AQA GCSE 3.2 Influences on Business

<<Technology - Digital Communication<<

Digital communication means communicating using digital means, such as:

• Text
• E-mail
• Mobile phone
• Skype
• Chat bot (on a website)

STAKEHOLDER - A stakeholder is a person, business, or organisation that has an interest in how a business is run and managed. i.e: suppliers, local community, shareholders, employers, customers

CLOUD COMPUTING - Cloud computing is where data is stored anywhere in the world on any storage device

• GDPR - General Data Protection Regulation

^^INFLUENCE OF TECHNOLOGY:^^

Sales

• Use of technology can improve sales
• Customers may be unhappy with a slow service in a shop - shopping online is instant
• Customers get convince of shopping whenever they want

Costs

• Using e-commerce and payment systems means that just about anyone can start their own online business
• All they need is a simple website, a good product and a paypal account
• One person can run an entire business online
• No need for premises like a shop, which reduces costs →businesses have to pay business rates

Marketing

• Technology means that now marketing campaigns have more speed, relevance and reach
• If a business starts a marketing campaign on TV, it can back it up with social media and then use targeting to send out e-mails. It also means that businesses can respond to events (see Oreo Eclipse Campaign 2015)
• Target demographic - set times ad is shown, certain products shown with certain programs (i.e children’s toy adverts on children’s channels)
• ^^Marketing Mix^^ - Product ; Place ; Price ; Promotion

^^E-COMMERCE IMPACT^^

Increased use of ICT can provide a competitive advantage for the business, however it can also pose a threat to it’s success.

• May reduce costs and increase sales ; wider markets can be accessed ; some customers may not have or like technology ; potential to initially increase costs.

Digital Communication

Includes use of phones, tablets, web-conferencing, emails, social media, etc

• Improved communication with customers ; costs can reduce ; increased efficiency ; staff need training ; costs of buying new technology ; equipment becomes obsolete

}}Environment - Influence on Business}}

SUSTAINABILITY - Avoidance of the depletion of natural resources in order to maintain an ecological balance

CIRCULAR ECONOMY - A model of production and consumption which involves reusing, repairing, refurbishing, and recycling existing materials and products as long as possible.

%%BUSINESS IMPACT ON ENVIRONMENT%%

• Pesticides pollute water
• Animal testing
• Farming/ cows → release methane
• Power stations
• Transportation → release pollution
• Visual pollution
• Noise pollution
• Use of non-renewable energy
• Packaging →gets sent to landfill
• Deforestation
• Smog from factories

%%ENVIRONMENT IMPACT ON BUSINESS%%

• Availability of raw materials - coal tin, oil
• Farming - quality of soil
• Farming space available
• Sites or archaeological importance
• Cost of compliance
• Natural disasters / areas prone to natural disasters →affect supply chain ; increase costs for raw materials
• Climate / weather

%%ETHICS AND ENVIRONMENTS%%

Plant trees →CARBON OFFSET - %%NET ZERO CARBON BUSINESS%%

%%ADVANTAGES AND DISADVANTAGES OF ENVIRONMENTAL POLICY%%

Advantages

• Positive publicity
• Attract staff
• Win customers
• Charge higher publicity
• Possible government grants
• Higher staff retention
• Unique selling point
• Advertising

%%Disadvantages%%

• Negative publicity if you do not comply
• Loss of customers “ “
• More expensive to be environmentally friendly
• Loss of competitiveness if you do not comply
• Time consuming

]]The Economy - Interest Rates]]

The current Bank of England Base Rate is 2.25%. This is the rate that all other banks and moneylenders base their interest rates on.

@@WAYS PEOPLE AND BUSINESSES CAN BORROW MONEY@@

• Bank loans
• Loans form family or friends (can result in conflict)
• Bank overdrafts

INTEREST RATES - Interest rates are the PRICE OR COST OF BORROWING MONEY and the REWARD for SAVING. It is a % that is paid on top of what you borrowed. If you put money into a bank account, you receive interest as a ‘thank you’ for lending the bank your money.

