Influences in the Business Environment Flashcards
Name the 10 External Influences
Economic Financial Social Geographic Political Legal Institutional Technological Competitive Situation Markets
Economic Influences
Changes in economic conditions will result in changes in consumer spending, impacting the ability of a business to make a profit
Financial Influences
This refers to the cost of borrowing money and the amount of attraction to save
Institutional Influences
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
List the Internal Influences
Products
Location
Resources
Management and Culture
Who are the internal stakeholders?
Owners
Managers
Employees
Who are the external stakeholders?
Government Customers Competitors Creditors Society Environment
What are the four stages of the business cycle?
Establishment
Growth
Maturity
Post-Maturity
Establishment Phase
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
Growth Phase
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
Maturity Phase
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
Post-Maturity Phase
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
Challenges in the Establishment Phase
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
Challenges in the Growth Phase
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
Challenges in the Maturity Phase
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
Challenges in the Post-Maturty Stage - Renewal
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
Challenges in the Post-Maturty Stage - Cessation
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
Factors that can contribute to business decline
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
Liquidation
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
Voluntary Cessation - Sole Traders & Partnerships
The owners can close the enterprise through electing to retire, selling off business assets, paying all debts and closing the business
Voluntary Cessation - Private & Public Companies
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
Involuntary Cessation - Sole Traders & Partnerships
If payments to creditors cannot be made, then the assets of the business, and even the personal assets of the owner will be sold
Involuntary Cessation - Private & Public Companies
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
