Topic 1.5- Understand External Influences on Business Flashcards
Define the term ‘ stakeholder’
A stakeholder is any person, group of people or other organisation that has an interest in the activities of a business.
What is the difference between internal and external stakeholders?
Internal stakeholders work within a business, either making decisions or carrying them out.
External stakeholders do not work within a business but are affected by its activities.
What is an owner’s interest and impact on a business?
interest: want to ensure the business is successful
impact: provide funding, make decisions
What is an employee’s interest and impact on a business?
employees want good levels of pay, job satisfaction and job security
impact: they can go on strike, demand higher wages
What is a customer’s interest and impact on a business?
interest: customers want good quality and a range of products at reasonable prices
impact: feedback and recommendations
What is supplier’s interest and impact on a business?
interest: suppliers want to receive payments on time, and regular orders
impact: low quality of goods
What are pressure group’s interest and impact on a business?
interest: want to increase knowledge of their cause
impact: improve working conditions, help employees
What is the government’s interest and impact on a business?
interest: want to raise more money from taxes
impact: change tax levels
How are conflicts between shareholders resolved?
Through negotiation and willingness to compromise.
What is e-commerce?
the buying and selling of products and services on the internet
Give 3 advantages of e-commerce.
- reach wider markets
- reduce overhead costs and break-even output compared to running a physical shop
- sell at any time , day or night generating higher sales
Give 2 disadvantages of e-commerce
- more competitors so may have to reduce prices to stay competitive
- requires ongoing maintenance and malware protection which may be expensive
Give 3 types of digital communication tools a business could use.
- websites
- instant messaging
- social media
Give two ways technology has benefited the use of payment methods
- easy and convenient which means the business can serve more customers
- Having safer and easier payment systems can encourage customers to use the services
Give two ways social media has influenced sales activity
allows a business:
- to run sales and marketing campaigns
- to interact with customers
How technology impacted business costs?- digital communication
- more employees can work remotely therefore help to reduce costs for businesses,
Give two ways e-commerce has decreased business costs?
- requires less sales staff
- requires smaller premises
Give 3 ways e-commerce has increased business costs
- fees from handling payments online ( PayPal)
- costs in running a website
- may have to hire skilled IT staff
Give two ways social media has imapcted business costs
- provides a quick, cost-effective way to communicate and interact with customers.
- cheap from of market research
Give 3 examples of different payment methods
- online payments
- chip and pin
- contactless payments
Give 4 laws associated with employment
- recruitment
- discrimination
- health and safety.
- wages ( NMW)
what is national minimum wage? definition+number
The lowest hourly rate permitted by the government that an employer can pay to employees 22 and over
- £8.91
what is disposable income?
the money left after paying for expenses and tax which is used on leisure
Give 3 advantages of increasing NMW
- higher disposable income
- more motivated staff
- better work environment
Give 3 disadvantages to increasing NMW
- increases firms fixed cost and total cost
- if unable to there will be an increase of redundant employees
- paying less than NMW can lead to fines and bad publicity
what is legislation?
law
What does the consumer rights act do?
It protects consumers from business exploitation
How does the consumer rights act protect customers?
goods and services should be:
- as described
- of satisfactory quality
- fit for its purpose
Give three ways consumer law affects businesses negatively
- if broken, the firm would have to refund/replace the item increasing costs
- case could end up in court leading to an increase of costs- lawyers
- breaking it can lead to bad reputation– reduction of sales
Give 2 ways a business must adapt due to health and safety legislation
- firms need to carry out risk assessments to identify possible dangers
- staff must receive training and suitable equipment
Give 3 impacts of following the health and safety legislation
- more productive workforce
- expensive to train staff
- if not followed, firms can be prosecuted or fined and may have to pay compensation
What is the act that protects employees from discrimination?
The Equality Act 2010
What does the Equality Act 2010 legislate?
- must not discriminate against someone because of gender , race, age etc.
Give 2 impacts of following the equality act 2010
- adopting staff training
- if found discriminating, they’ll have to pay compensation
What is the Employment Rights Act 1996?
employees must be provided with a written statement outlining the details of their employment.
