External influences
on business
.
17
Types of external influences
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Technological changes
Business competitors
Economic conditions
Environmental constraints
All these influences can affect the way
a business operates.
1.7 External influences on business
Technological Change
 Technology changes quickly
 New technology replaces old products
e.g. Cassette replaced by CD. CD
replaced by MP3’s
 Businesses need to embrace technology
to be competitive and survive.
1.7 External influences on business
Advantages of technological change
 New products  consumers want latest
features  more sales
 Less workers needed  less costs
 If first to market then business or brand
has competitive advantage
1.7 External influences on business
Disadvantages
 Expensive to research
 Loss of sales if do not embrace
technology
 Workers need training
1.7 External influences on business
How do you think Technology can be
introduced successfully?
 Involve workers in the process – ask
them how to get most out of machines
 Inform workers that they develop new
skills and receive training
 New products  job security
1.7 External influences on business
Try Activity 5.1 p.81
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
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
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
Social Responsibility – which is right?
 Making cheap products but pollute
environment
OR
 Make more expensive but
environmentally products
1.7 External influences on business
Pressure Groups
 Pressure Groups - A group of people who try and
persuade others to share their views on something. EG
Friends of the Earth and Greenpeace. There actions may
be - writing letters to businesses, government and
newspapers, organising marches and protests and gaining
public support.
1.7 External influences on business
Summary
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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