Influences in the Business Environment

Question 1

Name the 10 External Influences

Answer 1

Economic
Financial
Social
Geographic
Political
Legal 
Institutional
Technological
Competitive Situation
Markets

Question 2

Economic Influences

Answer 2

Changes in economic conditions will result in changes in consumer spending, impacting the ability of a business to make a profit

Question 3

Financial Influences

Answer 3

This refers to the cost of borrowing money and the amount of attraction to save

Question 4

Institutional Influences

Answer 4

The Australian Competition and Consumer Commission determines how markets should operate, and will penalise businesses that mislead the public

The Fair Work Ombudsman ensures that employers do not breach workplace safety or laws relating to pay and conditions

Question 5

List the Internal Influences

Answer 5

Products
Location
Resources
Management and Culture

Question 6

Who are the internal stakeholders?

Answer 6

Owners
Managers
Employees

Question 7

Who are the external stakeholders?

Answer 7

Government
Customers
Competitors
Creditors
Society
Environment

Question 8

What are the four stages of the business cycle?

Answer 8

Establishment

Growth

Maturity

Post-Maturity

Question 9

Establishment Phase

Answer 9

Occurs when a business launches into the market

The idea at establishment is to create brand awareness and a market of loyal customers

Costs are often high, but for the first time, the enterprise will generate revenue

During this stage, a business may experiment with penetration pricing

Question 10

Growth Phase

Answer 10

Occurs when a business starts to sustainably increase its sales & turnover

As the level of sales rise, the scale of production may need to increase

The business may start to differentiate the product, and vary prices

The business may employ more staff with a degree of specialisation

Question 11

Maturity Phase

Answer 11

Occurs when a business has achieved a stable market share

At this point, the business needs to find ways to reduce costs in order to maintain profitability

The business could also add value by extending the product range

The business could look to take over smaller businesses

Question 12

Post-Maturity Phase

Answer 12

The business will either decline or find new opportunities to regrow

In order to regrow, the businesses will need to rebrand old products, improve existing products, enter new markets or make wholly new product lines

Question 13

Challenges in the Establishment Phase

Answer 13

Financial: Managing high cash outflow and low cash inflow

Operations: Ensuring there is enough reliable supply to manage early demand

Marketing: Increasing brand awareness whilst keeping costs low

Question 14

Challenges in the Growth Phase

Answer 14

Financial: Manage the high cash outflow and high cash inflow

Operations: Ensuring there is enough reliable supply for high demand

Marketing: Increase brand awareness and product quality

Human Resources: Find skilled staff in all aspects of business operations

Question 15

Challenges in the Maturity Phase

Answer 15

Financial: Reduce cash outflow & maintain profitability via value adding

Operations: Reduce supply costs through rationalisation

Marketing: Maintain brand awareness in a competitive market

Human Resources: Keep staff motivated to innovate

Question 16

Challenges in the Post-Maturty Stage - Renewal

Answer 16

Financial: Manage high cash outflow & cost of rebranding or entering new markets

Operations: Ensuring there is enough reliable supply to manage high demand

Marketing: Maintain product quality & differentiate

Human Resources: Attracting skilled staff to manage change and regrowth

Question 17

Challenges in the Post-Maturty Stage - Cessation

Answer 17

Financial: Manage high cash outflow and low cost inflow from low prices

Operations: Close supply lines and manage the sale of old stock

Marketing: Manage consumer disappointment over loss of brand

Human Resources: Managing the career transition of staff

Question 18

Factors that can contribute to business decline

Answer 18

Lack of innovation

Failure to keep up with the changing needs of customers

Inability to meet financial obligations/poor cash management

Inadequate leadership skills

The lack of a clear business plan

Question 19

Liquidation

Answer 19

When all of a firm’s assets are sold

This cash is then used to pay off creditors and others who are entitled to payment

Question 20

Voluntary Cessation - Sole Traders & Partnerships

Answer 20

The owners can close the enterprise through electing to retire, selling off business assets, paying all debts and closing the business

Question 21

Voluntary Cessation - Private & Public Companies

Answer 21

The shareholders can elect to wind up a business through selling off the assets, paying off all debts to creditors and then closing the business by notifying ASIC

Question 22

Involuntary Cessation - Sole Traders & Partnerships

Answer 22

If payments to creditors cannot be made, then the assets of the business, and even the personal assets of the owner will be sold

Question 23

Involuntary Cessation - Private & Public Companies

Answer 23

If payments to creditors cannot be made, there are two options:

1) The court may appoint an administrator (receiver) who will try and trade the business into a position of strength by selling off assets
2) If the receiver cannot trade the business out of debt, then it may lead to liquidation, when all of the assets of the business have to be sold off