Influences on business

• what is a market?

  when buyers and sellers come together to exchange goods and services for money
• markets can be local, national or global in size
• what is competition?

  when more than one firm is trying to attract customers
• competition causes businesses to adapt and change
• what is the best way to attract customers?

  low prices
• medium levels of competition


  • a few dominant firms that may also be competing with some small firms
  • the dominant firms all enjoy a strong market share
  • may avoid competing on price as this only hurts the firms
  • may compete in other ways such as improved or new products and customer service
• low levels of competition


  • one dominant firm is a monopoly
  • tend to see high prices and very little new product development
  • there is not really any pressure to compete but the government may force them to
• risk

  The possibility of something going wrong
• what should a business be rewarded with if it takes a risk?

  profit
• the greater the risk, the greater the reward but also the greater chance of failure
• uncertainty

  when there is a lack of information about a situation
• risks can lead to lower sales, a fall in profits and possibly bankruptcy
• internal risks

  • Staff may leave or go on strike
  • Fire or theft
  • Bad publicity following a poor decision
• external risks

  • A new competitor starts up
  • A natural disaster (eg. floods)
  • A new law that works against them
• how to minimise risks

  • identify and assess the risks (perhaps use experts to help)
  • plan for them to occur
  • train your staff to deal with issues
  • diversify into different markets (if one market/product fails then at least you have more)
• businesses can face uncertainty around:


  • entering new markets such as online or international markets
  • economic uncertainty such as recession
  • competitor actions such as price cuts, new products, takeovers and mergers
  • changes in relationships with trade blocs such as the European Union, and the impact on international trade
  • developments in technology
  • social changes such as tastes and fashion
• laws


  rules that determine how society operates
• relevant laws that affect businesses include:

  • employment law
  • health and safety law
  • consumer rights
• the national minimum wage and national living wage guarantee a minimum amount of pay per hour and increase every year to reflect inflation
• anti discrimination laws protect employees against unfair treatment due to age, race, gender or disability
• businesses can be sued if they are found to have acted in an unfair way which leads to huge increase in costs
• other laws give additional rights to employees such as:

  • the right to request flexible working (part time, work from home etc)
  • maternity/paternity rights
  • guaranteed paid holiday and sick leave
  • the right to be in a trade union
• generally, employment laws add costs to businesses (fines, legal advice, increased wages, additional training etc) but can lead to a happier and more diverse workforce
• health and safety laws prevent businesses putting employees (and customers) in danger
• businesses must ensure that:

  • the workplace is safe
  • appropriate precautions have been put in place
  • staff have been well trained
  • warning notices are visible
• complying with health and safety law increases business costs but failing to comply can lead to fines from the HSE / legal action
• various consumer laws protect consumers against:

  • selling goods/services that aren’t as described (labels must be true and clear)
  • selling goods that are unsafe
  • selling goods that do not work (they must be fit for purpose)
  • misuse of consumer information (information must be stored safely)
  • hidden fees (fees must be clear)
• consumer laws add to business costs but also ensure a level playing field for businesses and also encourage quality production
• intranets are networks for employees only, extranets are for selected stakeholders
• impact of technology (employees)

  • enhanced safety - machines and ai take over dangerous tasks, reducing workplace injuries
  • remote working - allows employees to work from home, improving work life balance
  • cybersecurity risks - more technology increases the risk of data breaches and cyber attacks
  • job losses - ai can replace human jobs, especially in manufacturing and administration
• impact of technology (suppliers)

  • better inventory management - businesses can track stock levels in real time, leading to smoother supply chains
  • improved communication - orders and invoices can be processed electronically, reducing delays
  • dependence on technology- if systems fail, supply chains can be disrupted
  • pressure to adapt - suppliers must invest in new technology to keep up with competitors
• impact of technology (shareholders)

  • global investment opportunities - online trading platforms make it easier to invest in businesses worldwide
  • better decision making - data analytics provide insight into company performance
  • market volatility - rapid technological changes can unpredictability impact stock prices
  • the cost for businesses to implement new technology may reduce profit (short term)
• impact of technology (customers)

  • online shopping allows customers to shop anywhere at any time with fast delivery and one click ordering
  • improved customer service - ai chatbots are used by many companies to instantly answer any customer queries
  • digital exclusion - some elderly customers find it difficult to use apps for banking or shopping
  • hidden fees and dynamic pricing - some businesses change prices based on customer data so that different people pay different amounts
• examples of ethical marketing

  • designing products to not damage the environment
  • not targeting children with advertising
  • not charging high prices just because you are dominant
• examples of ethical operations

  • buying from suppliers who don’t engage in unethical practices like child labour or deforestation
  • making products out of recycled or recyclable materials
  • using fairtrade suppliers
• examples of ethical human resources

  • not using zero hours contracts
  • offering more than the minimum wage
  • offering high quality training even though it is expensive
• examples of ethical finance

  • not avoiding paying a fair amount of tax
  • investing into the local community
  • lower prices for lower income groups
• behaving in a more socially responsible (ethical) way is likely to be more expensive so could reduce profit but it could also bring in more customers, motivate staff and build a positive reputation for the business
• business operations can cause damage to the environment (external cost) such as:


  • increased traffic congestion
  • air and noise pollution
  • use of non renewable resources
  • contribution to global warming
• how can businesses support the environment?

  • use sustainable resources and methods of production
  • dispose of waste responsibly and recycle where possible
  • reduce travel of staff and goods