Analysing the external environment Flashcards
Factors affecting trade
Trade barriers, trade wars,EU
CMA - monoplies,mergers etc
Laws eg landfill tax
Laws protecting consumers
Trade descriptions act (1968) ensures that businesses don’t mislead customers with false packaging.
Data protection act (2018) prevents the misuse of consumer’s data
Government policies that encourage enterprise
schemes to allow enterprises to borrow money at low interest rates.
offer tax incentives
Cost-push inflation
rise in inflation due to rising costs pushing up prices
demand pull inflation
high inflation can be caused by too much demand- happens when there is an increase in disposable income so spending increases.
Expansionary fiscal policy
Cutting taxes/raising spending so demand for goods and services increase
Contractionary fiscal policy
Raising taxes/cutting spending when there is a risk of inflationary pressure.
Factors affecting decision making
Demographic changes eg consumer behaviour, ageing population
Environmental issues
Migration
Corporate social responsibility
idea that a company should go above and beyond what is required by the law to help society, it’s workforce’s quality of life and the environment.
Examples of CSR
Barclays had a two year partnership with Teach first (training high quality teachers to teach in low income areas)
M&S work to ensure their suppliers employees have good working conditions by agreeing standards with suppliers.
ADV of CSR
Improves brand image and attracts new customers through positive publicity
Employee morale will improve and they will be more motivated to work for
Cons of CSR
shareholders can see it as a misuse of funds
Costs may be passed on to customers as people are prepared to pay more for socially responsible products
Examples of shareholders and stakeholders disagreeing on CSR
Some large companies, such as Starbucks exploited tax loopholes however public protests led to them paying a meaningful amount of tax
Carroll’s CSR pyramid
Lowest layer
Economic responsibilities
- to be profitable so the business survives
- this is the foundation on which the others rest
Legal responsibilities
- To obey laws and regulations
Ethical responsibilities
- to do the right thing and avoid harm
Philanthropic
- to be a good corporate citizen and to contribute resources to improve lives
What new opportunities does technology create
E-Commerce
New products
Improving production
Reduced barriers to entry
New technology and impact on areas of the business
common for HR to automate management tasks such as payroll, employee holidays and recruitment
Porter’s five forces
shows how an industry is influenced by five competitive forces
Barriers to entry
eg Patents and trademarks
economies of scale so can enter a price war with predatory pricing to force out new entrants
Buyer power
Buyers want products at as low price as possible
Supplier power
Suppliers want to get as high price as possible- more power when there are few suppliers
Threat of substitutes
how likely consumers are to buy an alternative eg depends on product differentiation , brand loyalty
Amazon reduced threat of substitutes eg buying a Kindle means you’ll usually buy Amazon products
Rivalry within the industry
depends on how much existing competition there is
