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CHAPTER 06 - EXTERNAL INFLUENCES ON BUSINESS ACTIVITY - Coggle Diagram

- - - - MINIMUM WAGE - employers are not allowed to pay less that set minimum wage per hour ( in some countries, minimum payment per week or per month)
        
        01 - LAW ON EMPLOYMENT PRACTICES -
        01 - these laws help control the relationship between employee and employer
        02 - substantial differences in legal control over employment between countries
        03 - two main objectives of these laws are-
        A- Prevent exploitation of workers by powerful employers by insisting on appropriate levels of health
        and safety on minimum wage rates
        B- control excessive use of trade union collective action
        04 - legal constraints usually cover the following areas of employment practices -
        A- recruitment, employment contracts and termination of contracts
        B - Health and safety at work
        C - minimum wage
        
        01 - RECRUITMENT, EMPLOYMENT CONTRACT AND TERMINATION OF CONTRACTS
        
        in many countries legally protecting the rights of workers takes the following terms:
        A - a written contract of employment so that the employee is fully aware of the pay, working conditions and disciplinary actions that are to be followed
        
        B - minimum wages
        C - maximum length of the working week
        D - holiday and pension entitlement
        E - no discrimination against people during recruitment and selection and selection (white/black, gender, religion)
        E - protection against unfair dismissal
        in the EU- it is illegal to discriminate on an employee's age. the EU has some of the most protective legislation in the world for employees, which includes not only paid maternity for the mother but also paternity leave for the fathers too.
        
        02 - HEALTH AND SAFETY AT WORK-
        
        These requirements aim to protect workers from discomfort and physical injury at work
        
        providing a healthy and safe environment in which to work is now a legal requirement in most countries
        
        the strictness of these laws and the efficiency of inspection systems vary considerably
        
        health and safety laws usually require the business to:
        
        A- equip factories and officies with safety equipment and train staff to use it
        B - provide adequate washing and toilet facilities
        C - provide protection from dangerous machinery and materials
        D - give adequate breaks and maintain regular workplace requirements
        EU has a comprehensive and legally enforceable inspection system - they have to inspect any work premises at any time and to start legal proceedings against firms that fail to meet the minimum standards.
        
        03 - MINIMUM WAGES
        
        Minimum wage rates are legally binding on businesses
        
        the rates vary considerably around the world
        
        -two main aims of minimum wages are to:
        A - prevent exploitations of poorly orgnaised workers by powerful employees
        B - reduce income inequalities between high paid and low paid in the economy
        BENEFITS OF MINIMUM WAGES -
        A- increased standard of living and purchasing power of lower income workers
        B -a work incentive - as working is more worthwhile than being unemployed
        
        LIMITATIONS OF MINIMUM WAGES -
        A- they can be avoided by employers by insisting on casual employees with flexible or no employment contracts. while illegal its difficult to prevent (especially in low development countries)
        B - raising labour costs for the company can make it less competitive and they migh make the workers less redundant
        C - other workers being just paid above the minimum wage would ask for a wage raise, and inflation might increase the costs of the businesses even further
        
        IMPACT ON BUSINESS OF CHANGES IN EMPLOYMENT AND HEALTH AND SAFETY LAWS -
        
        both positive and negatives in changing the laws
        
        Adding contraints can increase costs for the business:
        
        01 - supervisory costs for checking in recruitment, selection and promotion procedures
        
        02 - higher wages if minimum wages are introduced or increased
        
        03 - higher costs for holidays and pensions contributions and paid leaves
        
        04 - employment of more employees to respond to control over length of the working week
        
        05 - protecting clothing and equipment to meet stricter health and safety laws
        
        multinationals that operate in countries with very few legal contraints will enjoy the lower production costs
        
        however there are some benefits to be gained from exceeding minimum standards that are laid down by the law
        
        some businesses offer conditions of employment, pay levels and working conditions that far exceed the minimum levels
        
        these benefits include:
        01 - wokers will feel more secure, more highly valued and more motivated with a clear and fair employment contract
        02 - a safe working environment reduces the risk of injuries and accidents and time off work for ill health or injury
        03 - meet minimum standards avoids expensive court cases and heavy fines
        04 - businesses that make a policy of providing employment conditions and a healthy environment beyond legal requirements are likely to attract and retain the best employees (highly-trained and qualified)
        05 - good publicity can be gained if the business culture is considered to treat workers as partners in the business, equal in status and importance to managers and shareholders.
    - - various reasons why governemnts around the work take legal action to protect consumers of goods and services from unfair business activities and marketing behaviour:
        
