1.5 Understanding External influences on a business flashcards

examples of stakeholders in a business

• Shareholders/owners

• Managers and employees

• Customers

• Suppliers

• Banks/investors

• Government

• Local community

• Competitors

• Pressure groups

Objectives of business stakeholders

Shareholders/owners:

• Good return on their investment

• High level of profits and dividends

• Success and growth of the business

• Proper running of the business (if shareholders are not directly involved

in the day-to-day running of the company)

Managers and employees:

• Rewards, including maximising basic pay and other financial incentives

• Job security and good working conditions

• Promotion opportunities

• Job satisfaction and status through high levels of motivation, interesting

roles and responsibilities

• Success of the business

Customers:

• Value for money

• Product quality that meets their specific needs

• Appropriate levels of customer service

Suppliers:

• Fair or high prices and prompt payments

• Continued profitable trade with the business

• Financial stability – can customers pay their bills?

Banks and other finance providers:

• Profitability and cash-flow for the bank

• Low risk that the business will not be able to repay finance provided

• Growth in profits and value of the business

Government:

• Prompt and correct collection and payment of taxes, for example VAT,

income tax

• Creating jobs, for example through businesses succeeding and growing

• Compliance with business legislation, for example health and safety,

minimum wage/national living wage compliance, consumer protection,

fair trading, environmental protection

Local community:

• Success of the business – particularly creating and retaining jobs

• Compliance with local laws and regulations, for example noise, pollution

Competitors:

• Profitability and success for their own business

Pressure Groups:

• These could include trade unions and environmental groups

• Best deal for their members, for example trade unions will push for

higher wages, environmental groups will want safeguards to prevent

business activity damaging the environment

How can stakeholders impact businesses?

Negotiation - suppliers may try to negotiate better terms and conditions.

Voting - shareholders may be invited to vote on business decisions.

Refuse to cooperate - employees may refuse to work if they are not happy with suggested changes.

How might stakeholders disagree with each other?

shareholders vs. stakeholders

shareholders are also stakeholders - shareholders own a share of the business therefore they care about the business and are a stakeholder

How might stakeholders disagree with each other?

Stakeholders disagree due to conflicting goals (e.g., profit vs. wages), differing priorities (e.g., speed vs. quality), misunderstandings from poor communication, unequal power, and clashes over resources or ethical concerns like environmental impact, leading to tensions over decisions on finances, operations, and strategy. 

What technology can be used by businesses?

E-commerce, social media, digital communication, payment methods, checkout technology, customer assistance.

How can technology affect businesses sales and costs?

• online - more convenient to order from home - more sales

• costs will initially be higher, but then decrease as replaced employees’ wages are gone - cutting costs through automation

• improving customer engagement (social media)

How can technology affect the marketing mix?

• price - price of product can be lower as production and store costs are lower

• promotion: social media for targeted advertising that shows ads to the target market

• place: more sold online: less needs for physical stores - less rent costs

• product: new technology e.g. phones

What protections should there be for customers?

The consumer rights act ensures:

• Goods must fit their description

• Goods and services must be of satisfactory quality

• Goods must be fit for the purpose specified

The trade descriptions act ensures:

• It is an offence to make a false description about any goods or services supplied

How do businesses benefit from following consumer law?

• they won’t get into legal trouble, so customers will trust them more, so more sales

What legal protections should there be for employees? 💬

All employees must be paid at least minimum wage.

Employees over 25 must be paid at least the national living wage.

The equality act protects you from discrimination in the workplace.

The health and safety at work act ensures a safe workplace for employees.

What are the effects of following employee law?

they won’t get into legal trouble and employees are likely to stay/feel valued, higher employee motivation

What is employment rate?

The percentage of working age people in paid work.

What does a high employment rate mean for the UK?

lots of people in jobs means:

• more income tax

• more disposable income

• people are more skilled

• grows the economy

How does consumer income affect businesses?

If people earn more, they spend more

If people earn less, they spend less

What is interest?

• extra money gained on savings

• extra money you pay back on a loan

What is inflation?

1. Prices Rising

2. Interest Rises: encourages savings, encourages not taking out loans

3. Prices slow in growth

4. Interest decreases: people will spend more…

…so prices will rise again