internal and external influences Flashcards
what are external influences? examples?
are factors that business has no control over, which include economic, financial, geographical, social, legal, political, institutional, technological and competitive situation
external: what influence does the ECONOMY have on a business?
- boom period, the economy is thriving, employment is high, wages rise, and people spend more, boosting business growth.
- bust period, The economy slows down, unemployment increases, wages stagnate, and spending drops.
external: what influence does FINANCE have on a business?
- businesses rely on borrowing money (debt finance) when the markets become less regular, and the cost of borrowing depends on low or high interest rates.
- depreciation: Exports become cheaper, imports become more expensive
- appreciation: Exports become more expensive, but importing goods becomes cheaper
external: what influence does ones geographical location have on a business?
-Location of Australia (Asia-Pacific) means that we face competition with China, Korea, Japan and the US when selling products
- Change in demographics (sex, age, race, religion etc) has impact on the demand
-Globalisation (bringing the world closer together through international trade) has also allowed for the products of businesses to be seen overseas
external: what influence does the SOCIAL side have on a business?
-Businesses need to respond to changes in tastes, fashions and culture which can lead to sales and profit opportunities
- Desire for family-friendly programs to combat work and family conflict: Flexible work arrangements, parental leave policies
- Growing awareness of the vulnerable environment: Sustainable practices
external: what influence does the LEGAL side have on a business?
- Must be able to abide by laws in the country and must understand obligations towards stakeholders
- EXAMPLE: Competition and Consumer Act 2010, details how businesses cannot use any unethical approaches to advertising and marketing, so that they do not give an unfair advantage to themselves and deceive consumers.
external: what influence does the POLITICAL side have on a business?
- Change in politics can result in business uncertainty OR business confidence
- free trade policies change meaning that Barriers of trade are removed, and tax on imported goods have dropped, However, cheaper imports of products has resulted in closing your local businesses as some businesses cannot compete with those cheaper products.
external: what influence does the INSTITUTIONAL side have on a business?
It refers to entities and structures that are formally established and recognised within a society or industry to set rules, norms and standards.
- government bodies include federal, state and local obligations which are the main decision-makers that make the laws for the country
- whereas regulatory bodies are organisations that enforce SPECIFIC laws for different industries EG. NSW fair trading
external: what influence does the TECHNOLOGICAL side have on a business?
- Improves the range of products in a business, as well as business productivity and efficiency.
- Can lower the need for human staff, and lower costs for employers an owners
what are internal influences?examples?
the specific factors within the business that will affect its operations. eg. product, location, resources, management and business culture.
internal: what influence do PRODUCTS have on a business?
The owner chooses what they wish to sell, and the services they want to offer.
- depending on the types of products/ services offered affect the operation of the business and how fast the business will expand operation
- The size of the business will be based on products, level of technology and the volume of products produced.
internal: what influence does location have on a business?
- A good location will bring in sales and profits, whilst a bad location is a liability that affects sales and profits.
- factors when choosing a location include: cost, visibility, proximity to customers and support services (expand on each)
internal: what influence does resources have on a business?
human (skill level, experience, qualifications), information (knowledge and data needed by a company), physical (equipment, machinery, buildings and raw materials) and financial resources (debt and equity finance).
what is a stakeholder?
any group or individual who has an interest in the activities of the business, or is affected by it
internal stakeholder include?
- owners
- shareholders
- managers
- employees
external stakeholders include?
- customers
- environment
- society
- government
5.suppliers
factors that contribute to a businesses decline include
- lack of management expertise and skill
- lack of sufficient money (finance)
- poor location
- failure to adapt to change
