Understanding External Influences on Business

Question 1

The Objectives of Owners and Shareholders

Answer 1

-To have high dividends- they want to make money by being given a share of the profits of the business in return for their investment.

-To have high share prices- they want to make money if they sell their shares which is possible if the value of shares increases.

Question 2

The Objectives of Employees

Answer 2

-To get the best possible pay and rewards for doing their jobs.

-To keep their jobs and to ensure that their job is secure.

-To have many promotion prospects available

Question 3

The Objectives of Customers

Answer 3

-To get the best value for money on their purchase

-To get the best possible quality product

Question 4

The Objectives of Managers

Answer 4

-To make sure that the business succeeds so that they get paid.

-To ensure that their jobs are secure

Question 5

The Objectives of Suppliers

Answer 5

-To increase sales and profits.

-To encourage businesses to buy from them again in the future.

-To grow their business.

Question 6

The Objectives of the Local Community

Answer 6

-To minimise the business’ environmental impact in the area

-To increase the number of jobs locally

-To improve the local economy

Question 7

The Objectives of Pressure Groups

Answer 7

-Persuade customers to boycott or stop buying from a business if they feel it is acting unethically.

-Encourage a business to act in a more ethical way that helps other stakeholders.

-Encourage customers to bur from businesses which they feel sell appropriate products.

Question 8

The Objectives of the Government

Answer 8

-To create more jobs in order to raise more money from taxes and save money on benefit payments.

-To make a large profit in order to receive higher tax rates

Question 9

How Owners and Shareholders are Affected by Business Activity

Answer 9

-Shareholders and owners may decide to grow the business and authorise opening new stores. They will expect to see sales increase over time.

-However, opening a new store will cost money, which may affect profits in the short term and could affect the amount of dividends they will receive.

Question 10

How Managers are Affected by Business Activity

Answer 10

-Managers take on additional responsibilities and set new targets.

-They may have opportunities for career progression, and they could become demotivated if they are not given such opportunities.

Question 11

How Employees are Affected by Business Activity

Answer 11

-Employees have increased job security as a business grows.

-They could also have opportunities for promotion to new roles. Some employees could feel resentful if they are not offered opportunities.

Question 12

How Customers are Affected by Business Activity

Answer 12

-Customers will benefit from having more choice about where to shop, but they may remain loyal to existing businesses.

-Through good marketing activity by the business, some may be tempted to try the new store.

Question 13

How Suppliers are Affected by Business Activity

Answer 13

-Suppliers benefit from increased orders to equip and stock the new store, which might lead to an increase in their profits.

-If they are unable to cope with the extra demand, there is a risk that the business will use other suppliers.

Question 14

How the Local Community is Affected by Business Activity

Answer 14

-The local community will benefit as a new store is likely to bring new jobs.

-However, they may be unhappy with increased traffic or noise.

Question 15

How Pressure Groups are Affected by Business Activity

Answer 15

-Pressure groups may protest against the new store if they feel their cause is adversely affected.

-This could deter other businesses from coming to the area.

Question 16

How the Government Affected by Business Activity

Answer 16

-The government may be pleased to see new jobs being created and may expect to see increases in tax revenues as a result.

-However, other businesses could lose customers, which would reduce their profits and the tax they have to pay as a result.

Question 17

How Owners and Shareholders Impact Business Activity

Answer 17

-Owners have the most impact, as they make decisions about the activities of the business and provide funding to enable it to start up and grow.

-Shareholders influence the objectives of the business.

Question 18

How Managers and Employees Impact Business Activity

Answer 18

-Managers make some recommendations and decisions that influence the business’ activity.

-Employees may have a limited amount of influence on business decisions. However, they can also affect the business directly.

Question 19

How Customers Impact Business Activity

Answer 19

-Customers buy products and services and give feedback to businesses on how to improve them.

-Customers are also able to influence others by recommending the business to friends or by warning them against using the business.

Question 20

How Suppliers Impact Business Activity

Answer 20

-Suppliers can have a significant impact on a business if there are any changes in the quality of the goods they supply or the reliability of their deliveries.

