The External Environment (SAC)

Question 1

Describe two factors of the macro environment in relation to business planning.

Answer 1

Economic conditions:
- The set of influences that relate to economic activity, including interest rates, wages, unemployment, exchange rates and inflation
- When planning a business, it is important to consider the prevailing economic conditions, as they directly impact consumer behaviour, spending power, and resources. During periods of high inflation and interest rates, businesses may face challenges in managing costs, while during periods of economic growth, businesses may have more opportunities for expansion and investment.

Technological considerations:
- The issues related to the growing use of tools, techniques or systems.
- In modern-day society, businesses need to adapt and incorporate technology into their operations to remain competitive. Technological factors include areas such as automation, digitalization, e-commerce, etc. When planning a business, it is important to consider how technology can impact processes, productivity, customer engagement, and market reach. For example, a business that fails to adopt relevant technological advancements may struggle to meet customer expectations or face obsolescence.

Question 2

Describe two factors of the operating environment in relation to business planning.

Answer 2

Customers
- Making businesses ensure their future viability and profitability
- Recognise and assess changes in consumer tastes so it can constantly satisfy consumers’ wants and needs

Competitors
- Influencing the decisions that business owners make. - - Changes in the actions of competitors are likely to result in an alteration to a business’s practices.
- For example, if a competitor introduces a wider range of products that consumers find appealing, the business must ensure that it adjusts its product range in order to maintain market share.

Question 3

Describe two factors of legal obligations in relation to business planning.

Answer 3

When a business is first established, a business name must be registered with the Australian Securities and Investments Commission (ASIC) unless the owner is trading under their own name. New business name registrations require an Australian business number (ABN) and a partnership or company requires its own tax file number (TFN). If the business is established as a company, it is required to register with ASIC to receive a Certificate of Registration and an Australian company number (ACN). Additionally, the business must acquire all of the licenses required to commence operations, such as a restaurant that would need a safe food handling licence.

Question 4

Define CSR.

Answer 4

Managing a business in such a way that the broader social welfare of the community, including its employees, customers, suppliers and the environment, is taken into consideration when making business decisions

Question 5

Distinguish between the external macro and operating environment.

Answer 5

• Both a part of the external environment

Marco: the broad conditions and trends in the economy and society within which a business operates.
(Business = no control)
- Corporate social responsibility
- Global issues
- Economic conditions
- Legal and government regulations
- Societal attitudes and behaviours
- Technological considerations

Operating: the specific outside stakeholders with whom the business interacts in conducting its business.
(Business = some control)
- Suppliers
- Customers
- Competitors
- Special Interest Groups

Question 6

Using a contemporary business explain how a business can be socially responsible.

Answer 6

McDonald’s initiatives focus on children’s well-being, education, and local community development. For example, the Ronald McDonald House Charities provide accommodations near hospitals for families with critically ill children.

Question 7

Describe two social attitudes that could affect the planning of a business.

Answer 7

Environmental consciousness - businesses must consider green initiatives, sustainable practices, and renewable energy sources to meet the demands of environmentally conscious consumers.

Ethical consumption - Businesses must focus on fair trade, responsible sourcing, and social responsibility to align with consumer values, enhance their brand reputation, and remain competitive in a socially conscious marketplace. This can be achieved through ethical audits, guidelines, and fair wages.

Question 8

Explain what an interest rate is and how it can affect business planning.

Answer 8

The price charged or paid for the use of money that has been deposited or borrowed. High-interest rates reduce the likelihood of a business making a large profit, but falling interest rates can make business loans more affordable, allowing a business owner to plan to expand. Lower interest rates mean consumers have extra money to spend on goods and services, which can have an impact on business planning.

Question 9

Explain business and consumer confidence levels in relation to one phase of the business cycle.

Answer 9

Business and consumer confidence levels refer to how businesses and customers are feeling about the economy.

During the peaks, wages/salaries are high, profits are at the highest level, employment is high, and unemployment is low.

During the troughs, wages/salaries are low, profits are at the lowest level, consumer spending is at the lowest, low employment, and high unemployment.