mrs parkin - topic 1; business and the external environment Flashcards
what is demand
amount of goods, services bought at a given price which then is converted into revenue
what is market conditions
term to describe a wide range of factors affecting the market. these factors influence the cost of the business and the demand for their products
political factors
1) if demand in the economy is low - government will try to increase. try to cut taxes - so people will spend more - increasing the spending in the economy central banks reduce interest rates.
2) government will reduce demand if its too high. raise taxes - so people won’t spend more. central banks will increase interest rates to reduce demand and disposable income
3) government can influence demand for some products through taxes e.g. taxation on cars - to reduce the amount of people using cars to reduce the levels of carbon emission.
labour supply
labour supply have an effect on the business costs
1) if a place has high unemployment - good labour supply - business don’t have to pay high wages - costs are kept low - people will work more productive to protect their job
2) if place has a low unemployment - shortage of labour - people available for employment might not have to skills needed for that role - so training is required - increase costs of the business
incomes and economic
economy effects the demand and costs.
1) recession - business reduce costs and make some workers redundant to decrease labour costs. lower incomes would mean less people spending money on products - demand decreases.
2) economic boom - more people are employed- increase of wages - leads to greater costs because of the wages. higher incomes - people will spend more - increase of demand - increase to production cost due to the increase of demand
3) changing incomes- affect demand - results some products being inelastic and elastic
seasonal demand supply
some products are more needed due the season e.g. Christmas trees
can cause variations in supply so the more of the product can reduce costs
impossible to avoid seasonality - businesses need to have strategies to deal with it. so if they have so much of a product they can have a sale to rid of the stock to boost sales
what is the demographic change
the structure of a population changing over time in terms of age, sex, race
why is it important for the business to understand the demographic change
it is important to businesses because it has an impact on the demand for products. different demographics of consumers tend to buy different things, so businesses need to adapt the amount and type of products they producing
example of demographic change
demographic changes mean that certain types of business are more in demand - allows existing business to expand or new businesses to be set up. example - number of working parents is increasing which creates a greater demand for childcare services
why do businesses need to take into account of consumer tastes
consumer tastes have changed over time - example - men have started using cosmetic and personal grooming products - businesses need to adapt to theses changes so they can target their potential customers
how does the supply of workers affect the business costs
an ageing population means that a smaller percentage of the population are of working age- this may result in the supply of workers decreasing - businesses might have to increase wages to attract workers - increases costs
OR immigration levels have increased - also impact the supply of workers - if lots of working aged people are migrating into the country - supply of workers increase - drives wages down - decrease business costs
environmental factors can increase business costs
consumers concerned with the effect that their purchasing has on the environment
forced businesses to consider their impact on the environment
1) business pollute the environment via air through production processes and via traffic by transporting raw materials - packing creates large amount of landfill waste - unsustainable
2) government legislation - makes businesses to deal with some environmental issues e.g. have pollution targets which costs the business money , if businesses don’t have these in place they are more likely to get fine
3) businesses try to minimise the impact they have on the environment making it more sustainable e.g. recycle waste, making production processes more cleaner and many more other factors to making it more appealing to retailers - but it costs more increasing business costs
4) environmental friendly can give a company an advantage over its competitors and increase demand
ethical businesses have a great reputation with consumers
1) consumers are becoming increasing concerned with the ethical and unethical behaviour of firms e.g. child labour
2) some businesses have started to implement fair trade polices when purchasing from suppliers - means businesses can pay a much higher price for products e.g. Fairtrade bananas giving the businesses a USP - increase demand - making them profitable
3) if company treats its workers properly consumers will like this if not consumers will stop buying products and demand will drop
4) a company that is seen to be ethical = good reputation - increase of demand for the products can be high even if its expensive than rival products
technological advances can influence demand and costs
1) companies aim to increase demand for their products using technology to improve their marketing
2) companies use technology to gather information about lifestyles of their customers and the products the buy - help business to create promotions - targeting the right people - best chance of increasing demand for products
3) social media - another way to find out consumers tastes. companies can target their advertising to the people who are likely to buy the product - cheaper way of advertising - more likely to increase demand
4) technology can also improve production efficiency - reduce business costs in the long term - expensive to set up - can take peoples jobs making them redundant - ethical issue - impact the business negatively on the repuataion of the company which affect demand
