Chapter 3:

Influences in the Business

Environment
 Business Environment

● Businesses also have to deal with an ever-

changing environment in which they
operate
● All business decisions about how and
what to produce are affected by the
environment in which the business
operates
● The business environment refers to the
surrounding conditions in which the
business operates, and can be divided
into two broad categories: External and
Internal
● The external environment includes those factors over which the
business has little control, such as government policy, technology,
economic conditions and social attitudes.
● The internal environment includes those factors over which the
business has some degree of control, such as products, location,
resources, management and business culture.
● The factors that make up the business environment are not constant and
certain. They are dynamic (continually undergoing change) and a
business must keep ‘in tune’ with the changes and adapt its operations
accordingly.

● Who do you think the top 3 brands are? (predict before you watch video)
● Top brands time lapse-
https://laughingsquid.com/15-global-brands-ranked-annually-2000-2018
External Influences
 Economic Influences Economy:
The state of a
● The economic cycles of booms and recessions country in terms of
(busts) influences consumer and business the production and
spending consumption of
goods and services
and income
Questions:

1. Where would you place the current

Australian economy on the graph in the
previous source? (economic life cycle)

2. Briefly explain how the Australian

Government is encouraging consumers to
increase their expenditure in the economy.
● The state of the economy has a great impact on business
● The policies implemented by the government are aimed at keeping
the economy growing steadily and preventing major recessions
● The economy is also affected by overseas trends-changes in trade,
investment and currency levels all effect Australia’s level of
economic activity

Question:
Write down ONE way that the economy might influence a
business.
QUESTION
FINANCIAL INFLUENCES
Major changes in the global financial markets;
● Deregulation: Removal of government regulation from industry, with the aim
of increasing efficiency and improving competition
● Deregulation of Australia’s financial system has resulted in a more flexible, market-
oriented approach across the financial sector and increased competition through the
operation of many new banks

Question:
Write down ONE way that financial deregulation could influence a business.
Video: Financial influence

https://www.youtube.com/watch?v=l_1pJsDhpBg
Sources of finance
There are two main sources of finance for businesses :
● Equity finance: Internal sources of finance (finance provided by owners
either through cash or buying shares). Also refers to any net profit
reinvested in business.
● Debt finance: Funds borrowed from a bank (or investor or firm) with an
agreement to pay back principal with interest over a set period of time.
- High interest rates may reduce amount of debt finance a business
undertakes because it is more expensive
QUESTION
Geographical Influences
● Demography is the study of particular features of the population,
including the size of the population, age, gender, income, cultural
background and family size
● Changes in any of these factors can lead to changes in demand levels
and the nature of products and services

NOTE: THIS IS NOT THE SAME AS LOCATION OF A STORE!

Geographic influences on Australia include:

► Our location in the Asia-Pacific environment

► Populations moving from rural to urban areas

► Rapid economic growth of nearby Asian countries

► Variations in the number of refugees and migrants

► Population demographics- skill shortages due to baby

boomers
● Globalisation: A global world, rather than a world limited by national
borders

● Removal of trade barriers

● Globalisation means that Australia can trade with countries all over
the world and are not restricted to those that are geographically
close.
● Individual members are linked through the mechanism of
international trade: the buying and selling of goods and services
between nations.

Question:
Write down ONE way geography might influence a business
Question:

How has
McDonald’s in
Punchbowl
responded in
relation to
geographical
influences?
QUESTION

5. Geographic influences impacting on a business could include:

a) interest rates and unemployment
b) debt finance and equity finance
c) trade negotiations made by government
d) Population shifts from rural to urban areas
SOCIAL INFLUENCES
● Social influences are the changes in tastes, fashions and
culture, rapid identification of these changes can lead to
sales and profit opportunities, and business growth
● Failure to respond to social changes can threaten business
stability and viability.
Video: The rise of the conscious consumer

https://www.youtube.com/watch?v=1EbezlnBq74
Video: Social influences

https://www.youtube.com/watch?v=XsozC-25hEw
There are three social issues;
1). Firstly, a growing awareness of our vulnerable environment
2). The second social issue that is leading to significant change is a growing
desire for family-friendly programs. Conflict between work and family
responsibilities is a key factor causing women to leave businesses, and this
high turnover (employees leaving work) is expensive for business.
3). The third social issue that is leading to significant change is the growing
belief that businesses must cater for workplace diversity. Businesses are
required to effectively manage a diverse range of employees and cater for
their specific needs.
Video:
Ice cream store Manly

