learning outcome 6 Flashcards
What are the factors that comprise the external business environment?
Social factors
Technological factors
Economic factors
Environmental factors
Political factors
Legal factors
Ethical factors
Competitor factors
What are examples of social factors that affect businesses?
Demographic issues (e.g. age, gender, population size)
Attitudes to work
Disposable income
Social trends
Cultural beliefs
How do technological factors influence businesses?
Automation
Communication advances
Changes in purchasing and sales methods
Mobile technology
How do interest rates affect businesses?
Higher interest rates may increase borrowing costs, reducing investment.
Lower interest rates encourage borrowing and investment.
How do exchange rates impact businesses?
A weak currency increases the cost of imports and benefits exports.
A strong currency lowers the cost of imports but makes exports more expensive.
What is the impact of inflation on businesses?
Increased costs for businesses (raw materials, wages)
Reduced purchasing power for consumers
Can lead to price rises and reduced demand
How does unemployment affect businesses?
High unemployment may reduce demand for goods and services.
Lower unemployment can increase demand but may lead to higher wage demands.
How does taxation influence businesses?
Higher taxes reduce business profits.
Lower taxes can increase profitability and business investment.
What are examples of environmental factors impacting businesses?
Energy management
Carbon emissions
Waste reduction
Recycling
Pollution
Political Factors
Political instability
Changes in government
Government policies and initiatives
What are some key legislations affecting business operations?
Companies Act
Partnership Act
Sale and Supply of Goods Act
Supply of Goods and Services Act
Consumer Protection Act
Equality Act
Health and Safety at Work Act
Working Time Directive
National Minimum Wage Act
Data Protection Act
What are the implications of a business failing to meet legal requirements?
Legal implications: fines, penalties, lawsuits
Non-legal implications: damage to reputation, loss of trust
How can businesses act ethically?
Fair treatment of employees (no child labor, fair wages)
Fair trading (e.g., fair prices, fair trade)
Environmentally friendly practices (waste management, reducing carbon emissions)
Corporate Social Responsibility (charity donations, community involvement)
What are the positive impacts of operating ethically for a business?
Improved reputation
Increased customer loyalty
Better employee morale
Attraction of ethical investors
What are the negative impacts of a business not operating ethically?
Damage to reputation
Loss of customers
Legal consequences
Poor employee morale
What are competitor factors that affect a business?
Strength of competition
Market share
Competitor behavior
Position in the market
How can the external environment impact a business and its stakeholders?
Positive: New opportunities, increased demand
Negative: Increased costs, reduced demand, legal issues, reputation damage
How can businesses respond to changes in their external environment?
Seizing opportunities (e.g., expanding into new markets)
Dealing with threats (e.g., reducing costs, diversifying)
Adapting business strategies to stay competitive
What are the advantages and disadvantages of different responses to external changes?
Advantages: Improved profitability, market share, customer base
Disadvantages: High costs, risk of failure, resource depletion
