1.5 Understanding External Influences on Business (Edexcel GCSE Business): Flashcards
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Define stakeholder.
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Define stakeholder.
A stakeholder is an individual or group that affects or is affected by the actions of a business.
Name four stakeholders of a business.
Owners (shareholders), employees, customers, suppliers, managers, the local community, pressure groups and the government.
What is the main objective of shareholders?
To maximise the return on their investment through the company being profitable.
What do employees want from a business?
Fair pay, job security and a safe working environment.
A is an organisation that tries to influence a business to promote a specific cause.
A pressure group is an organisation that tries to influence a business to promote a specific cause.
What does a supplier want from a business it sells to?
To be paid on time and to have a long-term relationship with the business.
How can customers impact a business's activity?
Through their purchasing decisions and feedback, which influence product development and pricing.
True or False?
If a business becomes more profitable, employees may receive bonuses or promotions.
True.
A profitable business may reward employees with bonuses or promotions and pay shareholders higher dividends.
How can a pressure group impact a business?
By lobbying for policy changes or boycotting the business's products.
Why do conflicts arise between stakeholder groups?
Because stakeholders have different objectives — e.g. shareholders want profit while employees want fair pay.
Customers may want low prices, while the local community may prioritise environmental , which raises costs.
Customers may want low prices, while the local community may prioritise environmental sustainability, which raises costs.
True or False?
All stakeholders in a business share the same objectives.
False.
Stakeholders often have conflicting interests — e.g. shareholders prioritise profit while the community prioritises the environment.
How can a business manage conflicts between stakeholders?
Through careful communication, transparency and compromise.
Give a real example of a stakeholder conflict.
In 2020, British Airways clashed with employees and unions over plans to cut 12,000 jobs and reduce pay during the pandemic.
Define e-commerce.
E-commerce is the selling of goods and services online, letting businesses reach a global market.
Name three types of technology used by businesses.
E-commerce, social media, digital communications and payment systems.
Give an example of a contactless payment system and one benefit.
Systems like Apple Pay make paying more convenient for customers, giving a business a competitive advantage.
Installing a contactless payment system adds convenience but also incurs a for the business.
Installing a contactless payment system adds convenience but also incurs a cost for the business.
Which three areas of a business does technology most influence?
Technology influences sales, costs and the marketing mix.
How can e-commerce increase a business's sales?
By expanding the customer base and reaching a global market, as Amazon has enabled many businesses to do.
How can e-commerce reduce a business's costs?
By removing the need for physical storefronts — e.g. Zappos saved $10 million by closing its call centre.
True or False?
Social media is usually a more expensive way to advertise than traditional channels.
False.
Social media is a cost-effective alternative — e.g. Wendy's advertised more on Twitter while cutting national press spend.
How can social media increase a business's sales?
By building relationships with customers and generating leads — e.g. Glossier built a loyal base on Instagram.
Digital tools such as email and WhatsApp are a cost-effective alternative to traditional channels.
Digital tools such as email and WhatsApp are a cost-effective alternative to traditional communication channels.
True or False?
Technology has transformed the marketing mix for many businesses.
True.
Platforms like Instagram and Mailchimp give businesses new channels for content, communication and brand awareness.
Give one way social media has transformed the marketing mix.
It provides new channels for building brand awareness — e.g. Instagram and Snapchat allow visual content and live streaming.
Define legislation.
Legislation refers to the laws and regulations passed by governments that require businesses and individuals to behave in a particular way.
What are the three main areas of legislation affecting businesses?
Consumer protection, employee protection, and health and safety legislation.
What is the aim of consumer protection legislation?
To ensure consumers are treated fairly by the businesses they deal with.
Consumer protection law creates a playing field, so no business can gain an unfair advantage by taking shortcuts.
Consumer protection law creates a level playing field, so no business can gain an unfair advantage by taking shortcuts.
What does employee protection legislation aim to prevent?
The exploitation of workers.
Give two areas covered by employee protection legislation.
Pay and working conditions, equality to avoid discrimination, the right to join a trade union, and contracts and termination.
True or False?
Complying with legislation usually reduces a business's costs.
False.
