Internal and external influences on business, business Studies Unit 1 - Stakeholders, Business Studies : Nature of Business

Ease of entry (EI)

Ability of a person to establish a business within an industry. This depends on the market concentration.

Private company

Can have a maximum of 50 shareholders. Shares are not floated in the market, people have to be granted permission from the owners to purchase shares.

Regulatory bodies (EI)

Department of Environment, Climate Change and Water. Office of Fair Trading. Australian Securities and Investments Commission. Australian Competition and Consumer Commission.

Demographic influence (EI)

Features of a population such as age, sex, income, cultural background and family.

3 levels of Government in Australia

Federal, state and local impose regulations. Eg Taxes, employee entitlements, approve new developments.

Types of Market

Financial, labour and consumer

Internal influences

Things that can be controlled including the Product, location, management, resource management, business culture.

Product (IE)

Type and range of goods, Size of the business.

Characteristics of a recession period (EI)

Unemployment levels rise, Wages are less likely to rise, level of spending decreases, Inflation may remain stable or fall. Eg Global financial crisis

Partnership

Usually 2-20 partners own and operate a business. Some businesses, such as solicitors can have ho to 400 partners

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Technological Influences (EI)

increase in efficiency, productivity, innovation and new goods / services. EG Uber

Human resource (IE)

the employees of the business and who are generally its most important asset.

Public company

A company that has floated shares in the stock market. Shareholders have ownership of the company

Primary Industry

Extracts products from the earth and processes them into raw materials

External environment

Factors that a business has little control over

Internal environment

Factors that business has some control over

Geographical Spread

Local, National, Global: international and transnational

Effects on economic cycles

- Government Policies - Over seas trends

Name Characteristics of a Boom Period

- High levels of employment - Wage increase - Inflation may increase - Levels of spending by consumers increase

Four methods used to classify businesses

- Industry - Size - Geographical Spread - Legal Structure

Labour Market

- Labour Market has become less global in the last 60 years. Political barriers have restricted the flow of people between countries - Trend towards temporary skilled workers

External Influences on a business

- Market - Economy - Financial - Social - Political - Institutional - Technological - Geographical - Law - Competition

Financial market

- Mobile and flows easily - International Financial flows have increased rapidly the last three decades - GFC (Global Financial Market) saw the collapse of the US market and made changes to the domestic and international market

Industry

- Primary - Secondary - Tertiary - Quaternary - Quinary

Importance of Business to the economy

- Provides Challahges and rewards - Pays taxes - Provides employment - Assissts in the development of new tech - Provides income for business owners - Improves Quality of life - Produces product range - Creates value and encourages economic growth - provides training ground for future business people - Encourages competition, resukting in cheaper prices

Factors influencing choice of legal structure

- Size of Business - Ownership and Control - Finance needed

Legal structure

- Sole Trader - Partnership - Private company - Public company - Government Body Enterprise

Economic Influences

- The Australian economy experiences economic cycles (growth and recession) - After a period of growth business activity gradually slow until recession or depression is reached. Business will eventually pick up again

Consumer Market

- There has been growth in the value and amount of world trade since WW2 - global trade is set to rebound over the next few years

Recession Period

- Unemployment levels rise - Inflation may remain stable or rise - Wages are less likely to increase - Levels of spending decreases

Number of employees in a medium businesses

20-199 employees

Number of employees in a large business

200+ employees

Marketing strategies

A business can be influenced by the type of marketing measures taken by a competitor. Extent and type of marketing depends on: - Size of Market - Size of business - Number of Competition - Nature of product

Stakeholder (IE)

A stakeholder is any group or individual who has an interest in or is affected by the activities of a business.

Stakeholders

Any individual/group which is affected by a business & has an interest in its activities

Economic cycles (EI)

Are the periods of growth (boom) and recession (bust) that occur as a result of fluctuations in economic activity.

Size of business

As sales increase and business operations grow, the owner may need to change its business structure

ACCC (EI)

Australian Competition and Consumer Commission

ASIC (EI)

Australian Securities and Investments Commission

Government

Benefits from business with increased tax revenue increased employment and lower welfare payments. however this also means increased pollution, congestion and a loss of greenfield sites through development. The priority used to be growth but increased environmental awareness has forced governments into reducing development such as imposing landfill tax and climate change levy. These taxes increase costs, reduce competitiveness and likely increase unemployment. As a stakeholder businesses have to find a balance

Shareholders

Common objective of sustained long-term, giving both capital gain and increasing income. Although they can come into conflict as institutional shareholders are driven by the short term. This means high dividends and strategies to achieve growth quickly, which come into conflict with achieving long-term growth through reinvestment of profits and increasing brand value, which are what long term investors are looking for

Monopoly (EI)

Complete concentration by one firm in the industry. Eg Australia post Eg Oil Companies

Oligopoly (EI)

Consists of a small number of large firms. Eg Banks Oil companies Car manufacturers Phone manufacturers

Consumer luxury goods (EI)

Consumers are most likely to cut back on in a recession period

Quinary Industry

Domestic activities

External influences (EI)

Economic, financial, social, legal, political, institutional, technological, competitive situation and changes in the market.