        01 - individual consumers are relatively weak and powerless against businesses with large marketing and promotion budgets. advertising can also be misleading and influential
        02 - products and now becoming more scientific and technological- and therefore it is difficult for consumers to understand how they operate and assess the accuracy of the claims being made for them
        03 - selling techniques are very pressurised and inceasingly difficult for consumers to resist. these include cheap loans, which some of which can commit consumers to pay off debts after many years with high interest rates
        04 - the globalised marketplace has increased the import of goods consumers need protection from products that have different quality and safety standards to those in the domestic country
        05 - increasingly competitive markets lead to to some businesses trying to take advantage of consumers by reducing quality, service and guarantee periods in order to offer a lower price
        
        01 - CONSUMER PROTECTION LAWS
        01 - SALES OF GOODS ACT-
        A - goods and services have to be fit to sell - they should be safe and have no defects that will make them unsafe if they are used in the ways intended
        B - All goods and services must be suitable for the purpose for which they are intended
        C - goods and services must perform in the way described
        
        02 - TRADE DESCRIPTION ACT -
        the most important condition is that there should be no misleading decriptions of, or claims made for, the goods being sold (ex --> a plastic chair cannot be claimed to be of leather).
        03 - CONSUMER PROTECTION ACT -
        A - firms that provide dangerous or defective products are liable for the cost of any damage they cause
        B - it is illegal to quote misleading prices ( retailer cannot claim $50 dollars for a product caysing less than the manufacturers recommended price)
        
        Other laws govern weights and measures, safety and preparation of good products
        
        in addition, some products cannot be sold at all in some countries (such as dangerous products and illegal substances)
        
        the import of these products are heavily controlled with strict fines imposed on individuals or businesses that break the law
        
        IMPACT ON BUSINESS OF CONSUMER PROTECTION LAWS -
        
        complying with these laws can increase business costs for:
        
        01 - redesigning products to meet the consumer health and safety laws
        02 - redesigning advertisement to only give clear and accurate information
        03 - improving quality control standards and the accuracy of weights and measures
        
        laws to protect consumers may require a change of strategy and culture in the business
        
        putting consumer interests at the forefront of the company policy may demand a change of attiduede amongst senior managers.
        
        if consumers are offered an improved deal in terms of honest and accurate advertisements, promotional offers, quality products and excellent after-sales services and marketing benefits can eventually lead to profit increases and could be real and long lasting for the business
    - - BUSINESS COMPETITION AND THE LAWS AROUND IT -
        
        it is usually argued that free and fair competition between businesses has the following benefits for consumers:
        
        01 - wider choice for goods and services than just when one business dominates the market (market leader)
        02 - businesses have to keep the prices low as possible in order to remain competitive
        03 - businesses compete by improving the quality, design, performance and differentiating their product
        04 - competitive markets within one country also have external benefits. Rival businesses become more competitive against foreign firms and this helps strengthen the domestic economy.
        
        governments attempt to encourage and promote competition between businesses by passing laws that:
        
        01 - investigate and control monopoly activites and make it possible to prevernt mergers and takeovers that create monopolies
        02 - linmit or outlow competitive practices between businesses such as collusion
        
        MONOPOLY - a market in which there is only one supplier with no close competitors
        
        COLLUSION - businesses agree to work together and restrict competition by fixing prices and sharing contracts between themselves
- - - - SUSTAINABILITY - activities that meet the needs of the present without comprimising the ability to future generations to meet their needs
        GREEN CONSUMERISM - the trend for consumers to only buy products that are produced sustainably without environmental damage
- - - - CSR - corporate social responsibility
        - when a business accepts its legal and moral obligations to all stakeholders not just investors, it is then said to be holding CSR
        - the ways in which decisions of a business impact on society and the environment are very important indicators of whether CSR is a key priority for that business
        
