External influences on business 17 Types of external
External influences on business . 17
Types of external influences · Business competitors · Economic conditions · Environmental constraints All these influences can affect the way a business operates. 1. 7 External influences on business
Business competitors Competitors may: · · Raise/lower their prices Introduce more advanced goods/better service Move into the area Offer additional facilities, eg open later. If they gain customers, this increases their market share. 1. 7 External influences on business
Competitive features · The price of the product/service · The quality of the goods/service or the reputation of the business · The availability of the goods/service · Technological developments · Additional benefits/services Those chosen depend upon the product and the target customer market. 1. 7 External influences on business
Customer profiles Identify the key customer by: · · · Age Gender Income Lifestyle Place where they live 1. 7 External influences on business
Location of competitors May be: · Local · National · International Depends upon product/service and market eg Microsoft/Dixons/local taxi firm. 1. 7 External influences on business
Economic conditions · Interest rates · Price changes · Exchange rates The Government aims to keep these stable to help business planning. 1. 7 External influences on business
Interest rates The interest rate is the cost of borrowing money. Low interest rates: · Encourage customers to buy expensive goods · Mean lower repayments (for businesses and individuals) 1. 7 External influences on business
Price changes Price rises = inflation (measured by RPI) · · · Raw materials more expensive So selling price increases (sales may fall) People can’t afford goods so want wage rise Business costs increase again Selling price increases again. . . 1. 7 External influences on business
Exchange rates The exchange rate is the cost of foreign currency. Strong pound Weak pound · · £ 1 = 2 euros · · £ 1 = 1 euro · Bad for business (exports expensive) · Good for business (exports cheaper) · Good for consumers (foreign goods cheap) · Bad for consumers (foreign goods dearer) Good for British travelling abroad Good foreign tourists 1. 7 External influences on business
The role of the Government · Sets economic targets which are good for Britain · Raises taxes to slow down spending · Lowers taxes to encourage spending The Bank of England’s monetary team: · Raises interest rates to slow down spending · Lowers interest rates to encourage spending 1. 7 External influences on business
Environmental constraints · Laws and regulations on the environment affect business activities · Many organisations have environmental policies · Key areas are reducing pollution and wastage 1. 7 External influences on business
Types of pollution · Air pollution – affects air quality · Noise pollution – unwanted noise which harms or irritates · Water pollution – through hazardous substances or pollutants 1. 7 External influences on business
Waste Reducing waste by: · Recycling and composting · Using less energy · Minimising wastage and deterioration Plus: · Disposing of waste and dealing with special/hazardous waste according to the law. 1. 7 External influences on business
Summary · · · External influences affect business activities Some are unpredictable External influences change regularly Businesses must take action to cope Best action will vary, depending upon the business 1. 7 External influences on business
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