1.5 External Influences on Business

Who are business stakeholders?

Any individual or group with an interest in or affected by the business: shareholders, employees, customers, managers, suppliers, local community, pressure groups, and the government.

What do shareholders want from a business?

Profit/dividends, growth in the value of their shares, and a well-run, ethical business.

What do employees want from a business?

Fair pay, job security, good working conditions, career development, and to be treated with respect.

What do customers want from a business?

Good quality products at fair prices, good customer service, and honest/ethical business practices.

What do suppliers want from a business?

Regular orders, prompt payment, and a long-term trading relationship.

What does the local community want from a business?

Local jobs, minimal environmental impact, and a positive contribution to the community.

What does the government want from businesses?

Tax payments, legal compliance, job creation, and economic growth.

What is a pressure group?

An organisation that campaigns to influence business or government behaviour. E.g. Greenpeace campaigning against plastic packaging.

Give an example of a stakeholder conflict.

Shareholders want higher profits (lower costs) but employees want higher wages — these objectives directly conflict.

How can stakeholders impact business activity?

Customers can boycott products. Pressure groups can run campaigns. Suppliers can change payment terms. Government can impose fines or regulations.

What are the four types of technology used by businesses?

E-commerce (online selling), social media (marketing/research), digital communication (email, video calls), and payment systems (contactless, digital wallets).

How does e-commerce affect a business's sales?

It allows the business to reach more customers 24/7 beyond its local area, potentially increasing sales significantly.

How does technology affect a business's costs?

Automation can reduce labour costs. However, technology requires upfront investment and maintenance costs.

How does social media benefit businesses?

It enables cheap/free marketing, targeted advertising, direct engagement with customers, and real-time feedback.

How does technology affect the marketing mix?

It enables online selling (Place), targeted digital advertising (Promotion), and price comparison tools affect pricing decisions (Price).

What is the purpose of legislation in business?

To protect customers and employees, ensure fair competition, and hold businesses accountable for their actions.

What is consumer law and what does it do?

Laws that protect customers' rights — ensuring products are of satisfactory quality, fit for purpose, and as described. Key law: Consumer Rights Act 2015.

What are the key principles of employment law?

Laws covering: fair recruitment (no discrimination), minimum pay (National Minimum Wage), protection against discrimination, and health and safety at work.

What is the National Minimum Wage?

The lowest hourly rate employers are legally required to pay workers, set by the government. Protects employees from exploitation.

What are the costs of meeting legislation for businesses?

Higher wages, investment in safety equipment, legal compliance costs, training, and administrative costs.

What are the consequences of NOT meeting legal obligations?

Fines, legal action/prosecution, damaged reputation, loss of customers, and business closure in extreme cases.

What is the economic climate?

The overall state of the economy — including levels of growth, unemployment, inflation, and consumer spending.

What is a recession?

A period of economic decline where output falls, unemployment rises, and consumer spending decreases.

What is an economic boom?

A period of strong economic growth where unemployment is low, consumer confidence is high, and businesses thrive.

How does unemployment affect a business?

High unemployment reduces consumer spending (less disposable income), but makes it easier to recruit staff at lower wages.

What is inflation?

A sustained rise in the general price level of goods and services. It increases business costs and reduces consumers' purchasing power.

How do changes in interest rates affect businesses?

Higher interest rates increase the cost of borrowing (loans become more expensive) and reduce consumer spending, lowering business revenue.

What is an exchange rate?

The value of one currency against another. E.g. how many euros £1 can buy.

How does a strong pound affect businesses that export?

It makes UK exports more expensive abroad, potentially reducing demand for UK goods in overseas markets.

How does a strong pound affect businesses that import?I

t makes imported goods and materials cheaper, reducing costs for businesses that buy from overseas.

What is government taxation and how does it affect businesses?

Tax on profits (corporation tax) and VAT reduce profitability. Higher taxes mean less money available for investment or distribution to owners.

What are the possible business responses to changes in technology?

Adopt new technology to stay competitive, invest in training, use e-commerce to expand sales, or automate processes to cut costs.

What are the possible business responses to changes in legislation?

Update policies/procedures, invest in training, raise prices to cover compliance costs, or lobby government for change.

What are the possible business responses to changes in the economic climate?

In a recession: cut costs, reduce prices, streamline operations. In a boom: expand, invest in growth, hire more staff.

What does 'external influences' mean in business?

Factors outside the business's control that can affect its performance — including technology, legislation, economic conditions, and stakeholder actions.