        01 - CSR AND ACCOUNTING PRACTICES
        
        01 - is it socially responsible to report misleading profit figures that convince shareholders that a company is a good potential investment ?
        02 - is it socially responsible to inflate the value of the business so that lenders are more willing to give loans ?
        03 - these practices done by auditors to make the accounts seem more favourable are called account window dressing
        04 - the widely held view is that any deliberate attempt to distort the profitability or value of a company to give a misleading picture is socially irresponsbile and should be against the law
        
        02 - CSR AND ILLEGAL INCENTIVES
        
        01 - is it socially responsible to award "incentive payments" or bribes to directors or purchasing managers so that a contract is awarded to a particular company ?
        02 - is it socially responsible to award "incentive payments" to government officials to obtain subsidies or to avoid legal action for breaking environmental laws ?
        03 - most countries have effective laws to prevent these and other forms of incentive payments
        
        this leads to a distorted marketplace, where it is not necessarily the best product that receives a contract or the worst wrongdoer who pays fines
        
        03 - CSR AND SOCIAL AUDITING
        
        there is a growing demand for businesses to report annually on how socially responsible they have been doing
        
        01 - just as annual accounts report on profit or losses, an annual social report indicates the social impact of a business over the same period
        02 - it would show, for ex --> if profits were made at the expense of shareholders interests or if the business has made any real effors to meet its social repsonsbilities
        03 - it is not a legal requirement but many businesses do so voluntarily
        04 - social reports are called social audits
        --- SOCIAL AUDITS INCLUDE ---
        01 - health and safety record (ex --> the number of accidents and fatality)
        02 - pollution levels
        03 - contributions to local events and charities
        04 - the proportion if supplies from ethical sources also called as fairtrade suppliers
        05 - employee benefit scheme
        06 - feedback from customers and suppliers on the ethical nature of the businesses activities
        07 - annual targets for social responsbility measures
        
        BENEFITS OF SOCIAL AUDITING -
        01 - they identify what social responsibilities the business is meeting - and what still needs to be achieved
        02 - management can set targets for what improvements needs to be achieved in social performance by comparing with the best performing firms in the industry
        03 - they improve a company's public image, which acts as a useful marketing tool to attract sales
        
        LIMITATIONS OF SOCIAL AUDITING -
        01 - if the social audit is not independently checked, it may be not taken seriously by shareholders
        02 - detailed social audits are costly and time consuming
        03 - some consumers are just interested in cheap goods, not whether the businessses they buy from are socially responsible or not
      - WHY BUSINESSES NEED TO CONSIDER COMMUNITY NEEDS ?
        
        a business that aims to be socially responsbile will take decisions that consider the needs of the community as well as its shareholders
        
        BENEFITS OF MEETING THE NEEDS OF THE COMMUNITY -
        
        01 - improving the public image of the business- making it more attractive for investors and socially aware consumers
        02 - increasing the change that the community will accept business decisions such as expansion and relocation
        03 - increasing the change that the business can receive government grants and subsidies
        04 - reducing the risk of negative action being taken against the business by pressure groups
        
        PRESSURE GROUPS
        01 - environment and ethical considerations need to be taken into account by business into their strategic decision-making
        02 - one if the main reasons concerns the growing power and influence of pressure groups at international and national levels
        -- INTERNATIONAL KNOWN PRESSURE GROUPS --
        01 - greenpeace - campaigns for environment protection by businesses adopting green strategy and the government providing tighter anti-pollution laws
        02 - fairtrade foundation - achieve a better deal for agricultural producers in low income countries
        03 - extinction rebellion - encourages demonstrations to force governments to take action against climate change
        
        PRESSURE GROUPS CHANGES TO BE MADE IN 3 IMPORTANT AREAS:
        01 - businesses to change policies so that ex --> less damage is caused to the environment
        02 - consumers to change their purchasing habits, so the businesses will be forced to adopt appropriate policies and those who already do will see an increase in sales, while the others fall in sales
        03 - governments to change their policies and to pass laws supporting the aims of the group
        