Complying with new laws often increases costs — e.g. training, safety equipment and documentation.
What does health and safety legislation protect?
The physical and mental wellbeing of employees, contractors and customers.
Serious health and safety breaches can lead to fines, HSE investigation, or .
Serious health and safety breaches can lead to fines, HSE investigation, or prosecution.
Give two costs to a business of meeting health and safety law.
Staff training, changes to working hours, safety documentation, and buying and maintaining safety equipment.
True or False?
Following employee protection laws makes a business less likely to face legal action.
True.
Complying helps a business avoid legal action, avoid bad media attention, and attract employees.
What does consumer protection legislation cover?
The safety, standard and quality of products, customers' rights if unhappy, and the product information given to customers.
Define the economic climate.
The economic climate is the broad performance of the economy, measured by changes in GDP growth.
What happens to incomes and unemployment when GDP growth rises?
Incomes tend to rise and unemployment tends to fall, with more spending on goods and services.
Define inflation.
Inflation is the general rise in prices in an economy over time, measured using the consumer price index (CPI).
Give two ways inflation creates challenges for a business.
It raises costs (wages, raw materials, utilities) and leads to higher loan repayments as interest rates rise.
During high inflation, consumers focus more of their spending on rather than luxuries.
During high inflation, consumers focus more of their spending on necessities rather than luxuries.
How does a rise in consumer income affect a firm selling luxury goods?
Demand for normal and luxury goods rises, so sales revenue increases.
How does a rise in consumer income affect a firm selling inferior goods?
Demand for inferior goods falls, so sales revenue falls.
Define exchange rate.
An exchange rate is the value of one currency expressed in terms of another.
How does a stronger pound (appreciation) affect UK exporters?
Their sales are likely to fall, as products become more expensive for overseas buyers.
True or False?
A weaker pound makes imported raw materials cheaper for UK businesses.
False.
A weaker pound (depreciation) makes imports more expensive; a stronger pound makes them cheaper.
Define interest rate.
An interest rate is the percentage reward for saving money and the percentage charged for borrowing money.
What happens to a business when interest rates rise?
Loan repayments rise (increasing costs) and customers buy less on credit, leading to a fall in sales.
What is the difference between direct and indirect taxes?
Direct taxes are on income (e.g. income tax); indirect taxes are on spending (e.g. VAT).
A tax charged on spending, such as VAT, is an example of an tax.
A tax charged on spending, such as VAT, is an example of an indirect tax.
How might a business respond to higher taxes?
It may raise prices, employ fewer workers, or forego improvements or relocation to cope with higher costs.
How does a fall in unemployment affect a business's labour costs?
With fewer available workers, a business must pay higher wages to secure skilled and unskilled staff.
True or False?
The higher the unemployment rate, the cheaper a business can usually secure labour.
True.
Higher unemployment means a larger supply of workers, so labour can be secured more cheaply.
Name the three types of external influence a business must respond to.
Technology, legislation and the economic climate.
Give two ways a business can respond to changes in technology.
By investing in new technology, partnering with tech companies, and training employees to use it.
How can investing in new technology help a business?
It can improve products, reduce costs, increase efficiency or expand the business's reach.
Give two ways a business can respond to changes in legislation.
By complying with new regulations, lobbying policymakers, and seeking legal advice.
Cutting costs, diversifying and seeking finance are ways to respond to a change in the climate.
Cutting costs, diversifying and seeking finance are ways to respond to a change in the economic climate.
The key is to stay aware of external influences and be in responding to them.
The key is to stay aware of external influences and be proactive in responding to them.
True or False?
One way to respond to a difficult economic climate is to cut costs.
True.
A business may cut costs by reducing staff, renegotiating contracts or streamlining operations.
True or False?
Every business responds to external change in the same way.
False.
The response varies from business to business, depending on their circumstances and objectives.
What is the benefit to a business of responding well to external influences?
It helps ensure the business's survival.
How can a business raise money to survive an economic downturn?
By seeking finance from lenders or investors to weather the downturn or fund growth.
How can a business reduce its reliance on a single market during a downturn?
By diversifying its products, so it depends less on one market or customer base.
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