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
what must business with competitors aim to achieve
sustainable competitive advantage
define number of competitors
size and number of firms within an industry
define ease of entry
ability of a person(s) to establish a business within a particular industry
define local competitors
those who produce or sell a good or service in the same market
define foreign competitors
those businesses located overseas or offshore, they can sell their goods and services in Australia (competing with local businesses) but also can sell their products overseas (to grow a business)
what does the success of a business and its ability to sustain a competitive advantage depend on?
number of competitors, ease of entry, local and foreign competitors, marketing strategies used
what variables must local competitors deal with?
labour costs, transport costs, the economy, cost of stock/raw materials
What determines ease of entry
market concerntration
define and give examples of monopoly
one business dominates the market e.g. australian post
define and give examples of duopoly
two businesses dominate the market e.g. quantas/virgin
define and give examples of oligopoly
a few competitors (typically four) e.g. CommBank, BANK, AUZ, Westpac
how does the competitive situation influence a business
it influences a business on whether they succeed (they are the best business) or fail (other businesses are better) due to entering a market with other business
define and give examples of monopolistic competition
similar products but all slightly differentiated e.g. glassons, cotton on, H&M, universal, sportsgirl
define and give examples of perfect competition
large number of small business that sell products that are the same or similar e.g. fruit and vegetables
in market concentration, which is the easiest competitors to enter
it is very difficult to enter monopoly market whereas easier to enter monopolistic competition but must must advertise their differentiation
what markets are changing regularly
financial/capital markets, changing labour markets, changing consumer markets
why is financial/capital markets changing
-access to the share markets (domestic and global) is easier
-changes in the global market can affect domestic markets
why is labour markets changing
-flow of migrants is now more controlled
-rise in outsourcing/offshoring
why is consumer markets changing
-access in technology means more consumer shop globally
-new consumer markets have emerged, particularly China and Japan
what must business with competitiors aim to achieve
sustainable competitive advantage
