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External Influences On Business Activity

Businesses are influenced by factors in the external environment including political, legal, social, economic, technological, and international factors. The external environment comprises laws, economic conditions, technology, competitors, suppliers, trade links, and social/demographic changes. Businesses must understand how these external forces might impact operations to make effective decisions. Some examples of external influences are government regulations, pressure from groups like Greenpeace, new technologies, international trade agreements, and social trends.

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120 views

External Influences On Business Activity

Businesses are influenced by factors in the external environment including political, legal, social, economic, technological, and international factors. The external environment comprises laws, economic conditions, technology, competitors, suppliers, trade links, and social/demographic changes. Businesses must understand how these external forces might impact operations to make effective decisions. Some examples of external influences are government regulations, pressure from groups like Greenpeace, new technologies, international trade agreements, and social trends.

Uploaded by

kuziva.james
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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EXTERNAL INFLUENCES ON BUSINESS ACTIVITY

Businesses operate within an external environment which influences their activities and decisions.
This external environment comprises of: law, political and social factors, economic conditions, level
of technology, competitors and suppliers, international trade links and environmental pressures.
Businesses cannot take effective decisions without understanding these external forces and how
they might impact on business operations.

POLITICAL AND LEGAL INFLUENCES

• the advantages and disadvantages of privatisation of ZETDC in Zimbabwe, COTTCO, AFC

• the advantages and disadvantages of nationalisation of ZUPCO, Zimbabwe women microfinance

bank

• how a government might use the law to seek to control: employment practices, conditions of work

(including health and safety), wage levels, marketing behaviour, competition, location decisions,
particular goods and services

ACTIVITY 6.1 & 6.2

Tr to lead class discussion to revise Activity 6.4. Pupils to take down sample answer in their note

books

• the impact of changes in political and legal factors on business and business decisions

SOCIAL AND DEMOGRAPHIC INFLUENCES

• the impact of and issues associated with corporate social responsibility (CSR).

Pupils to define the term CSR.

Pupils to identify the different acts of CSR in their clubs as well as the School at large.

Pupils to give feedback on why they carry out acts of CSR.

Tr to explain on CSR and its importance to business.

Pupils to identify different organisations and their acts of CSR e.g. Econet wireless, paying incentives
for the award of contracts,

Pupils to research on Econet wireless social audit policy and the purpose.
https://www.econet.co.zw/sustainability/

NB a social audit is a report on the impact a business has on society

NB Changing social conditions and employment patterns can create just as many opportunities for

businesses as potential risks or threats.

The impact on business of social and demographic changes.

The most successful companies will be those that quickly adapt to social and demographic changes

and attempt to turn them to their own competitive advantage.

Pupils to read Table 6.4 Pg. 83

Key terms

Demographic, globalisation

Activity 6.6, 6.7 Tr to lead class discussion and pupils to take down the sample answer
• why businesses need to consider the needs of the community including pressure groups

More and more businesses are accepting the need to incorporate environmental and ethical
considerations into their strategic decision making. The main reason being the growing power and
influence of pressure groups at both national and international levels.

The best-known international groups are:

Greenpeace - campaigns for greater environmental protection by businesses adopting green


strategies and government passing tighter anti-pollution laws.
https://www.herald.co.zw/government-bans-kaylite-packaging-%E2%80%A2health-considerations-
cited-%E2%80%A2defiant-citizens-face-prosecution/

Pressure groups want changes to be made in 3 important areas:

 Business to change policies so that less damage is caused to the environment


 Consumers to change their purchasing habits, so that businesses which adopt appropriate
policies see an increase in sales but those that continue to pollute or use unsuitable work
practices see sales fall.
 Governments to change their polices and to pass laws supporting the aims of the group.

Pressure groups try to achieve these goals in the following ways

 Publicity through media coverage


 Influencing consumer behaviour
 Lobbying of governments

Technological influences on business activities

IT the use of electronic technology to gather, store, process and communicate information.

NB. You should not assume that a business must always use the latest technology. There are
substantial costs to new technology and some businesses thrive without it. Handmade designer
furniture will sell because each piece is unique and computer-controlled robots might be completely
impractical.

Identification of technological change and its impact on firms.

Introducing technology effectively

A business should go through the following stages when introducing or updating technology in order
to reduce internal opposition to change.

Analyse- the potential use of the new technology and the ways it can make the business more
effective.

Involve- managers and other employees in assessing the potential benefits and pitfalls of
introducing the new technology

Evaluate- the different systems available, comparing cost, and expected efficiency and productivity
gains. Consider the budget available.

Plan for the introduction of the new system, including extensive training for all users

Monitor the introduction and effectiveness of the system giving the expected benefits and if not,
what can be done to improve performance.

Activity 6.8

Influence of competitors and suppliers

International trade and its impact on businesses

All countries engage in international trade with other countries. The growth of world trade in recent
years has been very rapid and has had a great impact on economic development.

The potential risk from international trade include

 There may be loss of jobs from domestic firms that cannot compete effectively with
imported goods.
 There maybe a decline in domestic industries that produce essential goods due to imports.
 Newly established businesses may find it impossible to survive against competition from
existing imports.

Impact of international trade agreements

BRICS, SADC

 Imports of raw materials can allow a developing economy to increase industrialisation


 Creates competition. This should encourage to keep costs and prices down and make well
designed, high quality goods.
 It allows for specialisation and this can lead to economies of scale and further cost and price
benefits.
 Living standards should increase

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