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business studies > 1.5 Understanding external influences on the business > Flashcards

1.5 Understanding external influences on the business Flashcards

1
Q

Internal stakeholders.

A

Managers- ensure business success and employees.
Owners/Shareholders- want profits, control over hoe the business is run.
Employees- want wages

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2
Q

External stakeholders.

A 
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.
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3
Q

How can a pressure group influence business decisions?

A
  • Encouraging customers to increase the amount of products bought
  • Persuading customers to boycott unethical brands
  • Encouraging businesses to behave in more ethical ways.
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4
Q

Give 2 examples of potential stakeholder conflicts.

A

Shareholders may want higher dividends whereas Managers may want invest profits.
Employees may want higher pay but customers want lower prices.

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5
Q

What are the disadvantages of stakeholder conflict?

A

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.
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6
Q

Analyse the use of e-commerce for a business.

A

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.
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7
Q

Analyse the use of social media for a business.

A

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.

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8
Q

Analyse the use of digital communication.

A

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.
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9
Q

Analyse the use of payment systems.

A

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.
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10
Q

How does technology impact sales?

A

Increases demand of innovative products–> higher sales

–>higher revenue.

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11
Q

How does technology impact costs?

A
  • no paperwork, records are kept online.
  • online meetings and conferences reduce travel costs
  • emails as communication rather than sending letters
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12
Q

How does technology impact the components of the marketing mix?

A

-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.

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13
Q

Define legislation.

A

The laws that that a country, its people and businesses must comply with.

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14
Q

What is the purpose of legislation in business?

A
  • protection of consumers

- protection of employees.

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15
Q

What does the Consumer Act 2015 entail?

A
  • 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.
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16
Q

Benefits and drawbacks of consumer law.

A

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.
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17
Q

What is employment law?

A

the law that states how employees should be hired and treated by the business.

18
Q

What does the employment law entail?

A

-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.

19
Q

Analyse the benefits and drawbacks of employment law.

A

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.
20
Q

Cost of obliging by legislation.

A

-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

21
Q

Consequences of meeting and not meeting legislation.

A

Pros:

  • positive rep
  • higher sales
  • better job candidates
  • higher motivation

cons:

  • fines or penalties
  • bad rep
  • business may close down temporarily
22
Q

What does the economic climate mean.

A

the level demand and spending within the economy, ie the performance.

23
Q

What is demand.

A

Demand refers to the level of spending that occurs int he economy.

24
Q

Factors that can cause changes in demand.

A
  • 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.
25
Q

What are impacts of high demand?

A
  • inflation may rise
  • pound would get stronger
  • lower unemployment
  • higher interest rates
  • consumer income rise.
26
Q

What is unemployment?

A

The number of people of working are able to work but are not currently working.

27
Q

How does low employment affect businesses?

A

-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.

28
Q

How do changes in consumer income affect the business?

A

High:

  • more disposable income–> good for brands in niche market.
  • more products are bought–> businesses need an increase in stock
  • higher consumer confidence
29
Q

Impact of inflation on the business?

A
  • Business’s costs will rise unexpectedly–>lower net profit.
  • reduces consumer’s disposable income, so less spending, they’ll buy fewer goods
30
Q

What are interest rates?

A

the % reward or payment that is given to savers on savings and and borrowers on taking loans.

31
Q

What happens if interest rates are high?

A

Savers:
-Paid more money–> more disposable income.

Borrowers:
-have to pay more money to borrow from bank.

32
Q

What happens if interest rates are low?

A

Savers: paid small money–>less spending.
Borrowers: have to pay smaller amounts –>more to spend.

33
Q

How do rising interest rates affect businesses?

A
  • may struggle to pay loans.
  • small businesses are less likely to borrow money from bank.
  • borrowers are less likely to spend money.
34
Q

What are exchange rates.

A

Exchange rates is the price of buying foreign currency.

35
Q

What happens if the pound is weak?

A
  • Good for Uk exports, as the price of exports falls and sales increase.
  • Tourism increases
  • As imports become more expensive, exports become cheaper.
36
Q

Imports vs exports

A

Imports come in, exports exit.

37
Q

What happens if pound is strong?

A

Prices of exports rise–> sales might fall.
tourism falls
-imports become cheaper–>costs decrease.

38
Q

What is government taxation?

A

Individuals pay a proportion of their income or profits to the government so that it can be invested into the public sector.

39
Q

How can external influences be seen as opportunities?

A
  • Rise in economic activity–> increase demand
  • lower interest rates make it easier to borrow money.
  • new tech lowers production costs.
40
Q

Threats of external influences?

A

New competitors
New legislation
Fall in demand
new tech could make business’ products obsolete.

41
Q

Ways in which to respond to external influences?

A
  • 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.

business studies (10 decks)

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