External influences on business

External influences on
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Learning objectives
This presentation will cover:
What external influences affect the way that
businesses operate?
How have economic conditions and competition
caused some businesses to go into administration?
How and why does the government manage the
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External influences
Every business wants to achieve its aims and objectives to
make a profit. It will try to do this by organizing what it can
influence internally: employees, resources, quality etc.
However, a business is also affected by external influences
which it cannot control:
These external influences change from time to time
and a business must be able to adapt to them.
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High street chains in trouble
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The economy
An economy is the system within a
country which influences the production,
distribution and consumption of products,
and the supply of money.
Britain’s economy affects every British
business and citizen.
A British cabinet minister acts as the
Chancellor of the Exchequer. He or
she must manage the British economy by
taking advice from the Bank of England
and the Treasury.
Do you know who the current Chancellor
of the Exchequer is?
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Economic conditions
The British economy is affected by three areas:
interest rates – how much banks
charge for borrowing money
prices (and inflation)
exchange rates – what one currency
is worth in another currency.
Businesses and customers can be affected when these things
change. Changes to the economy can make it difficult for a
business to plan ahead and for customers to plan when to
spend or save.
How could interest rates, prices and exchange
rates cause difficulties for businesses?
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Managing the UK economy
The Chancellor of the Exchequer, the Treasury and the Bank
of England try to create economic stability for businesses
and customers so they can plan when to spend or save.
Through taxation and interest rates, they:
raise taxes to
discourage spending
lower taxes to
encourage spending
raise interest rates to
discourage spending
lower interest rates to
encourage spending.
Why have interest rates been kept low
since the 2008 recession?
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