External influences on a business (Legislation ( (The Consumer Rights Act…
External influences on a business
A stakeholder is any person, group of people or other organisation that has an interest in the activities of a business.
Businesses need to be aware of their stakeholders, as many of them will be affected by its activities. Stakeholders can also influence the decisions that a business makes.
Types of stakeholders
Different stakeholders will expect different things from a business. Given their different interests in the business, sometimes their expectations can cause conflict. The business has to balance these various interests.
The activities of a business will affect all stakeholders but some might be more affected than others.
All stakeholder groups have an impact on a business, but some will have more impact than others, giving them more power and influence on the activities of the business
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.
Three things are required for e-commerce to take place:
a seller who has products and services that are displayed electronically
a buyer who has the equipment required to view the seller’s products and services, and a means of paying for them
a network that enables information and payment to be exchanged by the buyer and seller
Customers from across the globe
Can sell at any time
Receive payments immediately
Reduced overhead cost compared to a physical shop
More competition so it is harder to get noticed
Employees may need new skills
Procedures required for how products and services will be delivered and processing returns
A need to maintain and update technologies, including security software, which may be expensive
Social media has grown to become an important part of business, particularly in relation to marketing activities
Any form of electronic communication that enables users to share ideas, content, information and messages can be described as social media.
Most business activity on social media involves:
sales and marketing
interacting with customers
communicating with stakeholders
Social media is a relatively cheap way to advertise in a visual or written form.
It can be used by both large and small businesses to attract a target audience that is interested in the products and services being promoted or sold.
Business can encourage people to follow their activities and promotions. In this way, businesses can gain loyalty.
Businesses can use social media to see what customers are saying about their products and services.Customers can ask questions, or express their views, about the products and services of a business. These customer interactions need to be handled carefully, as inaccurate or inappropriate responses can be shared quickly and easily, creating bad publicity for the business.
Social media platforms, such as LinkedIn, can be used to make contact with other businesses and network with relevant people and organisations. Many businesses now use social media as part of their recruitment process, not just for advertising vacancies but also to gain an insight into any applicants by looking at their social media activity. Closed (private) social media tools are sometimes used by some businesses for informal or internal communication with staff.
Communication is the process of sending information to others and receiving information back from them. Digital communication involves sending and receiving such information electronically.
Digital communication tools
Technology provides businesses with opportunities to attract new customers and increase their sales. However, with those opportunities come threats. A business may find itself struggling to maintain sales when technology means that it is competing against more businesses.
Many types of technology will have an impact on the sales activity of a business. Examples include digital communication systems, e-commerce, social media and payment methods.
The impact of digital communication systems on sales activity
The easier it is to contact a business – whether by phone, by email, through a website or using a mobile app – the more likely a customer is to trust that business and make a purchase. Using digital communication effectively can therefore help a business to increase its sales.
The impact of e-commerce on sales activity
The positive impacts of e-commerce on sales include:
businesses can attract customers across the world
businesses can sell 24/7
a well-designed e-commerce site can help a business look professional, which may attract customers
prices can be updated easily, making it possible to react to competitors
customers can see which items are in stock
The negative impacts of e-commerce on sales include:
more potential competition, as customers are not restricted to local businesses
the business must consider logistical issues around delivering orders to customers
providing customer service to a large customer base may be challenging for a small business
customers can compare prices with those of the business’ competitors
stock records will need to be kept up to date
The impact of social media on sales activity
Social media can be used to run sales and marketing campaigns and to interact with customers. Having regular direct communication in this way can help to build customer relationships, which can help to increase sales.
Poor responses to social media posts can quickly be shared with other customers, which can be very damaging to the reputation of a business and lead to a fall in sales. Good responses can have the opposite effect, leading to increased popularity and sales.
The impact of payment methods on sales activity
Making it easy and convenient for customers to pay for products and services means that they are more likely to make a purchase. Businesses that only accept cash may find it increasingly difficult to attract customers.
Investing in new technology costs money, but businesses often undertake such investment because of the reduced costs that implementing new technology can bring in the long term.
The impact of digital communication systems on costs
A business will incur costs when investing in any digital communication system. However, the initial costs will enable longer-term savings to be made. Examples of how businesses can save money using digital communication systems include:
The increasing availability of digital communication tools is enabling more and more employees to work remotely, for example from home. This can help to reduce costs for businesses, as they can operate from smaller offices.
Communications can be sent more cost-effectively in electronic format, such as via email or instant messaging, removing the costs involved in printing and postage.
Even greater savings may be made where video conferencing is used, since this can remove the costs associated with travelling to face-to-face meetings.
The impact of e-commerce on cost
Selling online is a lot cheaper than having to open many traditional branches, such as high-street shops. E-commerce also:
requires fewer sales staff
requires fewer and sometimes smaller premises
avoids the need to be located in high streets, where rents and rates are expensive
can automate tasks such as administration and record keeping
However, e-commerce also incurs additional costs, including:
costs involved in hosting a website
fees that must be paid for handling online payments
warehousing and distribution costs for products
The impact of social media on costs
Social media provides a quick, cost-effective way for businesses to communicate and interact with customers. It enables even small businesses to reach a wide audience for a minimal cost.
