1.5 Understanding External Influences on Business Flashcards
All 61 cards in this deck
What is a business stakeholder?
Any individual or group with an interest in, or affected by, the activities of a business.
Name four internal or external stakeholder groups of a small business.
Any four of: shareholders (owners), employees, customers, managers, suppliers, the local community, pressure groups, the government.
What is the main objective of shareholders (owners) as stakeholders?
A good return on their investment — profit, dividends and a rising value of the business.
What do employees want as stakeholders of a business?
Job security, fair pay, good working conditions and chances for promotion/training.
What do suppliers want as stakeholders of a business?
Regular orders and to be paid in full and on time.
Give one reason the government would want a small business to be successful.
It will collect more tax from the business's profits — or more people will be employed.
What is a pressure group?
An organised group of people who campaign to change the behaviour of businesses or government.
How can a pressure group impact a business?
It can damage the brand image so customers switch to ethical brands and sales fall; it can also push the government into new legislation that restricts the business.
Give one possible conflict between owners and employees.
Employees press for higher pay, which raises costs and lowers the owners' profit; they may also disagree over working practices.
True or false? Customers are stakeholders of a business but the local community is not.
False. The local community is also a stakeholder — it is affected by jobs, traffic, noise and pollution.
What is e-commerce?
The buying and selling of products and services using devices connected to an electronic network such as the internet.
Give one advantage to a small business of using e-commerce.
It can sell 24/7 to customers anywhere, so revenue may rise; it also avoids the fixed costs of a physical shop.
Give one drawback to a small business of using e-commerce.
Customers cannot see or try the product before buying; there are also website, payment handling, delivery and returns costs, and more global competition.
How can a business use social media?
To show images of new products, post links and offers, build a brand and interact with customers.
How can customer reviews on social media affect a business?
Good reviews are shared and attract new customers; a single incorrect bad review can damage the business's reputation.
What is digital communication in business?
Using electronic technology such as email, websites, online booking and virtual meetings to share information with stakeholders.
Give one benefit to a business of holding meetings online using digital communication.
It removes the geographical barrier of getting everyone in the same place, saving travel time and cost.
Give one drawback of holding meetings online using digital communication.
Any one of: technical problems such as a poor connection can disrupt the meeting; it is less personal, so it is harder to build relationships; a physical product cannot be inspected or tested.
What are payment systems as a type of business technology?
Technology that lets customers pay electronically, e.g. contactless cards, online payment services and mobile payment apps.
Give one benefit to a business of introducing a digital payment system.
It is more convenient for customers, allows buying 24/7 and in different currencies, so customer numbers may increase.
Give one drawback to a business of introducing a digital payment system.
Installation and ongoing maintenance against fraud increase costs, and customers may be wary of security issues.
How can technology reduce a business's costs?
No physical retail space is needed, so fixed costs such as rent fall, fewer sales staff are needed and admin can be automated.
True or false? E-commerce removes all of a small business's costs.
False. It creates new costs — website hosting, payment handling fees, warehousing and distribution.
What is the purpose of consumer law?
To protect consumers from poor-quality products and poor business practices.
What three quality rights must goods meet under consumer law?
They must be described accurately, be fit for purpose, and be of satisfactory quality.
What does 'fit for purpose' mean in consumer law?
Goods must do what they are designed to do.
What does 'satisfactory quality' mean in consumer law?
Goods should not be damaged or faulty when sold as new.
What standard must services meet under consumer law?
They must be supplied with reasonable care and skill, in a reasonable time and for a reasonable price if none was agreed.
What right does a consumer have if goods are faulty within 30 days of purchase?
They can reject the goods and get a full refund.
Which four areas does employment law cover?
Recruitment, pay, discrimination, and health and safety.
True or false? Product quality is covered by employment law.
False. Product quality and consumer rights are principles of consumer law, not employment law.
What does employment law on discrimination require of a business?
