Topic 2-Influences On Business Flashcards
What is e commerce
Any form of business activity conducted
electronically
E commerce methods
• online advertising
• online auctions
• online bookings
• online purchases
• online shopping
• websites
• mobile apps
• electronic payments
• internet banking
• social networking
• contactless transactions
Explain the e commerce method:online advertising
Display ads can be used online and target a
specific area or .demographic.
Eg:They can also be linked to pages that users have
liked on Facebook e.g. Broadband providers, and
will display in the right hand side of their e-mail
Explain the e commerce method:online auctions
An online auction is a virtual market place
where customers can bid for products or
services.
Benefits of online auctions
This means that the business owner does not
need their own website, so they do not need
technical ICT skills
• The business also will not need a shop or sales
room, this will reduce the business costs
Explain the e commerce example:online bookings and example
Method of booking a service or product online so they know when and if they will get it,securing there place.
Eg:restaurant,vets
Benefits of online booking
To reach more customers
Explain the e commerce example:online purchases for businesses
A business can use the internet to buy goods
and services
Eg:cleaners,consumables like ink
Explain the e commerce example:online shopping
a form of electronic commerce which allows consumers to directly buy goods or services from a seller over the Internet using a web browser or a mobile app.
Benefits of online shopping
A business may be able to
increase sales by offering
an online shop to their
customers
– Means customers can buy
24/7
– Opens the business up to
international markets
Benefits of websites
Allows customer to browse before purchase,less workers needed-more profit,provides information to customers
Benefits of mobile apps
Loyalty scheme which can lead to customers coming more and bringing higher revenue
E-commerce example: electronic payments
Payments online
Benefits of electronic payments
Electronic payment lowers
costs for businesses
• The more payments they
can process electronically,
the less they spend on
paper and postage
• Offering electronic payment
can also help businesses
improve customer
retention.
Benefits of internet banking
Internet banking can help a
business with their cash
flow, by allowing them to
mange their money and
apply for overdrafts to cover
• Easy to send payment to
suppliers or pay staff
Benefits of social networking
Gain useful information
about customers by looking
at their likes, photos and
videos
• Increase awareness and
brand loyalty
• Increase traffic to a website
by posting links
• Share new content faster
• Build relationships with
customers
Benefits of contactless transactions
With more and more
retailers accepting
contactless payments, even
for small amounts, tap and
pay purchases are easier
than ever before
• Customers can spend up to
£100 in each transaction*
Methods of digital communication
• Mobile phone call
• E-mail
• Text
• Video conference
• Social media
• Skype
• Blogs
Benefits and negatives of mobile phone calls
Benefits:immediate response,ideal when wanting to speak to someone
Negatives:no reception,no record of conversation,can be ignored
Benefits and negatives of emails
Benefits:free,convenient,record of sale,secure,quick
Negatives:spam,ignored,may be deleted by accident
Benefits and negatives of text
Benefits:Remind customers of things happening,easilt seen
Negatives:can be ignored,customers may forget to reply,sometimes texts do not arrive until late,customers can see it as intrustion
Benefits and negatives of video conferences
Benefits: Ideal for businesses separated over large distances,saves money,face to face agreement
Negatives:Complex,can feel awkward,May be middle of the night in some time zones
Benefits and negatives of social media in businesses
Benefits:Very flexible,can be ysed to talk to customers and employees,ideal to quickly respond to complaints,reach a lot of customers worldwide
Negatives:Lacks an authentic expression of feelings,managing account takes a long time,negative feedback is public for other customers to see
Benefits and negatives of blogs
Benefits:Can be used to engage with customers,excellent way to educate customers about the features and benefits of a product,can establish a businesses authority
Negatives-time consuming,can become a chore,negative feedback public
Define economic climate
The general condition of the economy, the way that the resources and the production and consumption of goods in the UK are managed
Define interest rates
Interest rates are the cost of borrowing money
or the reward for saving money
Changes to interest rates – state the effect on
business
If interest rates rise then the
cost of borrowing will rise
and this will mean that the
costs for a business may
increase, this could lead to a
fall in profits
• A fall in interest rates means
that the cost of paying loans
will fall, which may lead to
an increase in profits
Interest rates – impact on consumer
spending
If consumers can borrow they can buy;
clothes, cars, washing machines, houses,
caravans, holidays, and just about everything
else
• If the cost of borrowing goes up then
consumers decide to save instead of spend
Define unemployment
The number of people willing to work but out of work and seeking work
Define the Unemployment rate
% of the working
population out of work
• Current unemployment
rate is 4.7*%
What is disposable income
When a worker receives their wages they will
have to pay tax and national insurance
• What is left is called their disposable
income
What is discrentionary income
Now they have to pay all their bills, electric, gas,
water, food and rent
• What is left is called their discretionary
income – they can use this for the cinema or a
Big Mac..
