Influences In The Business Environment
They are continually undergoing change, and a business must keep ‘in tune’ with the changes and adapt its operations accordingly. External Influences The main external influences on a business are Define economic cycle. (p 52) Are the periods of growth and recession that occur as a result of fluctuations in the general level of economic activity. No economic system works perfectly all the time under all conditions. The level of economic activity does not remain at a constant level; it fluctuates (moves up and down) over time. In other words, total production, incomes, spending and employment rise and fall.
Complete the diagram below, which is based on Figure 3. 4 The economic or business cycle Recovery- key features Increasing consumer spending Business expectations increasingly optimistic Increasing business investment Sales and profits rising Unemployment falling Recession- key features Decreasing consumer spending Business expectations increasingly pessimistic Decreasing business investment Sales and profits falling Unemployment rising Inflation may remain stable or fall Complete the table below outlining what the characteristics of both ‘boom’ and Characteristics of a ‘Boom’ cycle
Evidence of a contracting economy is seen with rising unemployment, decreased economic growth and stabilizing or falling inflation. Consumers become more cautious. Spending and consumer confidence
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Business can increase production and will require workers. The state of the economy has a great impact on business. The policies implemented by the government are aimed at keeping the economy growing, without putting pressure on inflation (prices) and wages. The economy is also affected by overseas trends ? changes in trade, investment and currency levels all affect Australia’s level of economic activity. Not all businesses experience a downturn in revenue and sales during a recession; nor do they necessarily experience an upswing in trade during a ‘boom’ period.
The businesses most susceptible to the ‘swings’ are those selling consumer or luxury odds , as consumers will cut back on these when they reduce overall spending. Some businesses fare very well during a recession, for example ‘bargain shops’ or other clearance outlets. The government uses its economic policies to stabilize the economy and reduce the fluctuations in the business cycle. It can do this by using monetary and fiscal policies. Financial Influences There have been enormous changes in global financial markets over the past thirty years.
Define deregulation (p 54): Is the removal of government regulation from industry, with the aim of increasing efficiency and improving competition. Deregulation of Australia’s financial system began in 1983 and it continues to undergo change. Summaries the impact that this has had. (p 54) The process has resulted in the opening up of the financial industry to greater competition. A main source of finance for business is debt finance. Debt finance is significantly influenced by the level of interest rates. As interest rates increase, businesses will become more cautious in relation to taking on extra debt.
On the other hand, as interest rates drop, then businesses will take on more debt. Geographical Influences p 55) Australia’s geographic location within the Asia-Pacific region Economic growth in a number of Asian nations, especially China. They provide challenging opportunities for business expansion, sales and profit. Further changes that are likely to have a profound effect on business activity in Australia originate from changing demographic factors. Demography is the study of particular features of the population. Changes in any of these can lead to changes in demand levels and the nature of products and services.
A major demographic issue that has a considerable impact on businesses is changes n the age structure of our population. Commonly referred to as the ‘graying of the Australian population, baby-boomers ? people born between 1946 and 1964 ? are now reaching retirement age. What impact will this have? (p 55) This will cause some skill shortages in the workforce as well as an increase in demand for age related services such as health and aged care Any change in population growth will also have major implications for Australian businesses, as research shows there is a clear link between population levels and economic growth.
Globalization We live in a global world, rather than a world limited by national borders. The Earth is a global community whose individual members are linked through the mechanism of international trade: the buying and selling of goods and services between nations. Define globalization. (p 57) A process that sees people, goods, money and ideas moving around the world faster and more cheaply than before. Globalization, assisted by the technological revolution in communications and computers, is radically altering the shape of worlds markets, as well as the nature of business and everyday life.
Social Influences Rapid identification and response to changes in tastes, fashions and culture can lead to sales and profit opportunities, and business growth. Failure to respond to social changes can threaten business stability and viability. Outline the three social issues that are leading to significant change or have the potential to influence major change in business practices. (p 57-58) Growing awareness of our vulnerable environment Growing desire for businesses to provide family friendly workplace Growing belief that businesses must cater for workplace diversity Legal Influences
Business owners face an increasing number of legal obligations in every aspect of compliance is often time consuming and costly and regulations can be confusing and contradictory. Society expects business owners to abide by the laws of a country. Consequently, it is essential that they have a sound working knowledge of the laws that will affect their operations, and that they understand and accept the legal responsibilities they owe to all stakeholders. All levels of government impose legal responsibilities on businesses, and these laws govern every aspect of a business’s fife.
Identify some of the new statutes that have been introduced in the past two decades that have had a major impact on business conduct. (p 59) Laws on taxation, industrial relations, work health and safety, equal employment opportunity, anti-discrimination and protection of the environment. An area of law that has significantly altered business conduct is the Competition and Consumer Act 2010, which applies to virtually all businesses in Australia. It is administered by the Australian Competition and Consumer Commission (AC).
