Topic 1.5 - Understanding external influences on business

Question 1

What is a stakeholder?

Answer 1

A stakeholder is any person, group of people or other organisation that has an interest in the activities of a business.

Question 2

What are the eight main types of stakeholder?

Answer 2

• shareholders (owners), employees, customers, managers, suppliers, local community, pressure groups, the government.

Question 3

who are shareholders?

Answer 3

In PLC, they influence aims, objectives, and strategy. In LTD, they decide jointly with other shareholders. Shareholders are part owners of private or public limited companies.

Question 4

who are managers?

Answer 4

Staff who are responsible for implementing the decisions made by the owners and overseeing the work that is required

Question 5

who are employees?

Answer 5

Staff who carry out the day-to-day work of the business.

Question 6

who are customers?

Answer 6

People who buy products or services from the business

Question 7

who are pressure groups?

Answer 7

Pressure groups are organisations that seek to influence the policies and actions of businesses

Question 8

who are suppliers?

Answer 8

Other businesses and organisations that provide products or services to the business, eg a utility company that supplies it with electricity, or a business that provides the seats used when producing a car.

Question 9

who are local community?

Answer 9

People, organisations and businesses that live or are located in the area around the business.

Question 10

who are the government?

Answer 10

The government is responsible for creating and enforcing laws and regulations that affect businesses.

(it controls EVERYTHING)

Question 11

what is the business objective of shareholders or owners?

Answer 11

want to ensure the business is successful and are interested in how much profit the business can make

so that the value of their shares increases (maximising returns)

Question 12

what is the business objective of managers?

Answer 12

Their primary objective is to meet the company’s goals and objectives

They want to maximise profits and minimise costs while ensuring that the company operates efficiently

this may lead to an increased salary, bonus, or maybe even career progression

Question 13

what is the business objective of employees

Answer 13

want good levels of pay, job satisfaction and job security, and may also be interested in career progression

Question 14

what is the business objective of customers

Answer 14

want good quality, convenience, good customer service and a range of products at reasonable prices

Question 15

what is the business objective of suppliers

Answer 15

want to make a profit, receive payments on time, and regular orders (long-term relationship)

• to ensure sustainability and viability of the business

Question 16

what is the business objective of the local community

Answer 16

(people living in the area) may be looking for work, or affordable products or services, which local businesses can provide

(primary objective is for the business to have a positive impact on the community)

Question 17

what is the objective of pressure groups

Answer 17

Their primary objective is to promote a specific cause or agenda (and increase awareness)
Pressure groups want the company to support their cause or take action on an issue

Question 18

what is the business objective of the government

Answer 18

Their primary objective is to promote the public good and protect the interests of citizens
The government wants companies to operate within the law and contribute to the economy

may wants businesses to create more jobs in order to raise more money from taxes and save money on benefit payments

more money available to invest in future infrastructure projects

Question 19

what is the impact on business activity of shareholders/owners?

Answer 19

Owners make decisions about the activities of the business and provide funding to enable it to start up and grow. Shareholders influence the objectives of the business.

Question 20

what is the impact on business activity of managers

Answer 20

Managers make some recommendations and decisions, and implement them, to influence the business’ activity.

Question 21

what is the impact on business activity of employees

Answer 21

Employees may have a limited amount of influence on business decisions. However, they can also affect the business directly, eg by refusing to work or not working as well as they should.

Question 22

what is the impact on business activity of customers

Answer 22

Customers buy products and services and give feedback to businesses on how to improve them. Customers are also able to influence others by recommending the business to friends or by warning them against using the business.
they also buy the business’s products/services and are a source of finance

Question 23

what is the impact on business activity of suppliers

Answer 23

Suppliers can have a significant impact on a business if there are any changes in the quality of the goods they supply or the reliability of their deliveries.

Question 24

what is the impact on business activity of the local community

Answer 24

If a business affects a large number of local residents negatively, they may protest or object through the local council. They can also support businesses by buying products and services.

Question 25

what is the impact on business activity of pressure groups

Answer 25

Pressure groups can improve working conditions for employees and help them to get fair pay. They can also try to influence customers’ opinions of a business.

Question 26

what is the impact on business activity of the government

Answer 26

Governments can pass new laws, change tax levels or amend levels of government spending in ways that affect the business, eg by providing increased grants or funding.

Question 27

think about possible conflicts between stakeholder groups.

Answer 27

ok broo

Question 28

what is e-commerce

Answer 28

E-commerce, or electronic commerce, refers to the buying and selling of products and services using devices connected to an electronic network, such as the internet.

Question 29

subsidy

Answer 29

An amount of money paid to the firm by the government for each unit produced

Question 30

The interests of stakeholders should be considered whenever a question asks you to weigh up business choices, typically in the longer-answer questions. What should you consider? (4)

Answer 30

Which stakeholders might be supportive of each option?
And which stakeholders might oppose each option?
Is there a conflict between different stakeholders?
How might conflict be overcome?

Question 31

what is social media?

Answer 31

websites and applications that allow users to create and share content or to participate in social networking

Question 32

digital comms

Answer 32

the use of digital technologies to share info, ideas and messages (e,g: email, zoom, teams)

Question 33

payment systems

Answer 33

technologies used to process and manage financial transactions (e.g: apple pay, paypal)

Question 34

what are the four main technologies used by business?

Answer 34

• e-commerce
• digital comms
• social media
• payment systems

Question 35

read sme 1.5.2

Answer 35

have u read it?