Question 21

How the Local Community and Pressure Groups Impact Business Activity

Answer 21

-If a business affects a large number of local residents negatively, they may protest or object through the local council.

-They can also support businesses by buying products and services.

-Pressure groups can improve working conditions for employees and help them to get fair pay. They can also try to influence customers’ opinions of a business.

Question 22

How the Government Impact Business Activity

Answer 22

-Governments can pass new laws, change tax levels or amend levels of government spending in ways that affect the business.

Question 23

The Impact of Stakeholder Conflicts on Businesses

Answer 23

-Conflicts can have a direct impact on on the service provided to consumers. This includes not meeting customer needs.

-Moreover, if two groups are indirect conflict, a business might have to choose which group it feels has the most influence over the business.

Question 24

Possible Conflict Between Shareholders and Employees

Answer 24

-Employees want high wages but owners don’t want to pay higher wages as this will raise costs and impact profit.

-If employees strike, productivity will decrease. This means that customer needs will not be met. In turn, sales will fall which will also negatively impact profit.

Question 25

Possible Conflict Between Pressure Groups and Shareholders

Answer 25

-Pressure groups want low pollution levels but shareholders want high profits and reducing pollution levels raises costs and impacts profits.

-If a pressure group boycotts the business, this may give the business a bad brand image.

-This means that customers may be put off from buying from the business resulting in a fall in sales.

Question 26

Advantages of E-commerce

Answer 26

-Can trade around the world, at any time

-Can process order immediately

-Can give real-time order updates to consumers

-Can avoid running a retail outlet and so reduce costs

-Easier ordering process for consumers

Question 27

Disadvantages of E-commerce

Answer 27

-Can be expensive to keep up with technology

-Customers may have security concerns around fraud and the security of their account details

-Can make it harder to build relationships with customers leading to them making purchases because of price rather than brand loyalty

Question 28

Impact of E-commerce on the Marketing Mix

Answer 28

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.

Question 29

Importance of Social Media

Answer 29

-It allows a business to talk to customers, read their comments and respond to reviews.

-This means that it is an up to date and effective way to conduct research into a business’ target market and potential customers.

-Social media is also an effective way for customers and other stakeholders to influence a business.

-Social media is important for communication. It can display lots of types of information, updated regularly and seen by lots of people so is useful for promotion.

Question 30

Impact of Social Media on the Marketing Mix

Answer 30

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.

Question 31

Digital Communication: Websites

Answer 31

-Websites can be used to communicate with consumers and other stakeholders.

-They can be used to post blogs and provide customers service to inform consumers

-Websites can also be used to publish reports to shareholders.

Question 32

Digital Communication: E-mail

Answer 32

-E-mail is a very quick way of communicating with stakeholder.

-This can be on a personal level to respond to a customer or on a larger scale to contact all employees.

Question 33

Digital Communication: Apps

Answer 33

-Apps are usually used by firms to communicate with customers and provide information about a business.

-They can also be used to sell products and promote any special offers.

Question 34

Digital Communication: Video Calls

Answer 34

-Video calls allow employees to work from home and from different locations.

-Employees can hold meetings remotely, rather than travelling to meet.

-This can also be a good way for businesses to communicate with important shareholders who all live in different places.

Question 35

Digital Communication: Live Chats

Answer 35

-Live chats are an instant messaging service.

-Employees can use them to talk from different locations.

-Customers can use them to talk with a customer service advisor.

Question 36

Advantages of Digital Communication

Answer 36

-Quicker and cheaper than travelling long distances so employees’ costs are lower, decisions can be made faster and time is used more efficiently.

-Digital communication also means a business doesn’t need an office for all employees all the time.

-This means costs of overheads are reduced allowing that money to be used elsewhere.

-It provides businesses with fast, cheap communication with other countries. It also helps people understand each other with online translation services.

Question 37

Impact of Digital Communication on the Marketing Mix

Answer 37

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.

Promotion- Businesses can email newsletters, track customer behaviours on social media and their website, and advertise online.

Question 38

Importance of Payment Systems.

Answer 38

-Having safer and easier payment systems can encourage customers to shop with the firm.

