1.5 Understanding external influences on the business Flashcards
Internal stakeholders.
Managers- ensure business success and employees.
Owners/Shareholders- want profits, control over hoe the business is run.
Employees- want wages
External stakeholders.
Customers- value for money Local community Government- taxes and low unemployment Suppliers- on time payments Pressure Groups- influence business' decisions for a particular cause e.g ethical issues.
How can a pressure group influence business decisions?
- Encouraging customers to increase the amount of products bought
- Persuading customers to boycott unethical brands
- Encouraging businesses to behave in more ethical ways.
Give 2 examples of potential stakeholder conflicts.
Shareholders may want higher dividends whereas Managers may want invest profits.
Employees may want higher pay but customers want lower prices.
What are the disadvantages of stakeholder conflict?
DIS:
- can have a direct impact on the service provided eg if employees become unmotivated.
- Pressure groups can damage the reputation of the business
- Local community would suffer due to pollution etc.
Analyse the use of e-commerce for a business.
ADS:
- Can trade globally, 24hrs no time restrictions.
- Increases convenience, easy ordering for customers.
- Reduces costs of renting a retail shop.
- Payments online
Dis:
- Keeping up with the technology can be expensive.
- Customers can have security concerns e.g fraud.
- Hard to build relationships with customers online–> less brand loyalty.
Analyse the use of social media for a business.
Benefits:
- Relatively inexpensive way for promotion.
- Customers can be accessed globally
- Reduced marketing costs
- customer feedback
Dis:
Additional staff may be needed to handle social media.
Needs daily monitoring–>time consuming
Risks of reputation being damaged and informing customers quickly.
Analyse the use of digital communication.
PRos:
-can be used to provide updates on the delivery of products, keeping customers informed builds positive relationships.
-Can do video-conferences internationally through skype etc reduces the need to be available in person–> less time consuming–> more efficient.
Allows employees to work from home using the technology.
coNS:
- Not reliable, information can be lost, deleted or misplaced.
- Unable to communicate with customers that are not used to advanced technology.
Analyse the use of payment systems.
Benefits:
- faster and easier payments
- Reduces costs for payment processing and paperworks.
- Applicable to different currencies.
- Customers can pay through secure systems e.g paypal.
CONS:
- Vulnerable to fraud.
- Additional fees need to be paid by the business.
- customers may not buy products online due to additional delivery costs.
How does technology impact sales?
Increases demand of innovative products–> higher sales
–>higher revenue.
How does technology impact costs?
- no paperwork, records are kept online.
- online meetings and conferences reduce travel costs
- emails as communication rather than sending letters
How does technology impact the components of the marketing mix?
-Price: customers can use online price comparison websites, businesses can also reduce costs which helps them lower prices.
-Product: trading can happen online 24/7, increasing revenue, adapting products to be sold online e.g audible books or e-readers. Customers can customise their purchase.
-Place: Social media platforms, websites
Promotion: cheap digital promotion, online advertising costs less than physical promotion.
Define legislation.
The laws that that a country, its people and businesses must comply with.
What is the purpose of legislation in business?
- protection of consumers
- protection of employees.
What does the Consumer Act 2015 entail?
- ensures that products are of good quality and fit for purpose.
- allows customers to return the product back within 30 days.
- Digital content online should be of suitable quality.
- retailer is responsible for the delivery of good.
- business must provide the service with reasonable care.
- businesses are not allowed to enforce unfair terms.
Benefits and drawbacks of consumer law.
Pros:
- Complaint businesses are less likely to be sued.
- increased customer loyalty
- good publicity and improved relationships with stakeholders.
Cons:
- Businesses must stay up to date with laws.
- Laws restrict businesses.
- costs increase if they have to change the products to comply with the laws.
- can result in bad publicity if not followed.
What is employment law?
the law that states how employees should be hired and treated by the business.
What does the employment law entail?
-Recruitment should be faire and prevent discrimination.
-Health and Safety should be met.
-Pay should be fair- the equality act 2010 prevents discrimination against protected characteristics.
Redundancy should be fair.
-People with disabilities should be treated fairly.
Analyse the benefits and drawbacks of employment law.
PROS:
- Fewer employees will be tempted to leave the business, more retained–> reduces the need for further recuitment–> decreases costs.
- employees would be happier and more motivated–>higher productivity–> better customer service.
Cons:
- Maintaining health and safety can be costly.
- failing to comply may result in a loss of employees.
Cost of obliging by legislation.
-Pay must increase in response to an increase in NMW etc increases costs.
-Equipment may need to be changed or updated–>increases costs.
-Administration-business may have to update websites or paperwork.
-Training employees
Licences
Consequences of meeting and not meeting legislation.
Pros:
- positive rep
- higher sales
- better job candidates
- higher motivation
cons:
- fines or penalties
- bad rep
- business may close down temporarily
What does the economic climate mean.
the level demand and spending within the economy, ie the performance.
What is demand.
Demand refers to the level of spending that occurs int he economy.
Factors that can cause changes in demand.
- Level of economic activity- whether the economy is growing, stable or in recession.
- Interest rates- if they are low, borrowing would increase–>demand would increase.
- Exchange rates- if pound gets weaker, foreign demand will rise.
- > changes in taxation- a decrease would increase the disposable income of consumers.
What are impacts of high demand?
- inflation may rise
- pound would get stronger
- lower unemployment
- higher interest rates
- consumer income rise.
What is unemployment?
The number of people of working are able to work but are not currently working.
How does low employment affect businesses?
-fewer potential employees->harder recruitment
-happy and motivated employees as they feel secure.
Counter:
due to globalisation, businesses may not be affected by the level of unemployment if they have staff overseas.
How do changes in consumer income affect the business?
High:
- more disposable income–> good for brands in niche market.
- more products are bought–> businesses need an increase in stock
- higher consumer confidence
Impact of inflation on the business?
- Business’s costs will rise unexpectedly–>lower net profit.
- reduces consumer’s disposable income, so less spending, they’ll buy fewer goods
What are interest rates?
the % reward or payment that is given to savers on savings and and borrowers on taking loans.
What happens if interest rates are high?
Savers:
-Paid more money–> more disposable income.
Borrowers:
-have to pay more money to borrow from bank.
What happens if interest rates are low?
Savers: paid small money–>less spending.
Borrowers: have to pay smaller amounts –>more to spend.
How do rising interest rates affect businesses?
- may struggle to pay loans.
- small businesses are less likely to borrow money from bank.
- borrowers are less likely to spend money.
What are exchange rates.
Exchange rates is the price of buying foreign currency.
What happens if the pound is weak?
- Good for Uk exports, as the price of exports falls and sales increase.
- Tourism increases
- As imports become more expensive, exports become cheaper.
Imports vs exports
Imports come in, exports exit.
What happens if pound is strong?
Prices of exports rise–> sales might fall.
tourism falls
-imports become cheaper–>costs decrease.
What is government taxation?
Individuals pay a proportion of their income or profits to the government so that it can be invested into the public sector.
How can external influences be seen as opportunities?
- Rise in economic activity–> increase demand
- lower interest rates make it easier to borrow money.
- new tech lowers production costs.
Threats of external influences?
New competitors
New legislation
Fall in demand
new tech could make business’ products obsolete.
Ways in which to respond to external influences?
- Lower investment and spending when activity is low.
- Stop producing obsolete products
- Adhere to legislation
- invest in new tech
- increase productivity by recruiting more employees.
- lower prices.
