1.5 Understanding external influences on a business Flashcards
Owners
They achieve their objectives like max growth and own a share of profit and invest into the business
1.5.1 Stakeholders
Owners
Suppliers
Customers
Employees
Local community
Pressure groups
Government
Managers
Suppliers
To improve their profits by getting higher orders from business
Employees
They want a good pay, working conditions and they want job security and promotions and all this depends on if the business does well or not
Customers
The business mainly depends on customers and they want a affordable price and good quality products
Local community
Businesses can provide local employment and can increase the expenditure of people which would benefit the local economy but the business may create noise and sound pollution
Managers
They want job security, a good pay, good benefits and want opportunities for career development
Pressure groups
Want honest and fair dealing from the business
Government
Want honest and fair dealing from the business regarding legislations and taxes
Conflicts between stakeholders
There may be conflict between maximising profits and being an environmentally friendly firm. Renewable energy sources can be better for a community but they may be more expensive than traditional energy sources such as oil, coal and gas
Managers might have to work longer hours
Employees may need to work different shifts, including working later
Some customers may want even longer opening hours, eg 24 hours a day
Suppliers could impact their customers by changing delivery routes and times
The local community could be disturbed by increased traffic and noise
Pressure groups may be unhappy if longer opening hours are against their cause, eg groups promoting families spending more time together or improved work-life balance
The government may require additional resources to monitor the impact on the local area, eg additional policing to deal with any shoplifting that takes place later in the evening
1.5.2 Technology and business
Social media, digital communications, payment systems, e-commerce
Social media
Lets businesses interact with their customers and can pay for ads that can reach a wide audience
Digital comms
Video conferences like on zoom allow employees and stakeholders to talk to each other and hold meetings
E-commerce
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Attract customers across the globe
Sell at any time of the day or night
Receive payments immediately
Reduced overhead costs compared to running a physical shop
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More competitors from across the globe, making it harder for the business to get noticed
Employees may need new skills, eg website maintenance
Procedures required for how products and services will be delivered and processing returns
A need to maintain and update technologies, including security software, which may be expensive
Payment systems
People can pay easily by using google pay, apple pay or pay pal
Costs
One can determine the costs of each supplier much quicker online and there might costs may be able to get decreased due to offers or can be done quickly saving money but staff with good skills may need to be hired and lots of equipment will need to be bought
Marketing mix
Customers can buy products from not only the local area but around the world due to e-commerce which would mean businesses need to change their marketing strategies to gain an advantage
1.5.3 Legislation and business
Consumer law, employer law
Consumer law
The product should match its description and purpose and should be of satisfactory quality
Consumer law effect on business
If the business breaks the law they will pay fines and the case may end up in court maybe even causing the company to go bankrupt and their reputation will be tarnished
Employer law
Businesses have to pay employees a good wage, companies can’t discriminate
Safety and health
All staff must be trained to avoid danger and safety checks need to be carried out but safety training can be expensive but if there isn’t safety, people could get hurt and the company can be fined and go to court
Unemployment
Firms can pay lower wages if there is high unemployment, in some areas companies may even provide grants to firms to provide jobs
Less employment means less disposable income meaning that the business would get less sales, people may lose skills when unemployed, a firm may respond by cutting prices and firing employees
1.5.4 The economy and business
Unemployment, inflation, change in consumer income, taxes, exchange rates, changes in interest rates
Inflation
Consumers would buy more products before prices go up again, employees can put pressure on employers to increase wages which increases costs
High inflation makes UK exports expensive making UK firms less competitive
Taxes
Income tax - consumer spending decrease
Business tax increase- Reduces amount of investment into business slower growth
Business tax decrease - More money to reinvest and better growth
Change in consumer income
Higher income - More disposable income
Lower income - Less sales for high cost brands
Change in interest rates
Low interest rates - Increased spending
High interest rates - Decreased spending
Change in exchange rates
Weak Pound makes Imports Dearer but Exports Cheaper
Strong Pound makes Imports cheaper but Exports Dearer
If a pound appreciates against a dollar
You can get more of a dollar with a pound
1.5.5 External Influences
Technology, legislation, economic climate
Changes in technology Opportunities and threats
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.
Changes in legislation
Businesses have little control over changes in
government legislation
. They should, however, be notified of any changes in legislation before those changes are implemented. During this period, they will need to respond by taking any necessary steps to ensure that they comply with the new rules. Failure to do so could have serious consequences, including:
penalties, such as fines or imprisonment
bad publicity, which may affect sales
Economic changes
Changes in unemployment rate, interest rates, income rates, exchange rates
