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1.5 Understanding external influences on business - Economy Climate, Paper…
1.5 Understanding external influences on business - Economy Climate
1. Shareholders
Different shareholders and conflict
Managers
- want financial reward for their work
Suppliers
- the business to be successful so they continue to receive orders.They will also want to be paid on time.
Customers
- product or service to fulfill their needs
Local community
- want the business to be successful, so it continues to offer employment. Also want the business to do good for their community.
Employees
- want job security and financial reward for their labour
Pressure groups
- want the businesses to behave ethically and environmentally friendly.
Shareholders (owner
) - will want the business to be successful so they can maximise the profits
The government
- want businesses to be successful so that they continue to employ people. They also businesses to pay tax
2. Technology & Business
Types of technology
Digital communication
- involves making contact with customers electronically e.g. email, e-newsletters, websites, mobile apps, live-chat and video calls
Payment systems
- can be used by customers to transfer money very quickly and safely, allowing more convenient purchasing of products.
Social media
- provide businesses with a cheap and efficient way of communicating with customers about products or to gather feedback via pools.
How technology influences business activity
Increase sales
lower costs e.g selling online, using social media...
E-commerce
- buying & selling of products and services over the internet.
Impact of technology on the 4Ps
price
- allowed prices of products to be lowered
Promotion
- business can use digital ways to promote than traditional methods
Product
- customers have more choice
Place
- a large number of businesses are choosing to locate online
3. Legislation & Business
Purpose of legislation
Principles of consumer law
Ensure that consumers are protected from malpractice by businesses. products should be fit for purpose, must be of satisfactory quality and must be as described.
Principles of employment law
Stop employees from being exploited by their employers.
Impact of complying with legislation on business
Gain reputation
Employees are happy
Will increase business' costs (disadvantages)
4.Economy & Business
Government taxation
If government taxes increase, then consumers will have less disposable income. Also if VAT increases, it makes the products more expensive. Businesses must pay corporation tax which increases costs.
Inflation
As the general price of goods and services within an economy increases, suppliers are likely to put their price s up.
As the general price of goods and services within an economy increases, consumers will have less disposable income to buy products.
Unemployment
With high levels of unemployment, consumers will have less disposable income; the demand of products will fall; sales levels will decrease.
Changes in interest rates
With decrease in interest rates - Businesses costs is reduced for those that have borrowed money.
With Increase in interest rates - Businesses who have taken loans may see an increase in cost
Change levels of consumer income
If consumer income increase, consumer will have more disposable money to spend of product. However, if consumer income decrease, consumers will have less disposable money and luxury products may suffer.
Exchange rates
-
Increase in value of the £
- Cheaper to import materials from abroard
Decrease in value of the £
- Costs more to import materials from abroad
Paper 1
Topic 5 - Understanding External Influences on business
Must know how to explain each point