1.5 - Understanding external influences on business

Question 1

1.5.1 - What is a business stakeholder? Give examples.

Answer 1

A business stakeholder is a person or organisation that has an interest in a business. Ttakeholders have an interest in how the business operates and whether or not it is successful. These can include:

• Owner
• Managers
• Employees
• Suppliers
• Pressure groups
• The government
• Customers/consumers
• Shareholders

Question 2

1.5.1 - Name the three main internal stakeholders explaining their main interest(s)

Answer 2

• Owners: Main goal is profit
• Employees: Main goal is job security and promotions
• Managers: Main goal is extra manager promotions

Question 3

1.5.1 - Name six main external stakeholders explaining their main interest(s)

Answer 3

• Suppliers: To receive payment from the business
• Customers: For the product to be cheap and available
• Shareholders: To receive dividends from their shares
• Local community: No pollution from the business
• The government: To receive taxes from the business
• Pressure groups: For the business to be ethical

Question 4

1.5.1 - Why may there be conflict between suppliers and owners of a business?

Answer 4

• They have differing interests
• The owner wants high profits and so requires a low cost
• The supplier wants more money and so wants to charge more

Question 5

1.5.2 - What are the four main ways businesses use technology?

Answer 5

• E-commerce: Selling online
• Digital communication: Communicating digitally I
  guess?
• Social media: Social accounts online
• Payment systems: Systems such as paypal that guarantee security for the customer

Question 6

1.5.2 - How does technology affect the cost and sales of a business?

Answer 6

• Sales:
• Will increase as social media means more promotion,
• Payment systems means customers trust the
  business more,
• Digital communication means better reputation,
• E-commerce allows the business to reach more
  potential customers
  Costs:
• May originally be higher during installation, however usage of technology in place of employees reduces this cost.

Question 7

1.5.3 - When it comes to legislation, what are the three principles of consumer law?

Answer 7

• As described: The goods supplied must match any
  description or samples shown to you at the time of purchase.
• Fit for purpose: The goods should be fit for the purpose they are supplied for/specific purpose you made known to the retailer at time of purchase
• Of satisfactory quality: Goods shouldn’t be faulty or damaged when you receive them, and should last for a reasonable amount of time

Question 8

1.5.2 - What are the pros and cons of e-commerce?

Answer 8

+ Reach more customers as you are online
+ Use traffic data for market research
- Costs to produce website
- Customers can easily compare prices meaning they may choose other businesses over you

Question 9

1.5.3 - When it comes to legislation, what are the three principles of employment law?

Answer 9

• Recruitment: no discrimination in this process on age, race, gender, religion etc.
• The national minimum wage: The minimum amount workers are required to be payed. (£7.20/h 25+ on 4/18)
• Health and safety: A right to work in places where risks to their health and safety are controlled properly and employers who are responsible.

Question 10

1.5.3 - What costs do a business face due to legislation?

Answer 10

Legislation requires businesses to:
- Training staff
- Protection equipment for staff e.g. hairnets or googles
- Cost of paying NMW
These cost higher amounts reducing their profit

Question 11

1.5.3 - What consequences can a business/individual face for not meeting regulation?

Answer 11

• fines
• imprisonment
• disqualification

Question 12

1.5.4 - How does a change in unemployment affect a business?

Answer 12

• An increase in unemployment would lead to less disposable money for the general public
• This means businesses will have to provide more cheap products to meet the customer needs
• There will be a wider-range of people to recruit
• Luxury good retailers will suffer

Question 13

1.5.4 - How does a change in consumer income affect a business?

Answer 13

• Lower consumer income will mean there are less purchases of luxury products (More needs rather than wants)
• Businesses will have to adapt to provide products that meet lower costs and may reduce quality as a lower one is demanded

Question 14

1.5.4 - How does a change in inflation rate affect a business?

Answer 14

• If inflation goes up, consumers will feel poorer and reduce their spending, reducing business revenue.
• Inflation aims to be around 2% in the uk

Question 15

1.5.4 - How does a change in exchange rates affect a business?

Answer 15

• A weaker pound will mean that a businesses pay more for supplies from foreign countries (Higher exports lower imports)
• A stronger pound means businesses will pay less for supplies from foreign countries (HIgher imports lower exports)
• The pound being stronger means it has more worth. For example a the pound is stronger when £1 = €2 than when £1 = €1.50

Question 16

1.5.4 - How does a change in government taxation affect a business?

Answer 16

• If a business earns more than £83,000 a year they must register for tax
• An increase in government tax, will lead to higher costs for the business, reducing profits

Question 17

1.5.4 - How does a change in interest rates affect a business?

Answer 17

A rise in interest rates would mean that the cost of
borrowing will rise and cost of supplies will be higher and customer spending will be lower. Businesses will loose out on profit

Question 18

1.5.5 - What is the difference between being proactive and reactive and which should a business aim to be?

Answer 18

• Reactive is responding to a situation
• Proactive is being preapred for possible situations
• Businesses should aim to be proactive