It must treat employees and applicants equally, not discriminating on grounds such as gender, race, age, religion or disability.
What does health and safety legislation require of a business?
To provide a safe working environment, including training, safety equipment and risk assessments.
Give one way new employment legislation can increase a small business's costs.
Higher wage bills from the National Minimum/Living Wage, plus the cost of training employees to comply (fees, travel, accommodation).
Give one advantage to a small business of meeting all its legal obligations.
It avoids prosecution, fines and a negative image; employees also feel cared for, so motivation and productivity rise.
What are the consequences for a business of not meeting its legal obligations?
Prosecution and fines, compensation claims, bad publicity and loss of customers.
Give one impact on a small business of a rise in unemployment.
Demand falls because customers have less money to spend; but recruitment becomes easier as more people are looking for work.
How does a rise in consumer incomes usually affect demand for luxury products?
Demand rises, because consumers have more disposable income to spend on luxuries.
What is inflation?
A general rise in the price level, meaning money buys less than before.
Give one way inflation affects a small business.
Suppliers raise the price of materials, so costs rise and the business makes less profit per unit or must raise its prices.
How can a rise in interest rates affect a business with a loan?
If the loan has a variable interest rate, the cost of borrowing rises, so repayments increase, leaving less profit and making expansion harder.
How does a rise in interest rates affect consumer demand?
Demand falls, because customers pay more on loans and mortgages so have less disposable income.
What is one impact of a decrease in interest rates?
Borrowing becomes cheaper, so customers are likely to borrow and spend more and demand may rise; a business with a loan also pays less interest.
How does an increase in government taxation on business profits affect a business?
It keeps less retained profit, so it has less to reinvest in the business.
What is an exchange rate?
The value of one currency in terms of another currency.
How does a rise in the value of the pound affect a UK business that imports goods?
Imports become cheaper, so the business pays less for goods bought abroad and its costs fall.
How does a rise in the value of the pound affect UK exporters?
UK goods become more expensive abroad, so demand and sales from overseas customers fall.
What are external influences on a business?
Factors outside the business's control that affect it, such as changes in technology, legislation and the economic climate.
Give one way a business could respond to a change in technology.
Train existing staff and recruit employees with up-to-date technical skills, or treat the change as an opportunity to offer new services.
Give one consequence of a business failing to respond to changes in technology.
Customers expect up-to-date services and will go to competitors instead, threatening the business's growth plans.
Give one way a business could respond to new legislation.
Train staff so the business complies, change working practices or raise prices to cover the extra costs.
Give one way a business could respond to a fall in consumer incomes.
Cut prices or offer cheaper, value products; it could also reduce costs, for example by cutting the workforce.
True or false? Every business has the same stakeholder groups, so managers can always be named as a stakeholder.
False. Stakeholders must be appropriate to that business — a very small business may have no managers.
Why does a fall in the value of the pound help a UK exporter?
Overseas buyers get more pounds for their own currency, so UK goods become cheaper for them and export sales are likely to rise.
What is unemployment?
When people who are willing and able to work cannot find a job.
What is the difference between a fixed and a variable interest rate on a loan?
A fixed rate stays the same for the whole loan; a variable rate can change during the loan, so repayments may rise or fall.
How does a rise in taxes such as income tax or VAT affect consumer demand?
Consumers are left with less disposable income, so demand for most products falls.
How can a rise in inflation affect consumer demand?
If incomes do not rise as fast as prices, each pound buys less, so consumers cut back and demand falls.
Give two things customers want as stakeholders of a business.
Any two of: value for money (a fair price), good-quality products, a choice of products, good customer service.
Give one thing managers want as stakeholders of a business.
Any one of: higher pay and bonuses; a business that succeeds and grows over the long term; more responsibility and status.
What does employment law require on pay?
Employers must pay at least the legal minimum (the National Minimum Wage, or the National Living Wage for older workers), and give equal pay to men and women doing work of equal value.