The AC operates nationally for the enforcement and administration of competition and consumer protection laws. A breach of any of the consumer protection provisions of the Competition and Consumer Act can result in the AC taking criminal proceedings against the business concerned. What are the penalties for companies and individuals who breach the Act? Penalties for up to $1. 1 million for companies, and $220 000 for individuals. Political Influences Government policies have a considerable impact on the business environment.
Major political change can lead to business uncertainty or business confidence. As overspent at all levels in Australia regularly face elections, there is an element of politics in most major issues that affect the business environment. Complete the diagram below. A significant political thrust that has led to widespread changes is the process of from industry, with the aim of increasing efficiency and improving competition. Prevarication is the process of transferring the ownership of a government business to the private sector.
Examples of prevarication involve the sale of partial sale of the Commonwealth Bank, Tellers and Santa. Institutional Influences There are three main institutional influences on business Government Australia has three levels of government: federal, state and local. Each level of government imposes a range of regulations on businesses to standardizes and protect their dealings with consumers and competitors. Complete the table below identifying some of the business laws that relate to each level of government.
Level of Government Business Laws Relating to Each Level of Government Federal Government Federal government obligations include: Payment of taxes for employees and for businesses with company tax and SST Provision of employee superannuation Observance of customs regulations State Government State government obligations include: Provision of employee entitlements, including workers compensation, work health and safety (WHYS) requirements, award rates of pay entitlements Payment of payroll taxes Abiding by relevant state legislation (e. G. Lath, trade practices, employment) Abiding by pollution controls Local Government Local governments have control over the following business activities: Approving new development and alteration application Fire regulations Parking regulations Size, location and shape of business signs Regulatory Bodies What is a regulatory body? (p 61) Set up to monitor and review the actions of businesses and consumers in relation to certain issues and the appropriate legislation. This is to ensure that businesses conduct themselves fairly in relation to the consumer, the community and other businesses.
There are a number of regulatory bodies that operate in NEWS and Australia. Complete the table below summarizing what the roles of each of the main regulatory bodies are. Regulatory Body Role Department of Environment, Climate Change and Water Primary environmental regulator for NEWS Aims to improve environmental performance and waste management for NEWS through a wide range of programs and initiatives Offers advice and incentives to help businesses improve their environmental performance.
Governed by the Protection of the Environment Administration Act 1991 Office of Fair Trading Is the NEWS consumer protection agency Provides information and assistance to all consumers and business owners on areas such as fair and ethical practices Services to businesses include Business license information, e. G. Real estate agents, builders, car dealers Information for builders and transported that covers their responsibilities and offers assistance in relation to disputes between themselves and clients/contractors Trade measurements relating to scales/scanners used to weigh and measure products.
Australian Securities and Investments Commission Monitors market integrity and provides consumer protection in areas such as payment systems and financial services such as investment advice Aims to ensure all businesses comply with the industry standards and codes of practice Operates the Business Names Register that allows people to register, renew and search business Ames nationally Australian Competition and Consumer Commission Is an independent statutory authority that administers the Competition and Consumer Act 2010.
This includes monitoring of: – Anti-competitive and unfair market practices such as the misuse or market power, exclusive dealing and resale price maintenance Other Other institutions that affect how businesses operate in Australia include (SUMMARIES them): Institutions Employer associations Developed in response to the growth of trade unions Represent the interest of employees Trade and industry National bodies that represent larger groups of employers
Examples include – Australian Chamber of Commerce and Industry and National Farmers’ Federation Trade unions Main aim was to improve working conditions and pay rates Union membership declined substantially in the past 20 years because of New legislation that outlaws compulsory unionism Changes to work patterns Australian Stock Exchange (ASS) Operates a share market where companies can raise funds by issuing shares in the company A business lists itself with the Australian Securities Exchange to become a public company.
The main reason for this is to raise extra capital, usually for expansion and development Global technological innovation has increased at a remarkable pace, revolutionaries the workplace and every aspect of daily life. With appropriate technology, businesses can increase efficiency and productivity, create new products and improve the quality and range of products and services. New communications technologies allow information to be rapidly transmitted to an ever-increasing number of customers with a speed that now makes communication almost instantaneous.
This has allowed businesses to reorganize their structure and has fundamentally changed workplace practices. A business that wants to be competitive must adopt the appropriate technology. If slow to use and exploit technology, a business is likely to fail. Competitive Situation Influences How does competition benefit both the consumer and the business? (p 64) It can provide the consumer with more choices, a range of qualities and a variety of prices.