@@Interest rates can be fixed or variable.@@

FIXED - interest rates stay the same over an agreed period of loan

VARIABLE - Interest rates that change over the lifetime of the loan, depending on what is happening to the other interest rates in the economy

@@EFFECTS OF INCREASING INTEREST RATES@@

Consumers

• Consumers costs increase (e.g: mortgage payment)

• Becomes more expensive for consumers to borrow money to make large purchases (e.g: car)

  →reduced amount of money spent, particularly on luxury items

Savers

• If they save their money, they get a better return on their savings

  → more likely to save their money than spend it

Homeowners

• Their mortgage payments may increase

  → less money to spend on goods and services

Businesses

• Loans to expand cost more

• Less people will be buying their goods/services

  → less likely to buy new equipment and expand - more likely to reduce competitiveness

  reduce production since sales revenue will decline

  cost increase (interest payments)

@@EFFECTS OF DECREASING INTEREST RATES@@

• Overall less incentive to save

• Cheap to borrow

• Existing loans are cheaper (if variable)

  → spend more

Businesses

• Loan payments may reduce (if variable)
• Cheaper to borrow - so they may expand and spend on new assets (building, equipment)
• Sales may increase if customers end up spending more

MORTGAGE - An agreement between you and your lender that gives the lender the right to take your property if you fail to pay back the money you have borrowed plus interest

@@WHY CHANGE INTEREST RATES?@@

Monetary policy committee use interest rates to try and control inflation. The target for the MPC is to get inflation at 2%. Currently (2022), inflation is at 11%.

RECESSION - A period of temporary economic decline, during which trade and industrial activity are reduced, generally identified by a fall in GDP

CONSUMER PRICE INDEX (CPI) - Monthly change in prices made by consumers

RETAIL PRICE INDEX (RPI) - Measure of inflation, which in turn is the rate at which prices for services and goods are rising

<<Economic Climate - Economic Growth and Incomes<<

ECONOMIC CLIMATE - The state of key factors within a country, such as the level of goods and services produced, and the number of jobs available

• Economic growth
• Employment
• Inflation
• Trade, etc

^^ECONOMIC GROWTH^^

• GDP (Gross Domestic Product) measure the size of an economy (the value of everything being produced/sold/earned within it)
• Real GDP means it has been adjusted for inflation (changes in price overtime)
• Economic Growth - where Real GDP is increasing
• Recession - where Real GDP has fallen (for 2 consecutive quarters)

^^ECONOMIC CLIMATE^^

Strong Economy:

Real GDP is increasing - economic growth;

Weak Economy:

Real GDP is falling;

^^EMPLOYMENT^^

Being unemployed means being willing and able to work, but cannot find employment despite an active search.

^^The current rate of UK unemployment (2022) is 3.8%^^

^^IMPACTS^^

During low employment:

To Business -

• Increased employment costs (paying higher wages for scarce skill labour)
• Lower sales
• Better performance
• Expand business

To Individuals -

• Business may need to hire more local workers
• Job security
• Negotiation for higher wages
• More job opportunities

During high employment:

To Businesses -

• Focus on survival rather than maximising profits
• Loosing valuable, skilled workers due to labour cuts

To Individuals -

• Increased spending
• Less bargaining power on wages
• High competitions on job positions

[[GLOBALISATION - Influence on Business[[

==WHAT HAS ALLOWED GLOBALISATION TO HAPPEN?==

• Improved communication
  • Internet
  • Email
  • Social media
• Logistics - better transport
• Travel - holidays
• Improved technology - Global video communication
• More developed economies - BRICS (Brazil; Russia; India; China; South America)
• Media - TV, Travel shows, Documentaries, Travel magazines
• Migration

GLOBALISATION - ==The geographic dispersion of industrial and service activities==, for example, research and development, sourcing of inputs, production and distribution, and the cross-border networking of companies, for example, through joint ventures and the sharing of assets.

• Globalisation is a process in which economies have become increasingly more integrated and interdependent
• Globalisation is dynamic
• It is not inevitable - it can reverse, indeed the growth of the world trade in goods and services slowed in recent years following the global financial crisis

MNC - Multi-national company - Has business operations in at least one other country other then it’s home country

PROTECTIONISM - Restricting products from other countries through methods such as tariffs on imported goods and import quotas.