Social Influences (EI)

Environmental movement, Family friendly workplaces, Time poor consumers.

Directors and managers

Focus their efforts on achieving long term objectives, and they use resources under their control to achieve maximum benefits and to gain the most from the assets they manage. The rewards they achieve usually reflect the fortunes of the business. However, self preservation is sometimes a motivator for middle managers and senior managers by attempting to maximise their salaries and benefits whilst cutting costs through redundancies

Financial resources (IE)

Funds the business uses to meet its obligations to various creditors.

What is GDP?

GDP stand for Gross Domestic products and it is the total value of goods and services provided in a country in one year

Political influences (EI)

Government policies have a considerable impact on the business environment.

Institutional influences (EI)

Government, regulatory bodies and other groups.

Characteristics of a boom period (EI)

Higher levels of employment, Wages increase, consumer spending increases, Inflation may increase. Eg Growth of China on Australian exports.

4 main Resource of a business (IE)

Human resources, Information resources, Physical resources, Financial resources.

Physical resources (IE)

Include equipment, machinery, buildings and raw materials.

Internal environment (IE)

Includes those factors over which the business has some degree of control.

External environment (EI)

Includes those factors over which the business has very little control.

Deregulation (EI)

Is the removal of government regulation from industry, with the aim of increasing efficiency and improving competition. Eg: Pharmaceutical Industry regulations

Monopolistic competition (EI)

Large number of buyers and sellers. Eg Clothing manufacturers Local retailing

Size

Large, medium, small, micro

Number of employees in a small business

Less than 20 employees

Number of employees in a micro business

Less than 5

Management influences (IE)

Levels of business structure

Secondary Industry

Manufactures finished goods made from raw materials

ACCC (EI)

Monitor misuse of market power, product safety and liability, misleading and deceptive advertising. EG Nurofen

Competition (EI)

Number of competitors, Local and foreign Marketing, Ease of entry. Eg Apparition media

Sole trader

One person owns and operates the business

Tertiary Industry

Provides a service to general population and to businesses

Ambient media (EI)

Refers to the new breed of outdoor advertising.

Business Culture (IE)

Refers to the values, ideas, expectations and beliefs shared by members of the organisation.

Information resources (IE)

Resources include the knowledge and data required by the business. Eg market research, sales reports, economic forecasts, technical material, legal advice.

Regulations (EI)

Rules, laws or orders that businesses must follow.

Customer

Satisfying customer needs through providing a quality product and efficient service at a competitive price, should not be at odds with good business practice, but they sometimes are. The short term nature of business means that the achievement of immediate profit comes before customer satisfaction. Customers like to feel needed and respected, its far too easy to alienate your customer base, which means maintaining customer relations is increasingly important

Quaternary Industry

Services that involve the transfer and processing of information and knowledge

Main Stakeholders of a business

Shareholders Directors & Mangers Employees/workers Customers Suppliers Government Local communities

SLEEPT analysis (EI)

Social, legal, economic, environmental, political, technological.

SWOT analysis

Strengths, Weakness, opportunities, threats.

Suppliers

The business and its suppliers are mutually dependant. Suppliers want a fair price while businesses want to minimise costs. However, the business usually hold the power in the market which is market imperfection. Supplies in developing countries are the worst off as they only see a tiny portion of the final sales value, although fair trade is trying to correct this

Ownership and Control

The legal structure of the business will depend on how much control the owner wants over the business

Employees/Workers

The major concern is job security and with many businesses incorporating technology, this conflicts with the views of the stakeholder. At one point this would have lead to industrial action, however, the workforce is aware of modern employment and the lack of trade union power so strikes are unlikely, and are thus more likely to accept job restructuring, and redundancy

Incorporated

The process companies go through to become separate legal entities from their owners

Business environment

The surrounding condition in which a business operates. It's divided into 2 categories; external and internal

Local communities

There are a number of benefits of business activity for local communities such as employment, increased regional wealth, improved facilities and infrastructure. However, conflict can arise with disputes over pollution, environmental damage, loss of open space and noise pollution

Finance needed

When a business expands it will need injections of money. Money can be obtained from debt, venture capital or floating shares in the market.

Unincorporated

Where the business and the owner are one entity

Business culture (IE)

can be revealed officially in the policies, goals, slogans or how people in the business behave. The culture of a business is often evident in its organisational structure. Eg Apparition media.

Location influence (IE)

customer convenience, visibility, proximity to other businesses.

Legal Influences (EI)

laws on taxation, industrial relations, occupational health and safety, equal employment opportunity, anti-discrimination and protection of the environment.

Geographical influences (EI)

location in Asia pacific region, Globalisation and demographics.

Globalisation (EI)

process where people, goods, money and ideas move around the world faster and more cheaply than before. (export and import sales)

Shareholders (IE)

the owners of a business.

Business Environment

the surrounding conditions in which the business operates. It can be divided into internal and external factors.