Factors impacting business decisions

• Globalisation


  Economies of the world connect due to the reduction of trade barriers (tariffs) and natural obstacles (language and culture)
• Globalisation facts

  • Provides Australian consumers access to a wider variety of goods and services than would have been available on the domestic market alone
  • 1 in 5 Australians have a job connected to exports and hence tied directly to the process of Globalisation
  • A lot of Australian businesses now outsource part of their business functions to overseas
  • Increasing competition and a need to cut costs is what is driving Australian businesses to seek more cost effective ways of doing business
• Globalisation allows for

  • Increasing flow of goods, services , people, finances and information around the world
  • Manufacturing located – inputs cheapest
  • Raw materials sourced – cheapest and most abundant
  • Finance controlled – headquarters in different country
  • Emergence of a global web – inputs sourced from all over the world
• Importance of globalisation


  • Competitive advantage
  • Reduce cost
  • Increase production
  • Improve quality of goods
  • Elimination of legal red tape
  • Trade Agreements reduce trade barriers
  • Businesses can take advantage of currency fluctuations
  • Emergence of global consumers
• Technology


  The use of science to develop new products, services and processes in the production process
• Technology


  • Improves efficiency of product process
  • Improves quality of the product/service
• Machinery


  • Makes manufacturing more accurate
  • Produces more goods at a time
• Technology


  • Is an integral part of a business
  • Can lead to a business losing or gaining a competitive edge over other businesses selling the same good/ service
• Globalisation


  Is inherently linked to technology
• Globalisation


  Has been made possible as a result of developments in transportation and communication technologies
• Automation


  Replaces labour which makes up 60% of production costs - cost savings both domestically and globally
• Automation


  • Helps to achieve economies of scale
• New technology


  Is very expensive in short-term - cost saving in long-term
• New technology


  • Requires additional training for workers
• Technology


  Could have defects/errors - costly
• Technology


  Leads to new problems
• Technology


  • Leads to innovative products
  • Increases quality of products
  • Improves better aesthetics
• Fiscal policy refers to changes made to taxation or government spending to achieve economic goals.
• Monetary policy is used by central banks such as the Reserve Bank of New Zealand (RBNZ) to control money supply and maintain price stability.
• The government can influence the economy through monetary policy, which involves controlling interest rates to manage inflation.
• Business cycle


  The fluctuations in economic activity that an economy experiences over time
• When economic problems start to appear


  Consumers become more cautious with the way they spend their money
• Reduced spending


  Has an impact on business; profits start falling and cost cutting must occur if they are to survive
• Cost cutting


  Can be in the form of retrenching workers; therefore, the economy falls further into recession
• When evidence shows a growing economy

  Confidence returns
• Consumers are more willing to purchase consumer or luxury goods

  Spending levels rise and business profits improve