Chapter 3 - Influences In The Business Environment + Chapter 4 - Business Growth And Decline Flashcards
Give examples of external influences on a business
- government policy
- technology
- economic conditions
- weather
- competition
- social attitudes
Define was internal influences are on a business
Factors over which the business has some degree of control,
E.g. products, location, resources, management and business culture
Examples of internal influences on a business
- products
- location
- resources
- management
- business culture
What are the categories of the main external influences on a business
(hint: there are 10)
- economic
- geographic
- financial
- technological
- social
- competitive situation
- legal
- markets
- political
- institutional
What impact does recovery have on a business’s performance
- increased consumer spending
- business expectations increasingly optimistic
- increasing business investment
- sales and profits rising
- unemployment falling
What impact does recession have on a business’s performance
- decreasing consumer spending
- business expectations increasingly pessimistic
- decreasing business investment
- sales and profits falling
- unemployment rising
What impact do peaks have on a business’s performance
- wages and salaries at high levels
- business operating at full capacity
- sales and profits at highest levels
- low level of unemployment
- inflation may increase
What impact do troughs have on a business’s performance
- wages and salaries at low levels
- business operating at below full capacity
- sales and profits at lowest levels
- high level of unemployment
- inflation may remain stable or fall
Define what external influences on a business are
Factors over which the business has little control
E.g. Government policy, technology, economic conditions, social attitudes
Financial influences on a business
- deregulation (the removal of government regulation from industry, with the aim of increasing efficiency and improving competition). Results in a more flexible, market-orientated approach across the financial sector.
- debt finance, which is significantly influenced by level of interest rates. As interest rates increase, businesses become more cautious in relation to taking on extra debt. As interest rates drop, businesses take on more debt.
- new banks and financial institutions, creating more competition
- international sources of resource due to the globalisation of the world’s financial markets
Geographical influences on business
- Australia based in the Asia-Pacific region and the economic growth in a number of Asia’s regions (especially China). Provide opportunities for business expansion, sales and profit.
- Changes in demographics of Australia (e.g. size of population, age, sex, income, family size, cultural background) lead to changes in demand levels and the nature of products and services
- Major demographic issue = changes in age structure of population. Retirement population increasing, leading to skill shortages in workforce, and an increase in age-related service (ie health and aged- care)
- international trade = the buying and selling of goods and services between nations
Retirement - future challenges on Australia
- ‘retirement age may have to be raised to 70 to slow rate of ‘baby-boomers’ leaving workforce’, a Federal Government agency warns. This will make ‘baby-boomers’ work for longer.
- Otherwise, Australia might not have enough workers to support all retirees, students and people on welfare
- A report says increasing retirement age to 70 will boost workforce participation rates by 1.4%, and increase economic growth by $25 billion a year
Social influences on business
- businesses must respond quickly to changes in tastes, fashions and culture to gain sales and profit opportunities, and business growth.
- environmental movement = become key topic in last decade.
- family friendly programmes = belief that businesses should support families, so businesses must consider flexible work hours and better childcare options (conflict between work+family a key factor causing women to leave businesses, and this high turnover is expensive for businesses).
- technology makes leaving work difficult = it is calling on companies to introduce rules where employees must leave work phones + computers in office when they’re on leave. Makes family time difficult.
Legal influences on business
- businesses must be completely aware of the countries laws in which they are operating to avoid penalties. In past 2 decades, new statutes introduced, including: laws on taxation, protection of environment, anti-discrimination & work health and safety.
- ‘Competition and Consumer Act 2010’ administered by ACCC = applies to virtually all businesses in Australia. The ACCC operates nationally for the enforcement and administration of competition and consumer protection laws. A breach of this act: companies face penalties of up to $1.1 million; individuals face penalties of $220,000
- deregulation
- regulation (opposite of deregulation)
What does ACCC stand for
Australian Competition and Consumer Commission
Political influenced on a business
- taxations (goods and services tax)
- labour market reforms (decentralisation of wage determination; free trade policies)
- social reforms (paid parental leave)
- environmental management (Emissions Trading Scheme = ETS)
- in recent years tariff rates generally lowered = the business unable to compete with cheaper imported item go out of business
Institutional influences on business
- government (federal, state, local)
- regulatory bodies (EPA, NSW Fair Trading, ASIC, ACCC)
- other (employer associations, trade and industry associations, ASX)
Describe some Federal government obligations
- payment of taxes for employees (earning above the minimum taxable income level) and for businesses with company tax and GST
- provision of employee superannuation
- observance of customs regulations
- abiding by relevant legislation that would affect business operations
Describe some state government regulations
- provision of employee entitlements, including workers compensation and work health and safety requirements
- payment of payroll taxes
- abiding by relevant stage legislation (e.g. health, trade practices, employment)
- abiding by pollution controls
Explain what the local government have control over in terms of the business activities
- approving new development and alteration (to an existing building) applications
- fire regulations
- parking regulations (e.g. prevision of parking by new businesses)
- size, location and shape of business signs
What are regulatory bodies? Give examples.
- one that is set up to monitor and review the actions of businesses and consumers in relation to certain issues (such as advertising) and the appropriate legislation.
- done to ensure that businesses conduct themselves fairly in relation to the customer
- e.g. NSW Fair Trading; the NSW Environment Protection Authority; the Australian Competition and Consumer Commission
Technological influences on businesses
- increases efficiency and productivity
- creates new and improved products
- use of hi-tech robots improves productivity, reduces operating costs and makes mass production quicker, creating cheaper products
- eliminates boring repetitious jobs
- increases need for highly skilled labour
Influences on businesses in competitive situations
- number of competitors
- ease of entry into a market for a new business
- local versus foreign competition
- marketing strategies used by competitors
What does monopoly mean? Give an example.
- a complete concentration by one firm in the industry
- e.g. Australia Post
What does oligopoly mean? Give an example.
- where a small number of larger firms have a greater control over a market
- e.g. car manufacturers
What does monopolistic competition mean? Give an example.
- where there is a large number of buyers and sellers in a particular market
- e.g. local retailing shops
What does perfect competition mean? Give an example.
- where there is a large number of small firms that sell similar products. They are unable to differentiate from each other and so can only use price as a way of achieving market share.
- e.g. fruit and vegetable growers
What is ease of entry?
Describe the ease of entry when faced with different types of market concentration .
- refers to the ability of a person(s) to establish a business within a particular industry.
- ease of entry is determined by the type of market concentration.
–> perfect competition and monopolistic competition = entry not difficult, as businesses are small and more affordable for business owner to gain some part of the market
–> oligopolistic competition = entry difficult, as firms are larger and often more established
–> monopoly competition = no competitors can enter market, as one firm dominates entire industry (e.g. Australia Post)
What variables must local businesses deal with?
- labour costs
- transport costs
- the economy
- cost of stock/raw materials
What things about a business will determine the kind of marketing approach they take?
- the size of the market (number of existing and potential buyers)
- the size of the business (larger business more likely to spend money on TV and newspaper advertising; smaller businesses more likely to rely on flyers and word of mouth)
- number of competitors (more competitors = more need for marketing)
- nature of the product (e.g. postage stamps don’t need advertising in order to sell)
