Flashcards · 1BS0 · Topic 1.5

Understanding external influences on business flashcards

26 cards on Topic 1.5, subtopics 1.5.1 to 1.5.5. Pick a subtopic or study them all.

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The eight stakeholder groups named in the specification: Shareholders (owners), employees, customers, managers, suppliers, local community, pressure groups and the government.
Typical objectives of shareholders, employees, customers and managers: Shareholders: profit share, rising share value. Employees: pay, security, good conditions. Customers: quality, fair price, safety, service. Managers: salary, growth, a secure post, freedom to decide.
Typical objectives of suppliers, local community, pressure groups and government: Suppliers: regular orders, prompt payment. Local community: jobs, little noise or pollution. Pressure groups: a change in business behaviour. Government: tax, jobs, law kept, economic health.
Stakeholders 'affected by' the business versus their 'impact on' the business: Affected by: the business acts and the group feels it (late-night deliveries affect neighbours). Impact on: the group acts and the business feels it (bad reviews from customers cut sales; a supplier's price rise lifts costs).
Give two stakeholder conflicts and why they arise: Shareholders vs employees: wages come out of the profit that could be shared. Shareholders vs customers: low prices or high quality cost money. A conflict answer needs two groups, two wants, and why both cannot be fully met.

The four types of technology in the specification: E-commerce (buying and selling over the internet), social media (platforms for posting, talking and advertising), digital communication (electronic communication inside and outside the business) and payment systems (electronic ways of taking payments).
How technology can influence sales: Gains: a wider market, orders at any hour, more awareness. Drawbacks: website faults lose sales; more rivals are visible online.
How technology can influence costs: Savings: less postage, printing and travel; smaller premises. Extra costs: set-up, training, delivery, packaging, fees per sale.
How technology influences the marketing mix: Product: quick feedback. Price: lower selling costs, but easy comparison forces prices down. Promotion: cheap, targeted posts. Place: a website becomes a place to buy, so delivery must be reliable.
A card reader charges 2% on card sales of £1,850. What is the fee?: 2% × £1,850 = £37.

Legislation: Laws made by government that businesses must follow.
The principles of consumer law and employment law named in the specification: Consumer law: quality and consumer rights. Employment law: recruitment, pay, discrimination, and health and safety.
Why do we have business legislation?: To protect customers and workers, to make competition fairer and to give everyone the same basic rules.
Impact on a business of meeting and of not meeting its legal obligations: Meeting: costs for training, equipment, checks and records, but trust from customers and workers. Not meeting: fines, compensation, legal costs, bad publicity, lost sales and staff leaving.
Compliance costs £3,200 a year. Ignoring the rules would mean a £7,500 penalty and losing 8% of £150,000 sales revenue. Compare.: Lost sales = 8% × 150,000 = £12,000. Total cost of not complying = 7,500 + 12,000 = £19,500, which is £16,300 more than complying.

Effects of rising unemployment and of rising consumer income on a business: Rising unemployment: fewer customers with spending power, so lower sales, but easier to hire. Rising consumer income: more spending, especially on non-essential items.
Effects of rising inflation and rising interest rates: Inflation: costs rise, so the business absorbs them or raises prices, and customers can buy less. Interest rates: borrowing and loan repayments cost more, and spending and investment fall.
Effects of changes in government taxation: Higher tax on profits leaves the business less profit to keep; higher tax on incomes or sales leaves customers less to spend. A tax cut does the reverse.
Effects of a stronger and a weaker pound: Stronger pound: imports cheaper, exports dearer abroad. Weaker pound: imports dearer, exports cheaper abroad. A stronger pound helps importers and hurts exporters.
£1 = 1.30 euros. A supplier invoices 5,200 euros. What does it cost in pounds, and what if the rate becomes £1 = 1.25 euros?: Foreign currency to pounds: divide by the rate. 5,200 ÷ 1.30 = £4,000. At 1.25: 5,200 ÷ 1.25 = £4,160, which is £160 more.
A £30,000 loan's interest rate rises from 4% to 6%. What is the extra annual interest?: At 4%: £1,200. At 6%: £1,800. Extra = £600 a year.

Why do external influences matter to a business?: The business cannot control them, they can raise costs or lower demand, and businesses that respond sensibly stay competitive.
Possible responses to a change in technology: Invest in equipment or systems, sell online, use social media or digital communication, train staff, or change how goods are made or delivered.
Possible responses to a change in legislation: Train staff, change products, policies or contracts, budget for the cost, or raise prices.
Possible responses to a change in the economic climate: Change prices, cut costs, widen or narrow the range, find new markets or suppliers, renegotiate or delay borrowing, keep cash reserves.
Method for an external-influence response question: Name the change and its direction; state the effect on this business (cost, revenue, demand); suggest a response that fits; weigh its cost and risk; reach a conclusion if the command word asks for one.