1.5 Understanding external influences on business

Who are the internal stakeholders

• shareholders (owners)

• employees

• managers

Who are the external stakeholders

• customers

• suppliers

• local community

• pressure groups

• the government

How are shareholders affected by business activity

may decide to grow the business and authorise opening new stores. However, it may affect profits in the short term and could affect the amount of dividends they will receive.

How are managers affected by business activity

take on additional responsibilities and set new targets. they could become demotivated if they are not given such opportunities.

How are employees affected by business activity

increased job security. employees could feel resentful if they are not offered promotion opportunities.

How are customers affected by business activity

having more choice about where to shop, but they may remain loyal to existing businesses

How are suppliers affected by business activity

increased orders to equip and stock the new store. If they are unable to cope with the extra demand, there is a risk that the business will use other suppliers

How are local community affected by business activity

new store is likely to bring new jobs. However, they may be unhappy with increased traffic or noise

How are pressure groups affected by business activity

may protest against the new store if they feel their cause is adversely affected deterring future businesses

How is the government affected by business activity

be pleased to see new jobs being created and may expect to see increases in tax revenues

What are shareholder’s impact on business activity

influence the objectives of the business and provide funding to enable it to start up

What are manager’s impact on business activity

make some recommendations and decisions

What are employee’s impact on business activity

limited amount of influence on business decisions but they can affect the business directly, by refusing to work or not working as well as they should

What are customer’s impact on business activity

buy products and services, give feedback to businesses on how to improve them and recommend if it’s good or warn if its bad

What are supplier’s impact on business activity

changes in the quality of the goods they supply or the reliability of their deliveries

What are local community’s impact on business activity

affects on a large number of local residents negatively, may stir protests or objections through the local council

What are pressure group’s impact on business activity

improve working conditions for employees and influence customers’ opinions of a business

What is the government’s impact on business activity

pass new laws, change tax levels or amend levels of government spending in ways that affect the business like funding

What are potential conflicts among stakeholders

• managers might have to work longer hours

• employees may need to work different shifts, including working later

• some customers may want even longer opening hours, e.g. 24 hours a day

• suppliers could impact their customers by changing delivery routes and times

• the local community could be disturbed by increased traffic and noise

• pressure groups may be unhappy if longer opening hours are against their cause, e.g. groups promoting families spending more time together or improved work- life balance

• the government may require additional resources to monitor the impact on the local area, e.g. additional policing to deal with any shoplifting that takes place later in the evening

What are the advantages of e commerce

• Can sell products and services 24 hours a day, 7 days a week

• Costs can be reduced, as no need for retail premises

• Receive payments immediately

• Market can be expanded on a national and international basis

• Allows customers to shop from the comfort of their own home at a time when it is convenient

• Availability can be checked, which means no wasted journeys to shops

• Choice is increased, as products can be selected from anywhe

What are the disadvantages of e commerce

• More competitors from across the globe, making it harder for the business to get noticed

• No personal contact with customers, so more difficult to influence sales on an individual basis

• ICT systems have to be established, maintained and updated which can add to costs and lead to customer frustration if unreliable

• Distribution costs can increase rapidly through increased geographical spread of sales

• Customers cannot see or try goods before purchasing them; returning goods can be inconvenient or expensive

• Possibility of personal details being used for fraud or for unwanted advertising

• Delays in delivery compared to high street shopping, where goods are available immediately

• Loss of traditional retailers from high street shopping areas and retail parks, due to an increase in competition

Why is social media good for sales and marketing

• relatively cheap way to advertise

• used by both large and small businesses to attract a target audience

• encourage people to follow their activities and promotions gaining customer loyalty

Why is social media good for interacting with customers

• see what customers are saying about their products and services

• customers can ask questions, or express their views

• customer interactions need to be handled carefully, as inaccurate or inappropriate responses can be shared quickly and easily, creating bad publicity

Why is social media good for communicating with stakeholders

• LinkedIn, can be used to make contact with other businesses

• part of their recruitment process, not just for advertising vacancies but also to gain an insight into any applicants by looking at their social media activity

How do customers, suppliers, employees and shareholders use digital communication

• Customers – ordering, invoicing or sending bills, customer service, advertising

• Suppliers – ordering, payments, product information

• Employees – payslips, job information, booking holidays, checking hours to be worked

• Shareholders – annual reports, dividend information and payments

How do businesses digital tools that are commonly used in business to communicate, both internally and externally

• Email

• Mobile phones

• Mobile apps

• Websites

• Social media

• Web conferencing

• Cloud services

• Instant messaging

What are examples of new payments that are designed to make it easier to complete secure payments without using cash

Contactless payments e.g Apple Pay or Google Pay.

What are the advantages to a business of having technology based payment systems

• Lower costs, quicker receipt of money

• happy customers who find it convenient

• no need for cash to be kept or used

What are the disadvantages to a business of having technology based payment systems

• Cost of buying and using payment systems

• customers resistance to use of payment systems

• not all customers may have access to required technology

• risk of fraud

What are the positive impacts of e-commerce on sales activity

• attract customers across the world

• sell 24/7

• help 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

What are the negative impacts of e-commerce on sales activity

• 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

What is the impact of social media on sales activity

help to build customer relationships but poor responses to social media posts can quickly be shared with other customers, which can be very damaging to business reputations

What is the impact of payment methods on sales activity

easy and convenient for customers to pay for products and services means that they are more likely to make a purchase

What is the impact of digital communication systems on costs

• enabling more employees to work remotely

• help to reduce costs for businesses, as they can operate from smaller offices

• email or instant messaging, removing the costs involved in printing and postage.

• greater savings with travelling to face-to-face meetings.

