Understanding Business - Part 2 Flashcards
What factors influence a business?
There are many factors which influence how a business operates and the decisions that managers/owners make. These can be internal factors (the ones the business can control) or external factors (the ones the business cannot control).
What are external factors?
External factors are influences OUTWITH the control of the business.
Although the business cannot control these factors a successful business will anticipate the impact and plan how to manage them effectively
What are the external factors?
Political (Legal) Factors Economic Factors Social Factors Technological Factors Environmental Factors Competitive Factors
Describe 2 political factors
Taxation can effect the success of a business as it is the way that the government raises money to fund public services e.g. NHS. This means that an increase in corporation tax results in the business having to spend more money paying their taxes rather than spending it elsewhere in the business. This means the costs of the business are increased which may lead the business to have to cut costs elsewhere in the business e.g. the costs of raw materials/suppliers.
Legislation and laws can also effect the success of a business. This means that legislations and laws like The National Minimum Wage Act, Health and Safety at Work Act, and The Equality Act can affect businesses. This may result in additional costs to comply with the law, for example, training staff.
Describe 2 economic factors
Unemployment can effect the success of a business. This means that when unemployment is high people have less to spend on goods and services
This will reduce demand for some goods/services which will reduce a businesses sales revenue and profit
Exchange rates can also effect the success of a business as businesses trading internationally will be affected by changes in exchange rates. This means that when the pound is weak, it becomes more expensive to buy supplies from abroad which can increase expenses.
Describe 2 social factors
Lifestyles can have a effect on the success of a business. This means that businesses will need to adjust their product portfolios and marketing strategies to ensure they are taking into account the lifestyle trends and fashions or they will start to lose customers.
How ethical a business is will impact their success as there is increased pressure on businesses to operate ethically. This means that it may cost businesses more to operate ethically but it will improve the image of the organisation which may result in greater sales.
Describe 2 technological factors
New technology can have a positive impact on the success of a business. This means that production is made quicker, cheaper and more efficient than before which can give the business a competitive advantage and an increase in profits.
A development in technology can also have a positive impact on the business. This means that customers can use technology to interact with businesses, for example, websites to check availability and price and online chat to ask questions or resolve problems. This can result in better customer service and reputation for a business.
Describe 2 environmental factors
Severe weather condition could effect the success of a business as materials used in production can be destroyed. This may results in delayed orders and an increase in complaints. This means that the business may gain a bad reputation.
Being environmentally friendly can increase the effectiveness of a business. This means that businesses who work to minimize their carbon footprint or to cut down on pollution to rivers and the environment can also be more attractive to customers who are interested in the environment. This could also result in an increase in market share due to customer loyalty.
What are stakeholders?
A stakeholder is a person or group of people who have an interest and influence on an organisation and the way in which it is managed or run.
Describe 2 competitive factors
Competitor’s prices may effect a business as their prices may be more attractive to customers. This means that they are more likely to go and buy from them which could will gain competitors loyal customer.
The amount of competition could also effect a business as there may be many businesses selling similar goods and services, giving consumers a lot of choice when choosing where to buy their goods and services. This could decrease the chances of them buying from you.
Describe stakeholder interest
This is what they want from the business e.g. employees want a salary.
Describe stakeholder influences
This is how they impact the business e.g. employees can go on strike.
List the internal stakeholders
Owners
Shareholders
Employees
Managers
List the external stakeholders
Banks Customers Suppliers Local Community Pressure Groups Local Government National Government
Give 3 influences of managers
Influences -
Recruit and train staff
Make decisions, for example, what products/services to sell
Motivate staff