Can you think

of any other
business
examples?
QUESTION
What is the use of the
term in this question?
What are you required
to do?
 LEGAL INFLUENCES
● Legal influences are the laws that govern how businesses MUST
operate.
● All levels of government impose legal responsibilities on businesses and
these laws govern every aspect of a business’s life
● An example of a law that impacts business is Work Health Safety
Act- it dictates the safety standards that businesses need to abide
Regulations aim to promote fair conduct and include:
● Protection of environment
● Consumer protection –governed by ACCC
● Competition
● WH&S
● Industrial laws- equal employment opportunity/anti-discrimination
Question:
Write down ONE way that the legal influences might impact a business.
Questions:
- Describe the issue
- What was the outcome?
- How did ‘external legal influences’ impact the business
Political Influences
Political influences are those that relate
to the policies that the government in
power implements.
- Major political changes
Examples:
► The Howard Liberal-National Party
govt introduced the GST
► Free trade policies- The removal of
barriers
► Reduction in tariff rates
► Government can privatise its
businesses e.g. Telstra (on ASX as
public company)
Video: Political influence

https://www.youtube.com/watch?v=jCzu9avjaaI
INSTITUTIONAL INFLUENCES
There are three main institutional influences on business, including
government, regulatory bodies and other groups such as trade unions
and employer associations.
EXAMPLES
► The Environmental Protection Authority (EPA)
enforces NSW govt laws regarding the protection of
the environment.
► The Australian Tax Office (ATO) enforces and
administer federal govt tax laws.
► The Australian Securities and Investments
Commission (ASIC) monitors the operations of
financial institutions e.g. banks, stockbroking firms.
► Australian Competition and Consumer commission
(ACCC) attempts to regulate the level of competition
within a range of industries.
Video: Lorna Jane - ACCC

https://www.youtube.com/watch?v=0f4BSuU8wf8
Video: Kogan - Fair trading

https://www.youtube.com/watch?v=dl14ClzqKzs
► The NSW Office of Fair
Trading protects the rights of
consumers.
► Trade unions promote the
interests and working
conditions of employees.
► Employer associations
promote the interests of
employers.
► The Australian Securities
Exchange (ASX) is a market
for buying and selling shares.
Technological Influences
● Global technological innovation has increased at a remarkable
pace, revolutionising 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.
● A business that wants to be locally, nationally and/or globally
competitive must adopt the appropriate technology.

Snapshot Activity Video

● Apple-https://www.youtube.com/watch?v=JOEiK2JajMs
Video: Technology influence

https://www.youtube.com/watch?v=PMP9DXusLZw
 Technological
Developments
► Increased productivity
► Improved quality and
range of goods
► Reducing costs
► Eliminating boring
repetitive jobs
► Increases need for highly
skilled labour
► Emphasis on training
QUESTION
Examine:
Inquire into
Competitive Situation
• Competition between firms to be the ‘market leader’ or to win
customer loyalty can benefit the consumer and the business.
● Each business aims to achieve a sustainable competitive advantage over
its competition in order to capture a larger portion of the market.
● Competitive advantage- ability of a business to develop strategies that will
ensure it has an ‘edge’ over its competitors for a long period of time

Media news:
● https://www.news.c
om.au/finance/business/retail/napoleon-perdis-appoints-administrators-becomi
ng-second-retail-victim-of-2019/news-story/b7ab8dedcc46e7a0154307e9ed9f
c99a
Video: Competitive situation

https://www.youtube.com/watch?v=GZ_aEosfpO8
Task

1. Evaluate the accuracy of the following statement:

‘One of Australia’s main competitive advantages in
terms of world trade is its geographic location within
the Asia Pacific Region’

2. Select two competitive situation influences on

business and explain how they lead to opportunities
and threats for businesses.
Markets
The changing nature of markets impacts upon the business
through changes in:
► Changes in financial/capital markets- Finance (capital) is
now more mobile and flows relatively easily between
countries
► Changes in labour markets- movement of employees eg
skilled migrants on temporary work visas help to meet the
demands for labour in Australia.
► Changes in consumer markets- With the advent of the
internet, innovative and visionary Australian businesses may
reach much larger markets and take advantage of economies of
scale. Consumers around the world will just as readily
browse an online store as examine a catalogue delivered to
their private letterboxes.
Video: Markets

https://www.youtube.com/watch?v=6_mobDr5S_0&t=44s
 QUESTION
Karim is a trained barrister who would like to open a small
café in his local area, although he does not have any previous
business experience. There are existing cafes nearby who
have been operating for over 5 years. He enjoys working with
others and likes to direct his efforts towards achieving
objectives.

You have been hired to write a business report for Karim. In

your report, you should:
► Examine THREE external influences that may impact Karim’s
new venture

► Which syllabus area do you need to address?- you need to show an

understanding of relevant syllabus content in a logical and
Examine: sustained manner.
Inquire into ► You must use and apply the stimulus material!
► Apply the directive verb!
 Define ‘Internal Influences’
Hint - Refer back to past notes!
PRODUCTS
The type of goods and services produced will affect
the internal operations of a business.
E.g - If the goods are physically large or require
many raw material inputs, there will need to be
structures in place to organise and monitor the
processes involved in production.
➔ The range of products will influence size and
type eg. Retailer or manufacturer
➔ Quality
➔ Image
➔ Logo
➔ Where the product is positioned against
competitors (e.g. market, discount)
➔ Warranties
➔ Service and maintenance
Task:

Invent your own product for Apple to expand product range.