What happens if unemployment rises
If unemployment rises
people have no jobs
• This means that they
have low incomes
• This also means that
they have little
disposable
income
• Lower disposable
income means less
spending on goods in
the shops
How unemployment affects business
It weakens consumer buying as people have
less money to spend in the high street if they
are out of work.
It encourages
entrepreneurship
• Many unemployed people start their own
business instead of looking for jobs, they
become self-employed
Inferior goods
As income rises»_space;»demand will fall (we
don’t buy so many poor quality goods
when our income goes up)
Normal goods
– As income rises»»demand will rise
– As income falls»»demand will fall
Luxury goods
As income rises»»demand will rise (we
choose to buy holidays, cars and jewellery
when we have more money)
What happens if consumer income rises
As consumer incomes rise so does demand for
different goods and services
Define legislation
Legislation is the collective term for laws
Impact of legislation on business costs
A business will have to meet
all of the consumer,
employment and
recruitment laws
• This may mean additional
costs
Eg: Training staff
Impact of legislation on business
training needs
Businesses will need to make sure that all their
employees are trained and that the training is
up-to-date.Making sure the business is legaly compliant
Impact of legislation on business
recruitment
Race, sex, age or disability discrimination is
illegal in UK business, so businesses must be
careful to recruit within the equality law.Offering equal pay and promotion to all
Consequences of not following legislation
Consequences can include; include fines and even imprisonment
Recruitment process
The recruitment process involves; advertising,
selecting, interviewing and hiring the staff needed
for the business
What does the equality act 2010 do
The Equality Act 2010 legally protects people
from discrimination in the workplace and in
wider society.
Define national minimum wage
NATIONAL MINIMUM WAGE or NMW is the legal
minimum that can be paid to workers in the UK.
What is the national living wage
Its the minimum pay for those over 25.It is higher then the national minimum wagw
Health and safety at work Act-What must an employer do
-Prevent accidents and cases of illness by managing the health and safety risks
-Providing clear intructions and information and adequate training
-Engage and consult with employees on day-to-day
health and safety conditions Implement emergency
procedures
-Maintain safe and healthy working conditions, provide
and maintain plant, equipment and machinery, and
ensure safe storage / use of substances
Benefits for providing a safe working
environment
Avoids a fine – Health and Safety is a legal
responsibility of business
Avoids expensive compensation claims from employees who have had accidents at work
Avoids negative publicity
Reduces absenteeism
Principles of employment law: health
and safety
All workers have a right to work in places
where risks to their health and safety are
properly controlled.
Consumer law 2015
Goods must be as described,fit for purpose,satisfactory quality
Goods must be as
described
The goods supplied must match any description given to you, or any models or samples shown to you at the time of purchase.
Fit for purpose
A product must do what it is designed for and meet customer expectations.
Satisfactory quality
Goods shouldn’t be faulty or damaged when
you receive them.
Principles of consumer law: quality
If something’s gone wrong with an item a customer has bought, they may be entitled to a refund, repair or replacement
Consumers have legal rights if the item
bought is:
1.broken or damaged
2. unusable
3. not what was advertised or doesn’t match the seller’s description
Consumers won’t have any legal rights if:
The item was damaged by wear and tear, an
accident or misuse
2. The consumer knew about the fault before
they bought the item
3. The consumer has just changed their mind
Define the trade descriptions act
a law designed to prevent companies from presenting their goods or services in a dishonest or misleading way
Consequence of breaking trade descriptions act
Traders could get an unlimited fine or 2 years in
prison
What does the trade descriptions act actually do?