The impact of payment methods on costs
The development of new payment technologies has enabled traditional businesses to take payments in a more secure and cost-effective way without needing to hold large amounts of cash on their premises.
In addition, real-time online transactions can take place, with a business receiving payment almost immediately.
This convenience does come at a cost, though. Businesses that handle card payments charge a small percentage fee for every transaction.
Technology has had a significant impact on the way that businesses market their products and services.
The speed at which technology develops means that successful businesses need to be flexible and adapt to change, so that they can respond quickly to customers.
Technology affects the marketing mix – product, price, place and promotion – in various ways.
The impact of digital communication systems on the marketing mix
Digital communication can have a significant impact on the marketing mix of a business:
Product - Products can be adapted and accessed easily in a format that is convenient to the customer.
Price - Money saved by using digital communication can help a business to keep its prices low.
Place - Customers can access services regardless of where they are, eg through mobile banking apps.
Promotion - Businesses can email newsletters, track customer behaviours on social media and their website, and advertise online.
The impact of e-commerce on the marketing mix
E-commerce can affect all four areas of the marketing mix:
Product - Customers can download digital products (eg music tracks or e-books) immediately after payment.
Price - Customers can compare prices across online sellers easily, so prices need to be competitive.
Place - Selling online provides another way for customers to make a purchase at any time, wherever they are.
Promotion - Promotional offers or ‘flash sales’ are easy to implement through an e-commerce website.
The impact of social media on the marketing mix
Social media can also influence all four areas of the marketing mix:
Product - Product information can be shared using video demonstrations where appropriate.
Price - Cost savings may enable a business to lower its prices.
Place - Businesses can interact with customers around the world, regardless of location.
Promotion - Social media is a cost-effective way of targeting promotions at specific groups of customers.
The impact of payment methods on the marketing mix
Payment methods may have a less direct impact, but they can still affect the marketing mix of a business:
Product - Online payment methods allow digital products to be purchased easily.
Price - Any fees incurred through the use of specific payment methods need to be accounted for when setting the price of a product.
Place - New payment methods have facilitated the ability to sell products online.
Promotion - Businesses can promote the fact that they offer a variety of ways for a customer to pay, eg cash, card, PayPal.
The term ‘consumer law’ refers to any piece of government legislation designed to protect consumers from poor-quality products and poor business practices. In the UK there are two pieces of legislation that form the basis of consumer rights: the Consumer Rights Act (2015) and the Consumer Protection Act (1987).
The Consumer Rights Act (2015)
This act replaced and updated previous legislation. It was also the first consumer legislation to include digital products. It deals with transactions between a seller and a buyer, and is designed to protect consumers from unfair and dishonest business practices. It covers:
the product or service
repairs and replacement
Goods must be:
described accurately – businesses should not describe goods and services in a misleading way
fit for purpose – goods must do what they are designed to do
satisfactory quality – goods should not be damaged or faulty when sold as new
Services should be supplied under minimum standards, which include:
the service provider must use reasonable care and skill in delivering the service
any written or verbal information provided by the supplier is binding
the service must be provided in a reasonable time, unless agreed otherwise
the service must be provided for a reasonable price, if the price is not agreed beforehand
Under certain circumstances, consumers can reject a product (excluding digital products) and return it for a full refund within 30 days of taking ownership of it. They can do this if the product is not as described, unfit for purpose or not of satisfactory quality.
Where a fault develops within the first six months, it is presumed that the fault was there when the consumer took ownership of the product, unless the business can prove otherwise. After six months, the responsibility for proving that the fault was there when they took ownership falls on the consumer.
Repairs and replacement
After 30 days, a consumer must give a business one opportunity to repair or replace any goods, including digital goods that are not as described, unfit for purpose or not of satisfactory quality. If the repair or replacement is unsuccessful, the consumer can claim a refund or price reduction.
Delivery should usually take place within 30 days, unless agreed otherwise at the time of sale. The business selling the goods remains responsible for them until they are in the possession of the consumer. Failure to deliver within 30 days, or by the agreed date, gives the consumer the right to cancel the purchase and receive a full refund.
The Consumer Protection Act (1987)
This Act is designed to ensure that products are safe. It makes businesses that produce, rather than just sell, liable for any damage caused by poor quality or defective products. The producer is considered to be an individual or company who puts their name or trademark on a product, or has imported it into the European Union in order to sell it on.
It gives anybody the right to claim against the producer of a product for any damage caused by a manufacturing defect.
