1.5 Understanding External Influences on Business

stakeholder

a person, group or organization with an interest in the activities of a business

internal stakeholders

- shareholders
- managers
- employees

external stakeholders

- customers
- local community
- suppliers
- pressure groups
- government

different types of technology used by business:

- e-commerce
- social media
- digital communication
- payment systems

e-commerce

when buyers and sellers come together to trade in a virtual location

advantages of e-commerce

- attract customers across the globe
- sell at any time of the day or night
- receive payments immediately
- reduced overhead costs compared to running a physical

disadvantages of e-commerce

- more competitors from across the globe, making it harder for the business to get noticed
- employees may need new skills
- a need to maintain and update technologies

how businesses use social media

- to promote their products/ services
- can gain insight into customer needs and wants
- quickly communicates information

digital communication tools

email, mobile phones, websites

how online payment systems all for individuals

allows for quick and easy business transactions with suppliers, banks, and customers

positive impacts of e-commerce on sales activity

- can attract customers all around the world
- prices can be updated quickly
- customers can see what items r in stock

negative impacts of e-commerce on sales activity

- more potential competition
- providing customer service for a larger customer base my be challenging for a small business
- must consider logistical issues around delivering orders to customers

impact of payment methods on sales activity

- easy and convenient
- more likely to make a purchase

impact of digital communications on cost

- enabling more employees to work remotely which cuts costs and potentially get smaller office
- communications can be sent more cost-effectively

positive impact of e-commerce on costs

- requires fewer staff
- avoids need to be located in high streets
- can automate tasks such as administration and record keeping

negative impacts of e-commerce on costs

- costs involved in hosting website
- fees must be paid for handling online payments

legislations

laws passed mainly through parliament

basis of consumer rights

- consumer rights act (2015)
- consumer protection act (1987)
- trade description act (1968)

consumer rights act (2015)

deals with transactions between buyer and seller, and protects consumers from unfair business practises

goods and services according to consumer rights act (2015)

- described accurately
- fit for purpose
- satisfactory quality

consumer protection act (1987)

designed to ensure that products are safe - business that produce are liable for any damage caused by poor quality products

trade description act (1968)

ensures businesses accurately describe their goods and services

employment law

legislation to protect employees from exploitation

recruitment

legislation that outlines what employees can and cannot do when recruiting staff

pay

ensures workers receive an above set minimum

acts that cover recruitment

- equality act (2010)
- data protection act (2018)
- employment rights act (1996)
- pensions act (2008)

equality act (2010)

requires employers to treat people fairly and not discriminate in any way

data protection act (2018)

regulates how personal information is used and protects against misuse of personal details

employment rights act (1996)

requires that they are provided with a written statement outlining details of their employment within 2 months of starting

pensions act (2008)

may require new staff to be enrolled into a pension scheme

acts that cover pay

- national minimum wage act (1998)
- equality act (2010)

national minimum wage act (1998)

requires all businesses must pay their staff a minimum hourly wage

acts that cover health and safety

- health and safety act (1974)
- working time regulations (1998)

what employers should provide (health and safety)

- staff training
- safety equipment
- first aid equipment

what employees are expected to do (health and safety)

- complete training
- use safety equipment and wear safety clothes
- report any risks
- take responsibility for own safety at work

working time regulations (1998)

limits the amount of hours employers can expect staff to work

advantages of following legislations

- gain reputation
- sales more likely to increase
- more customers attracted
- staff feel more safe at work

disadvantages of following legislations

- increases likelihood of legal action is failing to meet requirements
- continuous process to keep up with new legislations
- can constrict creativity and entrepreneurship

examples of additional costs from legislations

- health and safety act (1974) = supply training and safety equipment
- national minimum wage act (1998) = pay staff higher wages
- working time regulations act (1998) = employ more staff to cover hours required

Gross Domestic Product (GDP)

measure of the size and health of a country's economy over a period of time

boom

high levels of consumer spending, business confidence, profits and investments

prices and cost in an economic boom

tend to rise faster

unemployment level in an economic boom

low because growth in economy tends to create new jobs

recession

falling levels on consumer spending and confidence meaning lower profits for businesses

unemployment levels in an economic recession

rise as business cut back to reduce costs

boom impact on economy

- consumer demands for goods and services is high
- quality of living standard increases
- business need more employees - more available jobs

recession impact on economy

- businesses that sell necessities do well
- quality of living standards decreases
- many are unemployed

impact of unemployment

- economy not making full use of workers available
- economy will not grow as quickly as it could
- downturn in economic activity will directly affect businesses

inflation

increase in prices over time

impact of inflation of consumers

- reduces disposable income
- reduce consumer income as they have to pay more in tax + necessities

impact of inflation on businesses

- likely to lead wage increase demands
- fall in profits
- as businesses lose confidence they will feel less inclined to invest and expand

interest

the amount of money the bank charges for borrowing money

interest rate

the percentage rate used to work out the amount of interest that must be paid

impact of increasing interest rates

- savers = money they saved would increase
- borrowers = amount of money to be paid would increase

impact of decreasing interest rates

- savers = will receive less interest on savings
- borrowers = mount of money to be paid back would decrease

tax

a proportion of an individuals income or business profits that must be paid to the government

national insurance contributions (NIC)

charges to cover healthcare, state pensions and employment-related benefits

value added tax (VAT)

charge on goods and services based on the value of the item sold

council tax

charge on property by local council based on property's value and number of people in household

corporation tax

charge on company's profit

effect of income tax on business + consumers

- a cut may give consumers more disposable income thus raising consumption
- a rise may discourage spending and reduce consumption

effect of corporation tax on business

a cut my increase available profit for businesses which may stimulate investment

effect of VAT on businesses + consumers

changes will effect prices to consumers and also the costs to a businesses