-faster payment methods also mean that businesses can serve more customers in any given time.

-Therefore, the businesses, sales an in turn revenue could increase.

Question 39

Benefits of Payment Systems

Answer 39

-Fast and easy

-Can be used at all times

-Allow people to order immediately which is good for customer service

-Trends in sales can be identified quickly

-Can work in many different countries

Question 40

Drawbacks of Payment Systems

Answer 40

-May be vulnerable to fraud

-May be additional fees to be paid by the business

-Customers have come to expect it and may choose not to shop with a business if digital payment is not available.

Question 41

Impact of payment Systems on the Marketing Mix

Answer 41

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.

Question 42

Influence of Technology on Sales

Answer 42

-Easier and faster to buy products using payment systems so consumers might buy products more often

-Technology allows sales to be made any time from anywhere. This means a business can access a larger market so increase or maximise sales.

-Technology helps to increases customer satisfaction so consumers are more likely to buy from the business.

Question 43

The Positive Impacts of E-commerce on Sales

Answer 43

-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

Question 44

The Negative Impacts of E-commerce on Sales

Answer 44

-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

Question 45

Influence of Technology on Costs

Answer 45

-As technology has developed, its costs have decreased making it available to more people and easier to use.

-Communicating through the internet means costs are kept low so an entrepreneur can start a business with a small investment.

-Not needing a permanent office or outlet reduces cost of having to pay overheads. Digital communication means costs are saved on travelling and printing documents.

Question 46

Positive Impacts of Technology on Costs

Answer 46

-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

Question 47

Negative Impacts of Technology on Costs

Answer 47

-Costs involved in hosting a website

-Fees that must be paid for handling online payments

-Warehousing and distribution costs for products

Question 48

Influence of Technology on Price

Answer 48

-Customers shopping online will have a lot of businesses to chooses from so technology helps a business lower prices in order to compete.

-Customers can use online price comparison websites to compare deals, which also encourages businesses to lower their prices.

-Businesses can operate more efficiently and reduce costs, allowing them to lower their prices and attract more customers while still making a profit.

Question 49

Influence of Technology on Product

Answer 49

-Businesses take advantage of the latest methods to produce goods, such as using robots to manufacture products so that products can be produced constantly.

-Businesses can use technology to offer new ways to access products or services such as offering a downloadable product dependant on what it is.

-Customers can also customise their product choices, which can be produced quickly using robotics or manufacturing technology such as custom names.

Question 50

Influence of Technology on Place

Answer 50

-Businesses can use social media to make customers aware of their brands, products and services and to make them feel positive about their brands.

-Businesses can create reliable, easy to use e-commerce websites that make purchasing easy for customers.

-Customers can be impressed by a good e-commerce website or put off by a bad one.

Question 51

Influence of Technology on Promotion

Answer 51

-Businesses can use cheap digital promotional materials which cost less than physical promotional materials.

-Businesses can target their advertising at customers by using cookies to track what a particular customer has been looking at online.

Question 52

Impact of Not Responding to Changes in Technology

Answer 52

-if a business does not adapt, it may lose its reputation. This could lead to lower sales or a continuing decline in reputation.

-There is also the risk that its competitors will adapt to the changes and could become more efficient and attract the business’ customers.

-If the changes in technology means technology used or sold by the business becomes obsolete, it could cause the business to fail completely.

Question 53

Positive Impacts of Employment Law

Answer 53

-Protects employees from exploitation and receiving unequal treatment in the workplace

-It has resulted in increased fairness and motivation leading to increased productivity

-A business can choose to pay above minimum wage levels to attract and retain staff.

Question 54

Negative Impacts of Employment Law

Answer 54

-If a company doesn’t pay its workers enough, it could be given large fines and face bad publicity so consumers might stop using the business.

-Minimum wage also increases costs. This may cause a business to increase prices which may put some consumers off leading to a fall in sales.

-Some firms may not be able to afford to pay the minimum wage to all their staff so may have to lose some staff in order to survive or replace them with machines.

