NATURE OF BUSINESS: External Influences Flashcards
what are external influences
government, technology, economic, social attitudes
CANNOT be controlled
how does economic influence
economic cycle: long term pattern of changes in national income (GDP)
- Recovery, Peak, Recession, Trough
what is the recessionary cycle
- contracting economy: rise unemployment, decrease economic growth, stabilising/falling inflation
- consumers: more cautious = spending confidence falls = profit falls
- cost cutting must occur: workers my be retrenched - adds to economic problems
what is the boom cycle
- evidence in expanding economy, falling unemployment, increase economic growth, rise inflation
- consumer confidence returns = spending = increase profits
- business can increase production, will require workers
what is financial influence
INTEREST RATES
- pay higher interest on loans = less likely to borrow money + look for ways to minimise increased expenses
TAXATION
- business are required to pay
Federal : GST
State: Payroll
Local: Council rates
GOVERNMENT DEREGULATION
-removal of government regulation and control on financial markets both domestically and internationally
- attempts to open up markets to ensure competition + growth
e.g removal trade tariffs on imported products
What is Technology influences
- advanced tech = allowed business environment to move forwards at remarkable pace through labout-capital substitution
- increase efficiency/productivity, innovate new products + improve quality
- slow to adopt tech = left behind by competitors
Geographical influences : NOT LOCATION
- australia’s location: easy acces into economies within Asia-Pacific region + importing goods from China
GLOBALISATION: the process that sees people, goods, money and ideas moving around the world faster and more cheaply than before - relates to demographics e.g australia’s ageing population, incomes
Social influences
- taste, fashion, culture
- respond to these changes
- modern: environmental concerns, family friendly workplaces
Legal Influences
- compliance with government regulation can be costly, confusing and time consuming
MARKETING: The Australian Consumer Law
- enforced by The Australian Competition and Consumer Commission (ACCC)
- protects consumers from exploitation + ensures products are fit for purpose
FINANCE: The Corporations Act
- enforced by Australian Securities and Investment Commission (ASIC)
- manages formation of businesses
- monitors financial services to ensure honesty, accountability and integrity
OPERATIONS & HR: Work Health and Safety Act
- enforced by SafeWork NSW
- ensures provision of safe workplaces, safety training for staff
- ensures access to compensation for injuries at work
HR: FairWork Act
- enforced by FairWork Ombudsman (Commision)
- enforces minimum standards of employment
-protects worker rights - leave entitlements/working conditions
Political influences
Labour Market Reforms
- decentralisation of wage determination
- free trade policies and agreements
-Changes in penalty rates
Social Reforms:
- Paid parental leave
- gender workplace diversity
- equal pay
Environment management:
- environmental regulations on business to reduce carbon emmissions
- banning plastic bags
Taxation:
- Goods and Services tax (GST)
- company tax cuts
Instituational Influences
Government: federal, state, local
regulatory bodies: EPA, NSW Fair Trading, ASIC, ACCC
Other: Employer associations, Trade and industry assocations, ASX
competitive situation influences
- competition encourages business to become market leader, drive innovation, overall quality, price, effeciency
-Goal: achieve a sustainable competitive advantage
Factors influencing a business’s competitiveness
- ease of entry into market (cost, competition, legal restrictions)
-number of competitors - market concentration
- Local/global competitors (cost of labout, transport, materials)
- Marketing strategies
Types of market concentration
Monopoly: ONE FIRM IN INDUSTRY
- ability to decide on prices - no other competitors
Oligopoly: small number of larger firms dominate market
- able to stay in control: spend on advertising, restricts new competitors
Monopolistic Competition: large number of businesses in market e.g clothing companies
- goods/services differentiated through advertising, quality etc
Perfect Competition: Large number of small businesses that sell same/similar products
e.g fruit and veg growers
- only achieve market share through price competition
Market influences
labour markets: availability of workers in society - limited number, skills, trained
if less workers, business willing to pay more = better working conditions
Consumer markets: availability of products in the market, competition