This prevents manufacturers, retailers or service
industry providers from misleading consumers as
to what they are spending their money on
Examples of trade description acts
Italian shoes made in the uk,set of 4 mugs only containing 3,marios saying hes english when hes from cyprus
Define a market
A Market is a voluntary meeting of buyers and sellers who trade or exchange goods or services.
Define dynamic markets
A dynamic market is a market where supply
and/or demand factors are constantly changing
Examples of dynamic markets
• Designer clothes
• Laptops
• Mobile Phones
Goods markets (or product markets)
For final goods and services or outputs. Things ready to sell
Factor markets
For factors of production like inputs in manufacturing. Raw materials
Labour markets
People and jobs
Define competition
This is the rivalry between businesses to gain
sales from customers
Define a competitive market
A competitive market is where a large number of sellers are selling to large number of customers
Impact of competition on business
– Have lower sales as there are lots of alternatives
– Have less profits unless the business reduces costs
and possibly quality
– Find it harder to get customers, they may need to
heavily promote and advertise
How a business can become more competitive
Provide better quality goods than the competition
• Provide a better service than the competition
• Offer a unique product
• Offer better value for money
Definition of a business risk
Business risk is the possibility a company will have lower than anticipated profits or experience a loss rather than making a profit.
Risks of a business
Patent issues
• Cyber attacks
• Recession, or economic
problems
• Change in tastes and trends
• Employment laws and
regulations
• Poor reputation
• Risk from competition
• Financial risks
• Political problems and
instability
Risk of not managing cash
flow
• Staff training and safety
• Weather and other
unforeseen factors, natural
disasters
• Operational risks – break
down of equipment
• Staff – reliability
• Lack of security
• Commercial risks, failure of
suppliers to supply and
customers to pay
Cyber attacks
A business which has a
cyber attack may suffer;
loss of data, money,
reputation and customers
may lose confidence in the
business
Recession and economic problems
In a recession or times of economic problems,
customers tend to save rather than spend on
non-essential items.
• This can slow down sales
Change in tastes and trends
Consumer tastes change over time which means that a
business is at risk if they don’t keep up with current
trends
Employment laws and regulations
All businesses in the UK must
obey the employment laws
• For example they must pay the
minimum wage or above, if they
don’t they are breaking the law
Poor reputation
If a business provides poor
customer service, or suffers a
problem, then it may have a
poor reputation
• This can lead to loss of sales,
loss of revenue and loss of
profitability
Financial risks to the owner
Running a business can be a financial risk for the
owner
• The owner may put their own cash and other
assets (e.g. a van) into a business
• If the business does not do well then the owner
could lose their money, which is why many
businesses become ltd to protect the owner
Risk of not managing cash flow
Cash flow is the flow of money in and out of a
business, many businesses fail because of
poor cash flow (or lack of cash)
Staff training and safety
If the staff are not trained properly and they have an accident they can sue the business and the owners can either go to jail or pay a big fine
Weather and other unforeseen factors,
natural disasters
A disaster can strike any organisation, large or
small. It can arrive in the shape of storm, flood,
fire, earthquake and even a tsunami.Can cause a business to close for a long time
Operational risks – break down of equipment
When machines break down there is the cost
to fix the machine plus the cost of lost
production time
Staff – reliability
Without reliable staff a business will not be
able to offer the right level of customer
service
Commercial risks, failure of suppliers
to supply and customers to pay
If a supplier fails to supply goods or services to
a business, this could be critical causing customers to shop elshewhere
If customers do not pay on time, then this may
cause cash flow problems for the business
who will need to pay their suppliers
State reasons why businesses fail
Too much competition,tax system,rising energy costs,cash flow issues,lack of bank lending
Define uncertainty
Uncertainty is when businesses are unable to predict external shocks or future events
Define globalisation
The process by which businesses start
operating on an international scale
Define multinationals
A multinational is a business which trades in
more than one country, often shortened to MNC
Benefits for UK business of globalisation
- Wider markets
- Economies of scale
- Labour migration
- Specialisation
- Multiplier effect
Define wider markets
Trading on a global level (rather than just the UK)
means access to more customers, and
opportunities to trade in bigger markets:
Benefits for UK business of globalisation-Economies of scale
A UK business which is trading on a global
scale can gain economies of scale, and
get lower average unit costs
Benefits for UK business of
globalisation-Labour
Labour migration into the UK now means a
fresh pool of applicants willing to carry out jobs in
manufacturing, hospitality, NHS and construction
Benefits for UK business of globalisation-Specialisation
Globalisation can mean that some economies start to
specialise at what they are good at
• This makes the country very efficient at producing those
goods, they can be better quality and more innovative than
other countries, which gives them competitive advantage
Multiplier effect
This means all the factory workers now have
an income which they can spend in the local
area; on restaurants, in shops, in garden
centres. This is called the multiplier effect.
