choice about where to shop, but they may remain loyal to existing businesses. Through good marketing activity by the business, some may be tempted to try the new store.
Suppliers
Other businesses and organisations that provide products or services to the business eg a utility company that supplies it with electricity or a business that provides the seats used when producing a car
suppliers want to receive payments on time, and regular orders
Suppliers benefit from increased orders to equip and stock the new store, which might lead to an increase in their profits. If they are unable to cope with the extra demand, there is a risk that the business will use other suppliers.
Local community
People organisations and businesses that live or are located in the area around the business
the local community (people living in the area) may be looking for work, which local businesses can provide
The local community will benefit as a new store is likely to bring new jobs. However, they may be unhappy with increased traffic or noise.
Pressure groups
Groups of people who share a common interest that is related to the business eg an environmental pressure group may actively promote a shared interest
pressure groups
want to increase knowledge of their cause, eg if a business is going to increase traffic pollution in their area
Pressure groups
may protest against the new store if they feel their cause is adversely affected, eg if the store would increase pollution. This could deter other businesses from coming to the area.
Government
The business will make tax payments to both local and central government
the government wants businesses to create more jobs in order to raise more money from taxes and save money on benefit payments
The government may be pleased to see new jobs being created and may expect to see increases in tax revenues as a result. However, other businesses could lose customers, which would reduce their profits and the tax they have to pay as a result.
Consumer law
The term ‘consumer law’ refers to any piece of
government legislation
designed to protect consumers from poor-quality products and poor business practices. In the UK there are two pieces of legislation that form the basis of consumer rights: the Consumer Rights Act (2015) and the Consumer Protection Act (1987).
The consumer rights act 2015
This act replaced and updated previous legislation. It was also the first consumer legislation to include digital products. It deals with transactions between a seller and a buyer, and is designed to protect consumers from unfair and dishonest business practices
Consumer protection act 1987
This Act is designed to ensure that products are safe. It makes businesses that produce, rather than just sell, liable for any damage caused by poor quality or defective products. The producer is considered to be an individual or company who puts their name or trademark on a product, or has imported it into the European Union in order to sell it on.
It gives anybody the right to claim against the producer of a product for any damage caused by a manufacturing defect.
Employment law
The term ‘employment law’ refers to any piece of government legislation designed to protect employees from exploitation In the UK, there are four areas of employment legislation that form the basis of employee rights in the workplace:
Recruitment, pay, discrimination and health and safety
recruitment – this legislation outlines what employers can and cannot do when recruiting staff, and what their responsibilities are once a job offer has been made
pay – this legislation covers pay and is designed to ensure that the pay workers receive is above a set minimum level
discrimination
– this area of employment law is designed to ensure that employers treat all people fairly
health and safety – legislation around health and safety is designed to keep employees safe while they are at work
Economic climate on business
The economy includes all activities in a country concerned with the manufacturing, distribution, and use of goods and services. The economic climate has a big impact on businesses. The level of consumer spending affects prices, investment decisions and the number of workers that businesses employ.
Increase in consumer income
As consumers’ incomes increase, people have more money to spend. This means that demand for many goods and services will increase as consumers look to spend their extra money. They might buy upgraded versions of products they already have, eg a new car, or take an expensive holiday. Businesses will expect to sell more of these luxury goods and services, so they will produce more, perhaps employing more staff
Reduction in consumer income
If consumers’ incomes fall, people will have less money to spend. They will buy fewer goods and services, as they will make do with what they already have. When they do spend money, they may buy cheaper alternatives, such as supermarket own-brand products or second-hand items. Businesses will expect to sell less when this happens, so they will plan to reduce the amount they produce, possibly making staff
redundant
Interest rates
The interest rate represents the cost of borrowing money or the amount a saver receives in interest.
Inflation
Inflation refers to a general and sustained increase in prices over time. It is measured using an index eg the Consumer Prices Index (CPI), which tracks how the price of a typical basket of items changes over time. The rate of inflation is usually stated as a percentage.
Income tax
Income tax is charged on income such as wages that have been earned.
Corporation tax
Corporation tax is a charge on a company’s
profits
National insurance
National Insurance contributions (NICs) are charges to cover healthcare, state pensions and employment-related benefits such as Jobseeker’s Allowance. Both employers and employees pay it
Value added tax
Value-added tax (VAT) is a charge on sales of
goods and services based on the value of the item sold. It is collected by businesses, which then pass it on to the government.
Council tax
Council tax is a charge on property by local councils based on the property’s value and the number of people in a household. It is used to pay for local services, such as refuse collection and street lighting.
Exchange rates effect
Changes in exchange rates can have a significant impact on the economy A UK business that exports products will benefit from a fall in the value of the pound. Overseas firms will receive more UK pounds for their money, so they will pay less for the UK’s products. However, UK firms that import raw materials will have to spend more pounds to obtain the same foreign currency, so they will pay more for those raw materials
Opportunities and threats of changing technology
Opportunities – Developing technology brings with it opportunities for new products or new uses for existing products. A business that can respond quickly can be first to market with a new product.
Threats – New technology means that old products are likely to become
obsolete
. Businesses that make these products could find themselves struggling unless they are able to respond to changes by developing new products.