Principles of employment laws
The term ‘employment law’ refers to any piece of government legislation designed to protect employees from exploitation. In the UK, there are four areas of employment legislation that form the basis of employee rights in the workplace:
recruitment – this legislation outlines what employers can and cannot do when recruiting staff, and what their responsibilities are once a job offer has been made
pay – this legislation covers pay and is designed to ensure that the pay workers receive is above a set minimum level
discrimination – this area of employment law is designed to ensure that employers treat all people fairly
health and safety – legislation around health and safety is designed to keep employees safe while they are at work
When recruiting new staff, employers need to make sure that they are complying with any relevant government legislation during each stage of the process.
While recruiting new staff
During this stage, businesses must consider the Equality Act (2010), which requires employers to treat people fairly and not discriminate in any way. This means, for example, that a business cannot advertise a vacancy as only being open to people under the age of 30.
Recruiting involves collecting and using personal data, so businesses also need to ensure they are complying with the Data Protection Act (2018). All candidates applying for a job must give permission for their personal information to be used. They can also ask the business to delete any information that the business holds on them – for example, if they were unsuccessful in their application.
Once new staff have been recruited
When an employee starts a new job, the Employment Rights Act (1996) requires that they are provided with a written statement outlining the details of their employment within two months of them starting. This written statement must include basic details, such as:
the job title and place of work
the date the employment started
the hours of work
the salary or wage
The Pensions Act (2008) may require new staff to be enrolled into a pension scheme. Both the business and the employer will make contributions to the scheme.
There are two significant laws that determine what businesses must and must not do when it comes to paying their workers. These are the National Minimum Wage Act (1998) and the Equality Act (2010).
What businesses must do
Under the National Minimum Wage Act (1998), all businesses must pay their staff a minimum hourly rate. There is no exemption for small employers or discounts for geographical areas. The aim is to increase the incomes of the low paid. The rates are set each year by the government.
For people aged 16 to 24, this is called the national minimum wage. It varies according to different categories (under 18, over 18, over 21 and apprenticeships).
For people aged 25 or over, it is called the national living wage.
What businesses must not do
The Equality Act (2010) makes it illegal for a business to pay people different rates of pay if they are doing the same job or similar jobs. This means, for example, that a business cannot pay a male member of staff more than a female member of staff if they are employed in the same role.
The Equality Act (2010) is designed to prevent discrimination on a number of grounds. These grounds are called ‘protected characteristics’ and include
Age - No preference can be given to someone based solely on their age unless there is a specific reason for doing so, eg being old enough to hold a driving licence for a job that involves driving.
Disability - Businesses cannot discriminate against disabled people. They must also take reasonable steps to enable access to the workplace and provide any appropriate equipment that disabled people need to work.
Gender - Unless there is a specific exception (eg a school may choose to recruit a PE teacher of the same gender as the students they will be teaching), a business cannot treat men and women differently, or treat one gender less favourably.
Marital status - People should not be treated differently because they are single, married or in a civil partnership.
Pregnancy and maternity - Women cannot be discriminated against on the grounds of being pregnant, or during the period following the birth of their baby.
Sexual orientation - People cannot be discriminated against on the grounds of their sexual orientation (whether they are lesbian, gay, bisexual or heterosexual). They also cannot be discriminated against if they are transgender.
Race - Discrimination on the grounds of nationality, race, colour or ethnicity is not permitted.
Religion - Discriminating against people based on their religious beliefs, including those who have no religious beliefs, is not allowed.
Health and safety
In order to prevent accidents and keep workers safe, the Health and Safety at Work Act (1974) outlines the responsibilities that both employers and employees have in keeping the working environment safe.
Employers should provide:
safety equipment, including tools and clothing where appropriate
toilets and suitable washing facilities
first aid equipment
Employees are expected to:
complete training provided by their employer
use safety equipment tools and wear safety clothing
take responsibility for their own safety in the workplace
report any risks to their employer
In addition, the Working Time Regulations (1998, amended 2003) place limits on the number of hours that employers can expect staff to work. They also specify the breaks employees are entitled to. The regulations ensure that staff:
can only be asked to work, on average, up to 48 hours per week
are entitled to a minimum of 5.6 weeks’ holidays per year
have a minimum of one day off each week
have at least 11 consecutive hours off in every 24-hour period
take a 20-minute break when working more than 6 hours
Businesses must comply with government legislation, but this means that they incur a range of additional costs in terms of time and money. Some of these costs are incurred because of the time required to produce documents, follow procedures and make sure legal obligations are met.
Health and Safety at Work Act (1974) Supply training and safety equipment
Consumer Protection Act (1987) Test products to ensure that they meet minimum safety standards
Employment Rights Act (1996) Provide a written statement of employment details within two months
National Minimum Wage Act (1998) Pay staff higher wages
Working Time Regulations (1998, amended 2003) Employ additional staff to cover hours required
Pensions Act (2008) Make financial contributions to employee pensions
Equality Act (2010) Put processes in place and then check that they are being implemented
Consumer Rights Act (2015) Check that promotional material is accurate and implement quality control
Data Protection Act (2018) Review the data that is held, and delete it when it is no longer required