How will you manage the following:

- Warranties
- Service and maintenance
- Quality - Raw materials/inputs/production process
LOCATION

Location can make the difference between success

and failure. A good location is an asset and will lead
to high levels of sales and profits. A bad location is a
liability that adversely affects sales and profits.
Google maps: Alternative video to maps:
Google maps tour - Pitt Street Mall
Pitt Street Mall Tour
Activity:
- List the stores you see during the Pitt Street Mall tour
- Explain why one of the stores (your own choice) have decided to operate a store in this
location? (provide 3 reasons)
1. Where would you locate
the business:

- Provide a street/road of
preference either in
Liverpool or in your local
area

1. Provide 3 reasons for your

choice
RESOURCE
INFLUENCES
► The four main resources available to a business are:

1. Human Resources- Employees

2. Information Resources- Knowledge and data requirements
eg. Legal data, economic forecasts
3. Physical Resources- Equipment, machinery
4. Financial Resources- Funds used by the business

The quantity and quality of these resources varies amongst

businesses, but it is by combining them that all the goods and
services are produced
1. Human Resources - Employees
2. Information Resources - Knowledge and data requirements eg. Legal data,
economic forecasts
3. Physical Resources - Equipment, machinery
4. Financial Resources - Funds used by the business
MANAGEMENT
● The philosophy of management has an effect of employee
behavior.
● Managers can empower subordinates by delegating (assigning)
decision-making authority and freedom to them.
● That is, rather than having a hierarchy, business adopts flatter
organizational structure
● This can lead to higher productivity, quality, innovation and
commitment from employees.
Video: Steve Jobs organisational structure

https://www.youtube.com/watch?v=xcTtQ0hiHbE

Discussion:
Comment on the organisational structure of Apple
Discussion:

Do you think businesses should move

from traditional hierarchy organisational
structures and instead adopt a flatter
structure?
Why?
BUSINESS CULTURE
● Business culture: Values, ideas, expectations and beliefs shared by the
staff and managers
● Business culture is clearly outlined in policies and goals as well as unwritten
or informal rules
● Formal businesses - Strict business cultures based on communication,
cooperation and accountability
● Informal businesses - Flexible, innovative and risk taking cultures

Question: Describe Qantas’s

corporate/business culture
Video: Google corporate culture

https://www.youtube.com/watch?v=7oWSopcJSho

Question:
1. Describe Google’s corporate/business culture:

2. Do you think Google’s corporate culture will generate greater employee

performance and business outcomes? Support your answer.
STAKEHOLDERS

Any group or individual who has an interest or

affected by the activities/decisions of a business
Video: Stakeholders

https://www.youtube.com/watch?v=JGZJjqhA9wY
 List the stakeholders of
Nike
+
Business responsibility
towards each stakeholder
Responsibilities to Shareholders
● Shareholders - owners of the business
● Business aim is to maximize the return on shareholder investment
The business has other duties to its shareholders, including;
● To hold an annual general meeting to give the shareholders the
opportunity to ask questions
● To allow shareholders to buy and sell their shares as they wish
● To divide surplus assets upon the company's closure.
Responsibilities to Managers
Business must provide
managers with;
● Continuous support
● Extensive training and
development
● Adequate resourcing levels
and communication
● Delegation of authority to
managers
Responsibilities to Employees
Business must provide employees with;
● Fair pay and conditions (equal
employment opportunity)
● A safe and psychologically rewarding
work environment - one that respects
differences
● Professional development and
training to improve skill shortages
● Rewards and recognition
● Rights to privacy and recognition of
legal rights
 Responsibilities to Consumers
● Consumer satisfaction should be of prime
concern
Businesses must;
● Recognize the rights of their consumers
and should not exploit them
● Provide quality products at reasonable
prices
● Ensure safety of consumers is upheld when
producing/selling goods and services
Responsibilities to Society
Businesses are expected to;
● Conduct fair and honest business practices
● Make ethically responsible decisions
● Participate in a range of community projects and activities- showing
that they are giving back to the community rather than just taking all
the time
Responsibilities to Environment
● Adopt ecologically sustainable practices - meeting needs without endangering the
ability to meet future needs
● Care and preserve the environment
● Responsible environmental management
Question

2. Which of the following are stakeholders in a business

A. Suppliers, distributors, employees, competitors,
B. Investors, Community, financiers and banking laws
C. Employees, Competitors, Environment and health
regulations
D. Unions, competitors, community programs and distributors
Questions…

1. Define the term stakeholder

(1 mark)

2. Explain why businesses are

not only responsible to its
shareholders but also its
stakeholders
(4 marks)
Question
Question
Writing task:

Are internal or external factors more influential?

Provide reasons in your answer.

NOTE: ANSWERS CAN VARY!