        PRESSURE GROUPS ACHIEVE THESE IN A NUMBER OF WAYS:
        01 - PUBLICITY THROUGH MEDIA COVERAGE - effective public relations are vital to successful pressure group campaigns. frequent press releases give details of undesirable company activities and coverage of direct - action events, such as meetings and consumer boycotts to help keep the campaign in the public eye. the more bad publicity the group can create for the company concerned, then the greater the change of the business changing its policies
        02 - INFLUENCING CONSUMER BEHAVIOUR - infuencing and doing it successfully that a consumers stop buying a company's product long enough. then the commercial case of changing policies become much stronger. public sympathy for a pressure group campaign can increase its effectiveness signficantly
        03 - LOBBYING GOVERNMENT - this means putting the arguments of a pressure group to government members as they have the power to change laws. if the popularity of the government is damaged by a pressure group campaign that demands government action, then the legal changes stand a greater chance of being introduced
    - - DEMOGRAPHIC CHANGES
        01 - structure of society is constantly evolving
        02 - many of these changes occur due to demographic change
        03 - changes in the size and structure of the population can occur at:
        A - LOCAL LEVEL - foreign regugees increase or large new housing estates
        B - NATIONAL LEVEL - decline or rise in the birth rate or ageing population
        C - GLOBAL LEVEL - projected growth of the population
        
        recent global social and demographic changes include -
        
        01 - an ageing population in many high-income countries
        02 - the changing role of women in society who increasingly seek employment
        03 - better provision of education facilities and increasing literacy leading to skilled and adaptable workforces
        04 - early retirement in high income countries leading to more relatively wealthy pensioners
        05 - rising divorce rates, creating an increasing number of single households
        06 - job insecurity, often caused by globalisation, forcing more employees to accept temporary and part time employment, although some workers prefer this option
        
        IMPACT ON BUSINESS OF SOCIAL AND DEMOGRAPHIC CHANGE
        
        01 - AGEING POPULATION
        
        01 - average age of the population is rising
        02 - often associated with:
        A - a larger proportion of the population over the age of retirement
        B - a smaller proportion of the population below the age of 25
        C - a larger number of dependants on social benefits
        
        these changes are often a result of lower birth rathers and more women in work and longer life expectancy
        
        03 - the impact on business of these changes is apparent in two ways:
        A - CHANGING PATTERNS IN DEMAND - older consumers demand different type of products. ex --> a construction company builds smaller units with special facilities for the elderly. Market research will be important to forecast changes in demand for products as a consequence for the ageing population
        
        B - AGE STRUCTURE OF THE WORKFORCE - there may be a reduced number of young employees available. business would be required to do workforce planning to include provision for employing older workers or keep existing workers for longer. younger employees may be more adaptable and easier to train with new technologies.
        however older workers are often said to have more loyalty to a business and will have years of experience that could improve customer service.
        
        02 - PATTERNS OF EMPLOYMENT
        
        01 - changing patterns of employment are one of the social constraints on the activities of business
        02 - for many businesses, labour is a crucial factor of production and probably the greatest single expense as well
        03 - true for service industries which provide personal care such as childcare and home for the elderly
        -- MAIN FEATURES OF CHANGING EMPLOYMENT PATTERNS IN MANY COUNTRIES ARE: --
        01 - LABOUR REPLACED BY CAPITAL EQUIPMENT -- Increases efficiency and productivity and can cause employment rates might fall
        02 - LABOUR TRANSFERRING FROM OLD ESTABLISHED INDUSTRIES - such as steel or manufacturing businesses to high tech and computer games design
        03 - NUMBER OF WOMEN IN EMPLOYMENT - wider range of occupation increasing
        04 - TEMPORARY AND FLEXIBLE CONTRACTS ARE INCREASING
        05 - PART-TIME CONTRACT IS INCREASING
        06 - LEARNER EMPLOYMENT ON PART-TIME ARE INCREASING
        07 - FLEXIBLE WORK PATTERNS ARE MORE COMMON - home working or flexi-hours arrangement can benefit both employers and employees
        08 - AGEING POPULATION INCREASES DEPENDENCY RATIO
        09 - WOMEN WANTING TO STAY FULL TIME EMPLOYMENT FOR LONGER
        10 - WOMEN TAKING MATERNITY LEAVES AND THEN RETURN TO WORK
        11 - COUNTRIES ARE MULTICULTURAL HAS AN EFFECT ON THE PATTERN OF WOMEN AT WORK
        