What are the positive impacts of e-commerce on cost

• 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

What are the negative impacts of e-commerce on cost

• costs involved in hosting a website

• fees that must be paid for handling online payments

• warehousing and distribution costs for products

What is the impact of social media on costs

provides a quick, cost-effective way for small businesses to communicate and interact with customer with minimal costs

What is the impact of payment methods on costs

more secure and cost-effective way without needing to hold large amounts of cash on their premises. However, businesses that handle card payments charge a small percentage fee for every transaction

What are the impacts of digital communication systems on the price

Money saved can help a business to keep its prices low

What are the impacts of digital communication systems on the product

adapted and accessed easily in a format that is convenient to the customer

What are the impacts of digital communication systems on the place

Customers can access services through mobile banking apps

What are the impacts of digital communication systems on the promotion

• email newsletters

• track customer behaviours on social media their website

• advertise online.

What are the impacts of e commerce on price

Customers can compare prices across online sellers easily

What are the impacts of e commerce on product

Customers can download digital products

What are the impacts of e commerce on place

Selling online provides another way for customers to make a purchase at any time

What are the impacts of e commerce on promotion

offers or ‘flash sales’ are easy to implement through a website

What are the impacts of social media on price

enable a business to lower its prices

What are the impacts of social media on product

Product information can be shared using video demonstrations

What are the impacts of social media on place

interact with customers around the world

What are the impacts of social media on promotion

cost-effective way of targeting promotions at specific groups

What is the impact of payment methods on price

fees incurred through the use of specific payment methods need to be accounted for when setting the price

What is the impact of payment methods on product

allow digital products to be purchased easily

What is the impact of payment methods on place

facilitated the ability to sell products online

What is the impact of payment methods on promotion

promote the fact that they offer a variety of ways for a customer to pay

What are the principles of the customer rights act 2015

• Products sold to consumers should be of a good standard and quality.

• Consumers have the right to return or reject goods.

• Goods should be delivered and installed safely.

• Businesses should disclose full information about products and services.

• Services should be provided with reasonable care.

• Terms of contracts should be fair.

What are the principles of employment law

• Recruitment procedures should be fair and prevent discrimination.

• All employees’ pay should be fair and meet minimum wage requirements.

• Groups of people, such as employees with disabilities should not be discriminated against.

• Health and safety requirements in the workplace should be met.

• Disciplinary issues and grievances should be dealt with fairly.

• Redundancy procedures should be fair.

What is the benefit of consumer law

• Businesses are less likely to be fined or sued

• may be considered professional and caring increasing customer loyalty

• improved relationships with stakeholders

• good publicity

What is the drawback of consumer law

• must keep up to date with the law

• restriction from free operations

• can be expensive to change business to comply with laws

• bad publicity if they don’t comply

• use law to take legal actions against businesses

What are the benefits of employment law

• considered good employers

• fewer employees tempted to leave

• employees may be happier and more motivated leading to better productivity

How do businesses meet the requirements of consumer and employment law

• business incur additional costs

• health and safety equipment for safety

• to acquire certain electrical licenses

• pay must meet living wage

• use correct recording systems during incidents

• training employees in customer service guidelines

What is the impact of unemployment on the economic climate

• fall in demand

• lead to a reduction in sales

• customers will have less money to spend if they lose their job

• may find it easier to recruit new employees

What is the impact of changes in consumer income on the economic climate

• As consumers’ incomes increase—-demand for many goods and services will increase as consumers look to spend their extra money

• If consumers’ incomes fall———They will buy fewer goods and services, as they will make do with what they already have

What is the impact of Inflation on the economic climate

• cause a business’s costs to rise unexpectedly impacting profits

• they buy fewer goods and services

• reduces the purchasing power of money

What is the impact of Government taxation on the economic climate

• LOW—-workers have to pay more tax on their income

• HIGH—workers have to pay less tax on their income

What is the impact of Changes in exchange rates on the economic climate

Strong Pound Imports Cheaper Exports Dearer

Weak Pound Imports Dearer Exports Cheaper

What is the impact of rising interest rates on the economic climate

• increase the cost of borrowing.

• Businesses on a variable rate may struggle to repay loans.

• Small businesses are less likely to borrow money to start up or to expand.

• Customers are less likely to spend money as borrowed money costs more, so consumer spending falls.

• Savers will receive more interest on their savings. This will encourage them to spend less so that they can save more.

What is the impact of falling interest rates on the economic climate

• lower the cost of borrowing.

• Businesses will have more money to spend and cash flow may improve.

• Businesses may borrow money for a start-up or expansion.

• Customers are more likely to borrow and to spend their money. Consumer spending rises.

• Savers will receive less interest on their savings. This will discourage them from saving, so they may spend their money instead.

What are Businesses’ positive responses to changing technology

opportunities for new products or new uses for existing products. A business that can respond quickly can be first to market with a new product.

What are Businesses’ negative responses to changing technology

New technology means that old products are likely to become obsolete. Businesses that make these products could find themselves struggling unless they are able to respond to changes by developing new products

What are Businesses’ responses to changes in legislation

• additional staff training

• reducing the number of staff they employ

• increasing the prices of their products

• making cost reductions elsewhere in the business

• increase businesses’ costs.

• reinvest extra money back into the business

What are Businesses’ responses to changes in the economic climate such as employment

• HIGH—-lower prices in order to encourage people to buy

• LOW—-increase prices as demand increases

What are Businesses’ responses to changes in the economic climate such as interest rates

• INCREASE—reduce products’ sizes but leave the price unchanged, increasing the profit margin

• DECREASE—-launch bigger versions of products to charge higher prices

What are Businesses’ responses to changes in the economic climate such as exchange rates

• INCREASED—-target new domestic markets for their products to attract new customers

• DECREASED—-target new international markets for their products as exports are cheaper