Question 55

Positive Impacts of Health and Safety Legislation

Answer 55

-Health and safety law helps to make sure that risks to people in the workplace are properly controlled.

-A safe working environment should mean fewer accidents so fewer injuries.

-This may mean a more productive workforce since people should need less time off work to recover.

Question 56

Negative Impacts of Health and Safety Legislation

Answer 56

-Following health and safety laws can be expensive and time consuming. This is because a business has to carry out risk assessments and take steps to reduce risks.

-All staff must also receive health and safety training and suitable equipment provided.

-If businesses don’t follow health and safety laws, they can be prosecuted, fined and closed down.

-They may also have to pay compensation to anyone who is injured leading to bad publicity.

Question 57

Conditions of Consumer Law

Answer 57

1- The product should be fit for purpose- it should do the job it was designed for.

2-The product should match its description. It is illegal for a business to give a false trade description or claim a product has been endorsed by someone if they haven’t.

3-The product should be of satisfactory quality- this means it should be well made with no major defects.

Question 58

Impacts of Consumer Law

Answer 58

-If a business breaks consumer law, it is faced with the cost and inconvenience of having to refund a customer, or replace or repair their item.

-The case could even end up in court if the customer is unhappy with the business’ response ( which costs a business even more if they lose).

-Breaking consumer law can also hurt a business’ reputation. leading to a reduction in sales so businesses have to be careful when selling products.

-They have to train their staff properly so they sell products accurately and understand customers’ rights if they are unhappy.

Question 59

Impact of Legislation on Costs

Answer 59

Training- this may need to be retaken and updated to comply with new laws. However, this can also be time consuming.

Equipment- this may need to be changed or updated. A business may also need to provide this to all staff for safety.

Pay- this may need to be increased in line with rises in minimum wage so any changes must be budgeted for.

Administration- a business may need to update documents to reflect the law. This includes cost for printing or time if an employee must update information.

Question 60

Positive Consequences of Meeting Legal Obligations

Answer 60

-The business has a positive reputation

-Customers and other stakeholders feel they are being fairly treated

-Higher sales due to customers being attracted to buy from the business because of its good reputation

-Better candidates for jobs with the business because people are attracted to work for the business.

Question 61

Negative Consequences of Not Meeting Legal Obligations

Answer 61

-The business may be taken to court, resulting in fines or even prison sentences for members of staff and owners.

-Negative media stories about the business leading to a bad reputation.

-The business is closed down temporarily or permanently.

-Someone is injured due to the business’ failure to meet legal obligations

Question 62

Benefits to a Business of High Unemployment

Answer 62

-There are a large number of potential employees

-A business can pay lower wages if there are lots of unemployed people desperate for a job

-In areas of high unemployment, the government may give grants to firms who open and provide jobs there.

-This may encourage a firm to grow when unemployment is high.

Question 63

Drawbacks to a Business of High Unemployment

Answer 63

-Less employment means lots of people have less disposable income.

-This can lead to a lack of demand for products so sales can fall. A firm may have to respond by reducing prices, reducing output or making staff redundant.

-It may also be a problem if firms hire people who have been unemployed for a while. People may lose skills while unemployed so a firm may have to retrain them.

-Employees may be less motivated as their jobs don’t feel secure as the economy is not doing well

Question 64

Impacts of Low levels of Consumer Spending

Answer 64

-Consumers are more restricted so they are more likely to buy lower priced products.

-The number of products bought is also likely to go down.

-Consumer confidence is likely to be low meaning that they are less likely to make a big purchase and will put it off until their income is higher.

Question 65

Responding to Low Consumer Spending

Answer 65

-If consumer income goes down, a business may lower its prices to ensure that sales remain high or it may look for consumers in other places.

-If it does not do this, it may fail to make enough sales, experience a cash flow problem and completely fail.

Question 66

Impacts of High levels of Consumer Spending

Answer 66

-Consumers have more money to spend so are more likely to buy luxury goods.

-The number of products bought is likely to rise as people are more willing to place their older possessions.

-Customer confidence is likely to be high meaning that people are happy to make big purchases as they are not worried about their income and job security.