        EVALUATING THE IMPACT ON BUSINESS OF SOCIAL AND DEMOGRAPHIC CHANGE -
        
        most successful business quickly adapt with the social and demographic changes and attempt to turn them into a competitive advantage
        
        POSSIBLE OPPORTUNITIES OF SOCIAL AND DEMOGRAPHIC CHANGE -
        01 - demand is increasing for products aimed towards at ethnic or age targeted groups
        02 - rising population can increase the demand for housing and household products
        03 - increasing numbers of high income, middle class people increases consumer spending on luxury products
        04 - part-time employment allow for greater flexibility of operations
        
        POSSIBLE THREATS OF SOCIAL AND DEMOGRAPHIC CHANGE -
        01 - reduced demand for products aimed at age groups or social groups that are becoming relatively less important
        02 - shortage of labour supply if there is an ageing population
        03 - increased taxation to pay for more people dependent on pension and social benefits
        04 - need to restructure work patterns to suit part-time workers
        05 - part-time workforce may be more difficult to build into a loyal team
      - DEMOGRAPHIC - structure of the population
        
        GLOBALISATION - the increasing freedom of goods, capital and people around the world
- - - - JOB ENRICHMENT - aims to use full capabilities of workers by giving them the opportunity to do challenging work
        01 - best managers use information provided by IT systems to improve and sped up decision-making
        02 - they should not use it to control all aspects of the organisation
  - - - 01 - ANALYSE -
        The potential use of the new technology and the ways it can make a business more effective
        02 - INVOLVE - managers and other employees in assessing the potential benefits and pitfalls of introducing the new technology. better ideas may come from workers who will use the system than from managers responsible for purchasing it
        03 - EVALUATE - the different systems available, comparing cost and expected efficiency and productivity gains. consider the budget available
        04 - PLAN - for the introduction of the new system, including instensive training for all users and demonstrations for all staff
        05 - MONITOR - the introduction and effectiveness of the system, is it giving the expected benefits and if not then what can be done about improving the performance
- - - - EVALUATION OF MULTINATIONALS IMPACT ON HOST COUNTRIES
        
        -- POTENTIAL BENEFITS --
        01 - their investment brings foreign currency and, if output from the plant is exported, further foreign exchange is earned
        02 - employment opportunities are created and training programmes improve the quality and efficiency of local people's skills
        03 - local firms benefit from supplying services and components, generating additional jobs and incomes
        04 - local firms are forced to improve quality to meet international standards, either to compete with the multinational, or to supply to it
        05 - tax revenues are boosted from profits made by the multinational
        06 - management expertise in the community will improve when, and if, foreign supervisors and managers are replaced by locals, once they are suitably qualified
        07 - the total output of the economy has increased, increasing the gross domestic product
        
        -- DRAWBACKS FROM EXPANSION OF MULTINATIONALS INTO A COUNTRY --
        01 - The local workforce might be exploited, there are no strict labour and health and safety laws in some countries, multinationals therefore employ cheap labour for long hours with few benefits that workers in other countries would demand
        02 - manufacturing plants might produce more pollution than allowed to in other countries. this could result from inadequate laws or fear in the host country that the multinationals might cease operations if environmentally acceptable practices are insisted on
        03 - local competing firms may be squeezed out of business due to inferior equipment and much smaller resources than the multinational
        04 - western based business are accused of cultural imperialism for imposing their culture on other societies with influential marketing and advertising (can be linked to pan-global marketing strategy).
        05 - profits may be sent back to the country where the head office is based rather than an re-investment in the nation (foreign subsidiaries as an example)
        06 - depletion of limited natural resources have been blamed on multinationals, they have no incentive to conserve these resources and they relocate their operations quickly if the resources run out
      - setting up operations in foreign countries is not without risks -
        01 - communication links with headquarters is not without risks (communication barriers)
        02 - language, legal and cultural differences could make communication difficult
        03 - coordination with other plants in the multinational group will become more difficult
        04 - the skill levels of the local employees may be low, requiring substantial investment in training programmes.