Question 36

what is legislation

Answer 36

laws and regulations passed by governments that require businesses and individuals to conduct their behaviour in a particular manner

Question 37

2/3 areas of legislation that have significant impacts on businesses

Answer 37

Consumer protection
Employee protection
Health and safety legislation (this could be added under employee protection)

Question 38

what is the purpose of consumer protection legislation?

Answer 38

Consumer protection legislation aims to ensure that consumers are treated fairly by the companies with which they interact

also aims to provide a level playing field for businesses ensuring that no business can gain an unfair advantage over rivals by taking shortcuts or by making false claims about its products

Question 39

what does consumer protection legislation cover? (not on spec but might as well know) (4)

Answer 39

• The safety of products
• The standard and quality of products
• The rights of customers if they are unhappy with their purchase
• The product information that must be given to customers

Question 40

what is the purpose of employee protection legislation?

Answer 40

Employee protection legislation aims to prevent the exploitation of workers

Question 41

cons of obeying consumer protection laws?

Answer 41

• higher business expenditure (costs)
• but it’s ntd cos all other businesses have to do the same

Question 42

what does employee protection laws cover? (4)

Answer 42

• Pay and working conditions
• Equality of employment rights for marginalised groups (e.g. those with disabilities) to avoid discrimination
• The right to belong to a trade union and take industrial action
• Contracts and termination of employment

Question 43

benefits of meeting employee legislation (3)

Answer 43

Businesses can avoid attracting unwanted media attention
They are less likely to be subject to legal action
New employees are likely to be attracted to work for a business that fulfill its legal obligations
Employees will be happier (higher employee retention)

Question 44

cons of meeting employee legislation (2)

Answer 44

• higher costs (e.g: salaries)
• may need to change business practices to be compliant with the law

Question 45

purpose of health and safety legislation on businesses?

Answer 45

Health and safety legislation requires businesses to operate in a way that protects the physical and mental wellbeing of its employees and contractors as well as its customers

(just makes everyone happy apart from business)

Question 46

what does health and safety legislation cover?

Answer 46

The provision of adequate breaks and rest periods
Temperature and noise levels
The provision of safety equipment
Hygienic, safe and sanitary conditions
Preventing stress

Question 47

code of practice

Answer 47

A set of written rules which explains how people working in a particular business should behave.

Question 48

which procedures help maintain health and safety in the work place? (5)

Answer 48

Staff training and supervision
Changes to working hours and rest provisions
Arrangement of manuals, signage and safety documentation
Purchase and maintenance of safety equipment
Drawing up and implementing a code of practice

Question 49

Gross Domestic Product (GDP)

Answer 49

The total value of goods produced and services provided in a country during one year

Question 50

what is the impact on businesses which sell inferior goods When household income rises?

Answer 50

• fall in sales.

Question 51

what is the impact on businesses which sell luxury goods When household income rises?

Answer 51

• increase in sales

(more disposable income)

Question 52

Consumer Price Index

Answer 52

Measures price changes to a ‘household basket’ of 700 goods/services that an average family would purchase

Question 53

Business Challenges Caused by Inflation (6)
- relate it to business costs, loans, consumer spending habits

Answer 53

• Workers often demand higher wages to compensate for the increase in the cost of living
• Suppliers increase the cost of raw materials and components
• Utilities such as electricity become more expensive
• Interest rates usually rise which makes business borrowing more expensive
• Price increases deter consumers from making more luxury type purchases
• Consumers focus more of their spending on necessities-

Question 54

impact of exporting if an increase in the value of the £

Answer 54

Sales are likely to fall as products become more expensive when compared to overseas competitors

In order to remain competitive, exporting businesses may need to lower prices and accept lower profit margins

Question 55

impact of importing if an increase in the value of the £

Answer 55

Costs are likely to fall as raw materials from overseas become cheaper

Question 56

impact of importing if a decrease in the value of the £

Answer 56

Costs are likely to rise as raw materials from overseas become more expensive

Businesses may seek domestic suppliers to reduce costs and maintain profit levels

Question 57

impact of exporting if a decrease in the value of the £

Answer 57

Sales are likely to rise as products become cheaper when compared to overseas competitors

Question 58

To help you remember the effects of an appreciating currency, remember the acronym SPICED - Strong Pound Imports Cheaper Exports Dearer

Answer 58

do you remember?

Question 59

impact of increased interest rates on a business (3)

Answer 59

• If interest rates rise businesses will have to pay more on their loan repayments which will increase their costs
• Businesses may be less willing to make capital investments choosing instead to save their money
• Customers are less likely to purchase goods on credit when interest rates are high leading to a fall in sales

Question 60

Customs duties

Answer 60

The taxes levied by a government on imported goods.

Question 61

business impact of changes in taxation?
- it’s really self-explanatory but you might as well refresh your knowledge (1.5.4 sme)

Question 62

how can a business respond to changes in technology? (3)

Answer 62

• Investing in new technology that improves the products, reduces costs, increases efficiency, or expands their reach
• Partnering with tech companies to gain access to their expertise and resources
• Training employees to use new technologies effectively

Question 63

how can a business respond of changes in legislation? (3)

Answer 63

• Complying with new regulations which may involve changes to their operations, such as increased reporting requirements or new safety standards
• Lobbying policymakers to influence the development of new legislation through trade associations or directly with policymakers
• Seeking legal advice to help navigate changes in legislation and ensure compliance

Question 64

how can a business respond to an unstable economic climate? (3)

Answer 64

• Diversifying their products/services to reduce their reliance on a single market or customer base can help them to weather economic downturns
• Cutting costs by reducing staff, renegotiating contracts, or streamlining operations which can help businesses to remain profitable during difficult economic conditions
• Seeking finance from lenders or investors to help weather economic downturns or to fund growth opportunities