==KEY FEATURES OF GLOBALISATION==

• Trade to GDP ratios are increasing for most countries
• Expansion of financial capital flows between countries
• Foreign direct investment and cross border mergers and acquisitions
• Rising number of global brands
• Deeper specialization of labour
• Global supply chains and new trade and investment routes
• Increased international labour and migration

==EFFECTS OF GLOBALISATION==

• Transport - Containerization: The costs of ocean have come down due to containerization, bulk shipping and other efficiencies
• Technological change: Rapid and sustained technological change has reduced the cost of transmitting and communicating information
• Economies of Scale: More competition and opportunities encourage firms to grow and take advantage of cost savings
• Difference in tax systems: Lower labour costs, lower regulations and taxation encourage Foreign Direct Investment (FDI)
• Less protectionism: Tariffs, quotas and import controls are reducing with more free trade with groups like the EU and World Trade Organisation (WTO)
• Growth of MNC’s: In their pursuit of revenue and profit, increasing global businesses and brands have invested significantly in expanding internationally.

}}%%EXCHANGE RATES - Influence on Business%%}}

EXCHANGE RATE - Price of one currency expressed in terms of another currency

Exchange rates are needed because no country can produce all the goods and services it needs. Some things need to be imported and exported by countries that have different currencies, so there needs to be a way to exchange currencies. This is done through %%THE FOREIGN EXCHANGE MARKET.%%

%%Decide what you want to buy → Decide on currency → Convert £ into chosen currency → Make purchase%%

%%WHAT DETERMINES THE VALUE OF A CURRENCY?%%

• How well the economy is doing (Boom v Recession)
• Value of currency can be determined by speculation (George Soros)
• Theory suggests currency value is determined by international trade (exporting more v importing more)

TARIFF - Tax on imported goods (i.e Chinese steel imports to America)

QUOTAS - Restriction of the volume of imports

Strong pound → Cheaper imports; more expensive exports

Weak pound → More expensive imports; cheaper exports

The UK imports more than it exports. In 1930, the UK imported over 70% of its goods and services. Currently, it’s biggest import is financial services.

%%STRONG £%%

• i.e £1 = $1.50
• Good for British who are travelling abroad
• Bad for businesses who export goods or services - their products become more expensive for oversea buyers
• Good for consumers importing goods or services - products overseas are cheaper

%%WEAK £%%

• i.e £1.50 = $1
• Good for foreign tourists travelling to the UK
• Good for businesses who export - prices of their goods or services become cheaper
• Bad for consumers who import - overseas goods and services are more expensive

%%Businesses want to see a stable £. Oversea buyers want to see a weak £.%%

%%WHAT FACTORS EFFECT THE VALUE OF CURRENCY?%%

• Demand and supply for the currency
• Interest rates - rising interest rates are more attractive as more money comes into the UK. Falling interest rates decrease the value of the £.
• Government intervention
• Speculation - investors buying and selling currency

%%WHAT FACTORS EFFECT THE EXCHANGE RATES?%%

• Interest rates - rising rates attract foreign investment. Falling rates decreases value
• Since money is a commodity, a currency’s value depends on:
  • The number of people who want to buy it (demand)
  • The number of people who want to sell it (supply)

{{LEGISLATION - Influence on Business{{

THE NATIONAL MINIMUM/LIVING WAGE

As of April 2022, the national living wage is:

• £9.50 - 23 years and older
• £9.18 - 21 to 22 years
• £4.18 - under 18 or apprentice

There are higher rates for people who work in London as London is more expensive

→ There are legal ground for prosecution if you are payed below the minimum wage for your bracket

THE EQUALITY ACT (2010)

• Aims to prevent discrimination in the workplace
• Illegal to discriminate against workers based on a protected set of characteristics:
  • Age
  • Disability
  • Gender Reassignment
  • Marriage and Civil partnership
  • Pregnancy and maternity
  • Race (refers to colour, nationality, ethnic or national origin)
  • Religion or belief (religious, philosophical, and lack of beliefs)
  • Sex
  • Sexual orientation
• The law covers four different types of discrimination:
  • Direct
  • Indirect
  • Harassment
  • Victimization

