3. Influences in the Business Environment Flashcards
What is the difference between the external and internal environment of a business?
The external environment is composed of factors the business has little/no control over. It includes government policies, technology, economic conditions and social attitudes.
The internal environment is composed of the factors that the business has control over. It includes production, location, resources, management and business culture.
List all the external influences that can affect a business.
- Economic
- Financial
- Legal
- Political
- Technological
- Market forces
- Social
- Institutional
- Competitive.
Smice Flpt
What are economic influences?
Influences on a business that occur due to the current state of the economy (i.e whether the economy is in a peak or a trough).
Think the business cycle
How is it that not all businesses are affected by troughs in the business cycle?
Businesses that provide luxury goods (that are expensive) are more susceptible to swings in the businesss cycle. During troughs, people are less likely to spend their income on luxury goods, as they must prioritise important costs such as debts and fulfilling needs.
Discount stores such as K-Mart, Big W usually fare well during recessions.
What are financial influences?
Influences based on the availability of finance to start up, grow and develop new products. Some include:
-Interest rates: higher interest rates = businesses are more cautious. Lower interest rates = encouragement to borrow funds for growth.
- Lender policies
- Deregulation - (removement of government regulation) allows business to explore borrowing options outside of major banks (e.g foreign or investment banks).
- Exchange rates - if value of $AUD increases, repayments on foreign loans and imports become cheaper. (Exports become more expensive however).
What are geographical influences?
Changesin demographic features such as age, gender, income, cultural background,
income, cultural background and family. I.e Ageing population, halal shops in
muslim areas.
What are technological influences?
Influences caused by technological changes/advancements. Impacts 4 of the key business functions:
- Operations: improves speed and accuracy of labour.
- Finance: making financial records and reports quicker to produce and more accessible.
- Marketing: enables businesses to connect with customers in various ways.
- Human resources: allowing many employees to work remotely, speeding up payroll processes and leave applications.
What are the effects of globalisation?
- Increased competition
- Expanded markets
- Greater customer expectations
- Economies of scale
- Location flexibility
- Cheaper materials
- Diversification
- Access to better labour
What are “legal influences?”
Influences based on laws enforced by the Commonwealth government, NSW government and local councils. Every activity, in every business function is impacted by the laws enforced in the area in which the business operates in, which is hence why it is important for business to stay up-to-date with laws.
→ Failure to comply with laws may involve the risk of a major lawsuit or a hefty fine, and also destroying the reputation of a business.
What are “political influences?”
Influences based on policies. Similar to legal influences.
List all the interal influences that can affect a business.
- Product
- Location
- Resources
- Management
- Business culture
What are the benefits of maintaining a good business culture?
- Higher productivity
- Greater willingness (of employees) to embrace change
- Lower absenteeism and staff turn-over
- Better brand image
What is a stakeholder?
Any individual/group that takes interest in or is affected by a business.
List examples of internal stakeholders.
Employees
Managers
Owners
List examples of external stakeholders.
- Suppliers
- Society
- Shareholders
- Government
- Creditors
- Customers
- Competitors