Give 3 benefits of meeting legal obligations
- staff are more efficient
- staff more likely to stay working for the business reducing recruitment cost
- the business gains a good reputation
Give 3 impacts of not meeting legal obligations
- pay compensation
- stakeholders and suppliers may be reluctant to be associated with the business
- business’ reputation is damaged
Give 3 benefits of unemployment to a business
- lower wages due to high demand for jobs
- government provides grants to those who provide jobs in the area
- less disposable income- higher demand for cheaper alternatives
Give 3 drawbacks to high unemployment rates for the business
- households have less disposable income leading to a lack of demand and lower sales
- firms may have to reduce prices
- less skilled workers
Give 2 ways an increase in consumer income affects businesses ( compare discount)
- higher disposable income leads to higher demand and an increase in sales
- stores selling at discount prices may decrease in sales due to less demand
Give 2 ways a decrease in consumer income affects businesses
- greater proportion of income is spent on necessities and cheaper alternatives therefore less money to spend on luxuries
- business will sell less and may decrease output , and increase staff redundancy
How does levels of interest impact loans?
- high level of interest: more expensive loan: difficult pay back
- low level of interest: cheaper loan: easy pay back
Give three impacts of low interest rates
- firms and consumers borrow more and save less
- consumers have more money leading to an increase of demand - more profit
- firms may increase output to compensate for higher consumer spending
Give three impacts of high interest rates
- Borrowing money becomes more expensive
- consumers will save more ( TIB ) in order to take advantage of higher returns
- reduced demand for products, less sales
How do levels of interest impact those who save?
high interest rates: better returns - higher reward
low interest rate- lower returns
Define inflation
Inflation is the rate at which the prices of products and services increase over time
Give 2 impacts of inflation to a business on consumer spending
- it increases in the short term creating extra revenue for a business increasing profits
- if income does not rise at the same rate, it can lead to a fall in demand
Give 2 impacts of inflation to a business on cost of labour
- employees pressure employers to increase wages to afford the higher prices
- higher wages leads to an increase in costs and reduce its profit
Give 3 impacts of inflation on Global Competition
- high inflation rate makes UK exports expensive so UK firms become less competitive globally
- Firms that sell lots of exports may see its sales fall
- when inflation is low , sales of exports increase
How does inflation and business growth link
- it is hard to predict what will happen to costs and sales
- this makes them reluctant to take risks and invest in their business
Define ‘ Exchange Rate’
and what are they affected by.
- an exchange rate is the price at which one currency can be traded for another
- it is affected by the economy of the country and the global economy
Define appreciation
- when the value of the pound increases
Define depreciation
- when the value of the pound decreases
Define a ‘ Strong Pound’
- when the exchange rates changes so that the currency gets stronger or appreciates
- it will be worth more
Give three impacts of having a strong Pound
- exports become more expensive whilst imports become cheaper
- British firms that export products will see sales and profits fall as they become more expensive lowering customer appeal
- British firms that import raw materials will make products more cheaply so their profits may go up
Define a ‘Weak Pound’
if the exchange rate changes and the currency gets weaker or depreciates
- it will be worth less
Give three impacts of the ‘ Weak Pound’
- British exports become less expensive abroad resulting in more sales and higher profits
- It is more expensive for foreign firms to sell their products in the UK allowing British firms to stay competitive as they will not have to reduce prices
- Firms which import raw materials will have higher production costs leading to an increase in the price of their product resulting in less sales and profits
Define Exports and Imports
imports: buying goods from another country
exports: selling goods to another country
Define tax and who is it set by
Tax is money that has to be paid to the government going towards public services
- it is set by the government
Give 3 ways changes to income tax impacts spending
if income tax falls, consumers will have more disposable income - ( a fall ) consumer spending increases leading to increased revenue for firms
- if it increases, businesses expect to sell less so will reduce the level of their investment
Give 3 ways increasing tax impacts businesses negatively
- reduces the money able to be reinvested leading to slower growth
- tax forces firms to cut costs in order to survive and meet profit targets: making staff redundant
- may relocate abroad to avoid paying high corporation taxes
Give 2 impacts of lowering business tax
-more money able to be invested growing the business
- may encourage firms from abroad increasing competition in the market, leading to a fall in sales
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Give 4 different types of tax
- corporation tax
- income tax
- value-added tax
- council tax
Give two impacts of increasing VAT
- consumers have to pay higher process , reducing their purchasing powers
- inflation occurs affecting business costs