Question 67

Benefits of Low Inflation Rates

Answer 67

-The amount that a business pays its suppliers should remain low.

-Employees are less likely to ask for pay increases and employers can give very small pay increases to continue to motivate staff.

Question 68

Impact if Income Rising at a Slower Rate than Inflation

Answer 68

-People will have to spend a greater proportion of their income to spend on things they really need.

-So they’ll have less money left to spend on luxuries. The demand for these products will go down.

-This means that businesses providing luxuries will suffer. Their sales will decrease leading to lower profits. To recover, they could lower prices or increase advertising.

-Customers selling at discount prices will benefit as customers will be making an effort to buy things as cheaply as they can.

Question 69

Impact if Income Rising at a Faster Rate than Inflation

Answer 69

-People will be spending smaller proportions on their needs so will have more money for luxuries. The demand for these products will increase.

-Businesses providing luxuries will see an increases in sales and their profits are likely to increase.

Question 70

Impact of Low Interest Rates

Answer 70

-When interest is low, it is cheaper to borrow money but there is less interest when saving money.

-When rates are low, firms borrow more and save less.

-Consumers have more money to spend so demand for products goes up. This means firms are likely to make more profit and may need to increase output.

-Firms borrowing will have smaller interest repayments so will have more money to spend on other parts of the business.

Question 71

Impact of High Interest Rates

Answer 71

-Increases in interest rates means borrowing becomes more expensive but savers get better returns on investments.

-Firms and consumers will have less money to spend- they’ll be paying higher rates. They are also likely to save more in order to take advantage of high returns.

-This reduces demand for products so firms often sell less and their profits may decrease.

-It may also mean that firms can’t afford to pay all of their staff so some people may be made redundant and
unemployment may increase.

Question 72

Responding to High Interest Rates

Answer 72

-If interest rates increase, a business may have to decide to slow down on any plans to expand its activities in order to avoid borrowing.

-if it goes ahead with its plans to borrow, the cost will be greater than first expected, which will have a negative impact on the business’ finances.

Question 73

Impact of Taxes on Consumers

Answer 73

-If the income tax that consumers have to pay falls, they will have more disposable income.

-This means that consumer spending is likely to increase, leading to increased revenue for firms.

-The opposite is true if taxes increase- consumer spending is likely to fall.

Question 74

Impact of Taxes on Businesses

Answer 74

-If the amount of tax a business has to pay increases, it reduces the amount of money they have available to reinvest. This can lead to slow growth.

-Some taxes may force a business to act in a different way to avoid paying it. High tax rates also means a business might have to find other ways to cut costs.

-A business might also consider relocating abroad to a country where businesses pay less tax

Question 75

Wider Impact of Taxes

Answer 75

-If the government reduces taxes, a business will have more money to reinvest. which helps a business to grow.

-However, lower taxes might encourage firms from abroad to set up in the UK.

-This increases competition in the market and a may lead to a fall in sales if UK businesses don’t compete well.

Question 76

Responding to Low Tax Rates

Answer 76

-If taxation falls, a business may respond by hiring more people as it can afford to pay more staff.

-This may make the business more effective, increases its sales and put it ahead of any competitors who have not taken advantage of the change.

Question 77

Impact of a Strong Pound on Exchange Rates

Answer 77

-An increase in the value of the pound makes exports more expensive and imports cheaper.

-British firms that export products to other countries are likely to see their sales and profit go down- their products will be more expensive so less people will buy them.

-They may decide to move abroad so they can trade in the currency of the country where they sell their products meaning they will be less affected by the exchange rate.

-British firms that import will be able to buy more products for less so their profits may rise. Firms that import materials can also make products more cheaply

Question 78

Impact of a Weak Pound on Exchange rates

Answer 78

-British exports become less expensive abroad resulting in more sales and higher profits for British firms that export products to other countries.

-The weak pound also makes it more expensive for foreign firms to sell their products in the UK.

-That is good for British firms that compete with imported goods as they won’t have to reduce prices so much to stay competitive.

-Importing raw materials is also more expensive so production costs increase. They may increase prices to cover costs which may cause sales to fall.