Drawbacks for UK business of
globalisation
Foreign competition
2. Loss of UK staff
3. Threat to service industries
4. Diseconomies of scale
Effects of Foreign competition
Competing in a global
market can mean that UK
businesses will have to
compete against foreign
imports
Loss of UK staff
Globalisation and
migration means that UK
staff can be poached by
overseas companies
Threat to UK service
industries
Globalisation puts pressure
on UK businesses to cut
costs and outsource as
much as possible to low
labour cost countries e.g.
Indian call centres
Diseconomies of scale
As UK businesses trade in
these larger global
markets they will grow
and expand accordingly
• As they grow they will
start to encounter
problems; co-ordination,
communication and
motivation
• This can lead to higher
than average unit costs
Define an export
An export is a product that the UK sells to
overseas markets
Examples of exports
Pearls, gems, precious metals and coins
• Machinery
• Vehicles
• Pharmaceutical products
Define international trade
International
trade is the exchange
of goods and services
between different
countries
Define import
An import is a product made overseas and brought into the UK
Define exchange rates
The exchange rate is
the price of one currency
Impact of exchange rates on profit
If the pound is strong against other currencies then it becomes more expensive for countries to buy uk goods.
Also,If the pound is strong against
other currencies then it
becomes cheaper to import
goods from abroad
Define noise pollution
Disturbing or excessive noise that may harm the activity or balance of human or animal life
Where is noise pollution from
The source of most outside noise is mainly caused by business operations and transport
Define air pollution
Air pollution is when harmful gases, dust, or chemicals enter the air, making it unsafe to breathe and damaging the environment.
Benefits of behaving ethically
Higher revenue
Improved brand/business awareness and recognition
Increased employee motivation and staff retention
Drawbacks of behaving ethically
Higher costs
Danger of building false expectations amongst consumers
Bad publicity if business is found to be acting unethically
What are fair trade products
Products which are bought that ensure fair wages and good working conditions for farmers and workers.
What are the environmental considerations of a business?
Impact on traffic congestion
Recycling
Disposing of waste
Noise and air pollution
Sourcing for business
Businesses should seek to source ethical products in a responsible and sustainable way
Define global warming
The increase in esrths average surface temperature due to risking levels of greenhouse gases
Define social responsibility
An approach to managing businesses in which the interests of all groups in society are taken into account when making decisions
Name one way a business can ensure ethical supply chains.
By only sourcing materials from suppliers who follow fair trade and fair labour practices
How can paying fair wages benefit a business?
It can increase employee motivation, reduce turnover, and improve productivity.
Define ethics
Moral principles which are right or wrong
Affects of breaking cosumer law
Can be faced with the cost and incovenience of having to refund the customer,bad reputation,can go to court
What are emails used for
Quick way in communicating with stakeholders,either on a personal level to respond to costumer querys,or on a bigger scale to employees
Use of apps
To communicate with customers and provide information about the business.They can also be used to sell products and promote special offers
Live chats and there use
Instant messaging service.To speak to employees from different locations or customers can use them to speak to customer service.
What is outsourcing
Getting products and services from other businesses normally in diff countries
