Influences in the business environment

Question 1

Examples of external influences? (10)

Answer 1

• economic
• financial
• geographic
• social
• legal
• political
• institutional
• technological
• competitive situation
• markets

Question 2

What is an external influence?

Answer 2

factors that the business has little control over

- changes in the environment make it necessary for adjustments to business operations

Question 3

What are economic cycles?

Answer 3

periods of growth (boom) and recession (bust) that occur as a result of fluctuations in the general level of economic activity

Question 4

What are the characteristics of an economic period of recovery? (5)

Answer 4

• increasing consumer spending
• business expectations increasingly optimistic
• increasing business investment
• sales and profits rising
• unemployment falling

Question 5

What are the characteristics of an economic period of recession? (5)

Answer 5

• decreasing consumer spending
• business expectations increasingly pessimistic
• decreasing business investment
• sales and profits falling
• unemployment rising

Question 6

What are the characteristics of an economic period of peak? (5)

Answer 6

• wages and salaries at high levels
• business operating at full capacity
• sales and profits at highest levels
• low level of employment
• inflation may increase

Question 7

What are the characteristics of an economic trough? (6)

Answer 7

• wages and salaries at high levels
• business operating below full capacity
• sales and profits at lowest levels
• consumer spending at lowest levels
• high level of unemployment
• inflation may remain stable or fall

Question 8

What is the typical shape of the business cycle?

Answer 8

• boom
• recession
• slump
• recovery
• boom
• recession

Question 9

What are some examples of the economy being affected by overseas trends?

Answer 9

• changes in trade, investment, currency

- continued growth and development of China’s economy has benefited business in regards to exports

Question 10

How does reduced consumer spending had an impact on business owners?

Answer 10

• profits fall and cost cutting may have to occur

- cost cutting in the form of retrenching workers therefore economy falls further into recession

Question 11

What is the recessionary cycle? (4)

Answer 11

• evidence of a contracting economy (rising unemployment, decreased economic growth, stabilising or falling inflation
• consumers more cautious, spending and consumer confidence fall
• reduced spending by consumers affects businesses
• cost cutting, workers may be retrenched

Question 12

What is the ‘boom’ cycle? (4)

Answer 12

• evidence of an expanding economy with falling unemployment, increased economic growth and rising inflation
• consumer confidence returns, spending increases
• increased spending will increase business profits
• business can increase production and will require workers

Question 13

What businesses are the most susceptible to swings in the economy?

Answer 13

those that sell consumer or luxury goods

Question 14

Which types of businesses fare well in recession?

Answer 14

bargain shops and clearance outlets

Question 15

What is deregulation?

Answer 15

removal of government regulation from industry, with the aim of increasing efficiency and improving competition

Question 16

When did deregulation of the financial system begin to occur?

Answer 16

• 1983

Question 17

What is the relationship between debt finance sources and interest rates?

Answer 17

• as interest rates increase,
  business are more cautious about taking
  one extra debt
• as interest rates drop, businesses take on more debt

Question 18

What impact does globalisation have on the world’s financial markets?

Answer 18

• no longer necessary for many large Australian businesses to use only domestic financial institutions
• can access finance from worldwide sources
• developments in communications technology have enabled global financial transactions

Question 19

What are some major factors on Australian business activity in regards to geography?

Answer 19

• geographic location in Asia- Pacific region

- economic growth in a number of Asian nations

Question 20

What is demography?

Answer 20

the study of particular features of the population

• size, age, sex, income, cultural background etc.

Question 21

What are some examples of changing demographic factors and their relation to business activities?

Answer 21

• change in age structure
  - more elderly people in community
• skills shortages in the workforce and demand in age-related services
• growth in tertiary sector

Question 22

What is international trade?

Answer 22

the buying and selling of goods and services between nations

Question 23

What are three social issues that have the potential to lead to significant change in the business environment?

Answer 23

• growing awareness of the environment
• growing desire for businesses to provide family friendly workplaces
• workplace diversity