external influences in the business environment Flashcards
define the business environment
refers to the surrounding conditions in which the business operates, it can be divided into two broad categories: external and internal
define the external environment
includes those factors over which the business has very little control
define the economic/business cycle
the periods of growth (boom) and recession (trough) that occur as a result of fluctuations in general level of economic activity
define GDP
(gross domestic product) total of all goods and services sold in a country in a year
list the external influences
-economic
-financial
-geographic
-social
-legal
-political
-institutional
-technological
-competitive situation
-markets
what are the characteristics of a boom (peaks)
high levels of wages and salaries
business operating at full capacity
highest sales and profits
low level of unemployment
consumer spending at highest levels
what are the characteristics of a recession (trough)
low levels of wages and salaries
business operating below full capacity
lowest sales and profit
high level of unemployment
consumer spending at lowest levels
what polices/interventions do the government use to achieve economic stabilisation
fiscal policy (money-budget, tax)
monetary policy (interest rates)
prices and incomes (wages)
external policy (exchange rates, protection and trade policies)
how is the business influenced by economic factors?
as described in the characteristics of a boom and recession
define deregulation
the removal of government regulation from industry, with the aim of increasing efficiency and improving competition
define increased international speculation
the act of conducting a financial transaction that has substantial risk of losing value but also holds the expectation of a significant gain or other major value
what are the recent changes experienced in global financial markets?
deregulation, communication technology, increased international speculation, refinancing of debts
how can changes and global and domestic financial markets impact a business?
it will influences the cost of borrowing money and therefore directly affect the level of investment by a business
define globalisation
the process that sees people, goods, money and ideas moving around the world faster and more cheaply than before
what are the main geographical influences on Australian businesses?
proximity to trading partners, changing demographic factors, the process of globalisation
why would a business respond to social changes
changing your business in response to social influences (changes within society) e.g. fashion and culture, can lead to increases in sales and profits
what are the three current social influences on a business?
growing environmental awareness, work/life (family-friendly) improvements, workplace diversity
how can legal influences impact a business
legal influences are the regulations (legal framework) within which a business must operate and work around
what do businesses have a legal responsibility towards
employees, shareholders, consumers, government
what government policies impact Australian business? and how?
the process of privatisation and deregulation impact them in the utilities and financial sectors
as well as taxation, market reforms, social reforms and environmental management
what political influences are on a business
they are derived from state and federal government policies and include trade policies and the process of deregulation
what institutions influence businesses
government, regulatory bodies and other groups such as trade unions and employer associations
how does technology influence a business
it can increase efficiency and productivity, create new products, improve the quality and range of goods and services, ease marketing strategies
define sustainable competitive advantage
refers to the ability of a business to develop strategies that will ensure it has an ‘edge’ over its competitors for a long period of time
