HBM Unit 1 - External Factors
- Created by: karengovig
- Created on: 12-01-18 23:58
Factors of the External Environment
External factors can bring positive or negative pressure to a business.
Factors are:
- Political
- Economic
- Social
- Technology
- Environmental
- Competitive
Political Factors
This includes Government Legislation (e.g - Health and Safety rules, taxes to be paid), Government Spending (e.g - grants) and Government Policy (e.g - planning permission for new builds/renovations, delegated to local councils, Competition Policy, Economic Policy).
Government Legislation
This includes Employment laws (e.g - living wage, minimum wage, maximum working hours, sick pay, redundancy pay etc), Health and Safety laws and other laws (e.g - smoking in public places ban, ban on free plastic bags). Businesses face fines if they do not comply with Government legislation.
Businesses must pay tax on profits called 'Corporation Tax'. Businesses deduct employees' Income Tax from their pay and pay it to the Government.
Example = Smoking Ban in Public Places
According to the British Beer and Pub Association, 39 pubs a week are now closing, which is down from the rate of 52 a week in the first six months of last year. There has been an improvement in public health but an estimated 250m loss in taxes for the Government.
Example = Legislation to Encourage Competition in a Market
Microsoct was found guilty by the European Competition Commission in 2004, which resulted in a 497m Euro fine. Microsoft were forced to unbundle it's Media Player software from Windows to allow other software makers to produce rival products.
Microsoft dragged its feet and the Commission later imposed a daily 1.5m Euro fine on the company, adding up to a total of 280.5m Euros.
Example = Taxation
The state pension age is currently 65 but due to rise to 68. This affects business as employees will be retiring later and older people will be applying for jobs. Staff may need retraining later in their careers. This is also a Social change.
Government Spending
The decision Governments make on how to spend money can support businesses in different ways. The Government sometimes provides grants to help businesses.
Economic Factors
This includes Interest Rates, Currency Exchange Rates, Inflation Rates, Employment, Economic Policy.
Interest Rates
- A rise in interest rates makes borrowing money more expensive, a fall makes borrowing cheaper.
- A rise in interest rates earns savers more money but a fall in interest rates means that savers earn less money for their savings.
Currency Exchange Rates
- If the business is interested in trading woth foreign companies, the exchange rate will affect how expensive goods are to buy or sell.
- A high valued pound makes exports, like Scotch Whiskey, more expensive for foreign buyers.
- A high valued pound makes imports, like German cars, cheaper for…
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