U3.1: Influences in the Business Environment - External Influences Flashcards
What are the 2 influences in the business environment?
- External Influences
- Internal Influences
Parts of the business cycle
- peak
- trough
- contraction
- expansion
Peak
- wages and salaries are high
- business operating at full
- sales and profits high
- unemployment low
- inflation may increase
Trough
- wages and salaries are low
- business operating below full
- sales and profits low
- unemployment high
- inflation stable or decreasing
Contraction
- decreasing consumer spending
- decreasing business investment
- sales and profits falling
- unemployment rising
Expansion
- increasing consumer spending
- increasing business investment
- sales and profits rising
- unemployment falling
Economic Influences
- information on economic growth, inflation trends, average earnings, interest rates etc gives insight into economic trends
- know when a recessionary or boom cycle occurs
- economic problems –> fall of consumer confidence in spending –> impact on business owners (profits falling) –> cost cutting
Financial Influences
- fluctuating exchange and interest rates
exchange rates - value of one currency in terms of another
interest rates - cost of borrowing money or the return on invested funds (%)
Geographic Influences
- location
- economic growth
- changing demographic factors (population, size, age) can lead to changes in demand and the nature of goods and services (aging population, more elderly people)
- globalisation: world is more interconnected due to trade and cultural exchange
Social Influences
- society’s expectations, trends and tastes to a business is crucial for its stability and viability:
- growing awareness of human and economic activity on the environment
- provision of family friendly workplaces
- catering for workplace diversity
- changing consumer trends
Legal Influences
- complying within the law:
- taxation
- industrial relations
- work health and safety
- equal employment opportunity
- anti-discrimination
- protection of the environment
Political Influences
- taxation: (GST, tax cuts, tax incentives)
- labour market reforms: (free trade policies and agreements, changes to penalty rates/skilled immigration policies)
- social reforms: (paid parental leave, equal pay, gender workplace diversity)
- environmental management: (environment regulations, banning disposable products)
Insitutional Influences
- Government
- federal (payment of taxes, provision of superannuation, customs regulations, abiding legislations)
- state (provision of entitlements, payment of payroll taxes, abiding state legislations, abiding pollution controls)
- local (approving new development, fire regulations, parking regulations, business signs: size, location and shape) - Regulatory Bodies
- EPA
- NSW Fair Trading
- ASIC
- ASCC - Other
- Employer associations
- Trade and industry associations
- ASX
Technological Influences
it can:
- increase efficiency and productivity
- create new products
- improve quality and range of products
- reduce production costs over time
allowed business to:
- communicate with suppliers and customers
- use e-commerce
- use e-marketing
- need to exploit technology to compete
Competitive Situation Influences
monopoly:
- complete concentration by one firm (has ability to decide price)
- no competitors
- e.g. Sydney Trains, Sydney Water
oligopoly:
- small number of large firms
- spend large amount on advertising
- e.g. Banks, car manufacturers
monopolistic competition:
- large number of buyers and sellers
- goods and services sold sold by packaging, advertising, brand names, quality
- e.g. clothing manufacturers, local retailing
perfect competition:
- large number of small businesses that sell similar products
- little advertising, need to increase market share through price competition
- e.g. fruit and vegetable growers, supermarkets