OTHER EMPLOYMENT LAWS

• Pregnant employees are entitled to 52 weeks paid maternity leave (or 1-2 weeks paid paternity leave)
• Permanent employees entitled to 5.6 weeks paid leave/holiday
• Employees provided with suitable training, and a safe working environment
• Employees allowed time off for certain reasons (including paid/statutory leave)
• Entitled to annual leave

WORKING TIME DIRECTIVE FROM EU - Specifies number of hours an employer can force you to work. The average is 48 hours per week

HEALTH AND SAFETY LAW ACT 1974

• Employer should provide a safe working environment
• Provide any safety equipment and uniform need
• Employees should act sensibly and appropriately
• Employees should complete training provided
• Employers should provide:
  • Drinking water
  • Toilets and washing facilities
  • First aid and equipment
• Employees expected to:
  • Use safety equipment and wear safe clothing
  • Report risks to employer
  • Take responsibility for own safety

Any health and safety information needs to be displayed and easily accessible

CONSUMER RIGHTS ACT 2015

Came into force on 1st October 2015. The law covers:

• What should happen when goods are faulty
• What should happen when digital content is faulty
• How services should match up to what has been agreed, and what should happen when they do not
• Unfair terms in a contract

]]MARKETING - Identifying and understanding customers]]

NEEDS - Something that needs to be fulfilled for us to survive (i.e food, water)

WANT - What we would like to satisfy our needs (i.e phone, clothes)

CUSTOMER - Someone who buys a product from a business (i.e parents buying items for children)

CONSUMER - Someone who uses goods and services provided by a business (i.e children)

MARKET - Where buyers and sellers exchange items or money

EXCHANGE - An exchange occurs when someone gives up something for something else

@@WHY MUST BUSINESSES IDENTIFY AND UNDERSTAND THEIR CUSTOMERS AND THEIR NEEDS?@@

• Makes customers more inclined to return
• Increased customer satisfaction
• Avoid costly mistakes
• Be competitive
• Increase sales
• Select correct marketing mix

<<MARKETING - Competitive environment, risk and uncertainty<<

^^MARKET STRUCTURES^^

• Competitive
  • Large number of sellers and buyers - low barriers to entry
  • Lower prices
  • Choice of many products
• Monopoly
  • One dominant firm
  • Less choice - often higher prices

The legal definition is to have a market share of 25% or more. Monopoly’s are regulated by the government - CMA (Competition and market authority)

^^ADVANTAGES AND DISADVANTAGES (for consumers)^^

COMPETITIVE

Advantage:

• Lower prices
• Wide variety of choice
• Easier to access market
• Firms are efficient

Disadvantage:

• Hard to spot the best deal
• Lacking innovation
• Can’t afford to invest

MONOPOLY

Advantage:

• Simplicity - not too much choice
• Economies of Scale
• Innovation

Disadvantage:

• Little choice
• Money spent advertising
• Cost and prices may be high

^^HOW DO FIRMS COMPETE?^^

• Research and development - developing new products
• Price
• Quality and service
• Advertising and branding

^^RISK VS UNCERTAINTY^^

UNCERTAINTY - Occurs when there is a lack of information about a situation. The outcome or consequences are very difficult to predict

RISK - Possibility of something going wrong.

^^HOW CAN BUSINESSES MINIMISE RISK?^^

• Business planning
• Training
• Market research
• Using experts and consultants
• Diversify

[[SEGMENTATION - Marketing[[

==ANALYSING THE MARKET==

MARKET SIZE - Measured as sales volume (units sold) or sales value (revenue, £)

MARKET GROWTH (%) - The change in market size compared to previous years

MARKET SHARE (%) - The proportion of sales from one one company compared to total market

MARKET SEGMENTATION is the process by which a business divided its market into smaller groups (which have similar characteristics). A MARKET SEGMENT is one of these groups (i.e women aged 18-25).

==SEGMENTATION ON:==

• Locations
• Income
• Lifestyle
• Household size

==BUSINESSES CAN SPLIT THEIR MARKETS BASED ON:==

• Age - children, teenagers, etc..
• Gender - male or female
• Location - by country or region
• Income - low, high, medium