External Influences on business activity Businesses cannot survive by neglecting the "real world", which includes influences that

forces a business to make certain decisions or constraints that limits or controls actions. Technological changes Technological change brings about constant changes in consumer products and production processes. By using Research & Development to develop new products, companies could open up new markets and make huge amounts of money. Such companies include Microsoft, Sony and Apple. However, new products quickly replace old ones just like how machines are replacing workers in production processes. There are two general things a firm could do when facing technological change: Ignore the changes and operate in the "traditional and old fashioned way". However, they can only sell to a small and limited market. Compete by welcoming changes and have an access to huge mass markets. Technological change in production Technological change leads to improved production of goods and services due to:

Computer-aided manufacturing ( CAM) this reduces labour costs, is more accurate and faster and can work at any hour of the day. The computer controls the machinery. Computer-integrated manufacturing (CIM) here, computers control the whole production line. Best example is in car production where robots undertake much of the work, reducing the need for labour to perform boring, routine tasks. Computer-aided design (CAD) Computers are used to help design products using computer generated models and 3D drawings. Reduces the need to build physical models to test certain conditions, known as prototypes. This can be expensive to produce just for testing purposes (e.g. aircraft or new cars.

Therefore new production technology can increase the speed of production, improve the quality of the product and reduce costs per unit of production. Here are some pros and cons of technological change: Pros:

New products encourage customers to buy more. If a business comes up with a new product first, they gain a huge competitive advantage. "High-tech" production methods make production more efficient. Fewer workers are required. New production methods can be adapted very quickly which gives businesses more flexibility in meeting consumer wants. E-commerce opens up new markets and the Internet is a medium of advertising.

Cons:

Research and development (R&D) is expensive, without guaranteed success. Businesses that do not develop new products will fail, leaving workers unemployed. New production methods and machines are expensive.

Workers will need retraining which is expensive. They might be reluctant to learn or fear that they will not do well. This could lead to a fall in motivation. E-commerce lacks personal customer service. Smaller businesses cannot afford these things.

Introducing technological change successfully Workers and managers may fear change. Workers might think: Will I be able to operate the new machines? Will I lose my job because the machines are more efficient? Older workers are especially afraid of loosing out to younger and better trained workers. Managers also fear change, since recruiting technology experts will make them look more inferior in some way. To make these changes work better, workers need to be involved in the changes. Workers might be told why the new machines are necessary and how they will be trained to use them, as well as letting them suggest ways to make work more efficient with the machines. It leads to more opportunities for trained and skilled staff and can lead to new ideas and products. The Environment Environmental laws and regulations are wide and varied, but essentially businesses have to make sure that they:

Store and treat waste safely and securely Protect employees and environment from air pollution Don't produce excessive noise, smoke, fumes & other forms of pollution Comply with rules for storage and use of hazardous substances & waste

To meet their obligations, businesses need to focus on:

Use of raw materials, water and other resources (inputs) Energy use and its impact on climate change Waste and pollution produced by the business The impact the business has on employees and the local, wider and international community

Whilst complying with these regulations and laws inevitably imposes additional costs on many businesses, it is possible to identify some advantages that arise for the environmentally-conscious business. These include:

Lower raw material costs & waste disposal charges Longer life of assets which are recycled or repaired Trading opportunities with organisations that will only use environmentally-friendly suppliers Improved customer goodwill

Sustainable business You will see the word sustainable or sustainability used in many businesses these days. A sustainable business is a business that has no negative overall impact on the environment. That definition makes it quite hard to quantify whether the goal of sustainability has been met, since it assumes the net effect of a business activities on the environment

can be measured in full. In practice, a business that aims to be sustainable gets involved in a range of activities designed to minimise their net effect on the environment. These are activities such as:

Using packaging that can be reused or recycled Minimising or eliminating the use of hazardous chemicals and processes that produce harmful by-products Working with suppliers to assess and improve their sustainability, or switching to more sustainable suppliers Using more energy-efficient equipment, or using renewable sources of energy Collaborating with other businesses that can use waste (or supply by-products that can be used as raw materials) Eliminating unnecessary activities e.g. replacing some business travel with conference calls instead

To be effective, a strategy of building a sustainable business requires the drive and support of people through a firm particularly top management. Management need to:

Understand how changes will affect employees and other stakeholders Gain commitment and support from those stakeholders Anticipate changes in environmental legislation - try to be "ahead of the game" Set short and long-term objectives for sustainability projects Review progress and objectives regularly

Business Ethics Ethics are moral guidelines which govern good behaviourSo behaving ethically is doing what is morally right. Ethical principles and standards in business:

Define acceptable conduct in business Should underpin how management make decisions

An ethical decision is one that is both legal and meets the shared ethical standards of the community Businesses face ethical issues and decisions almost every day in some industries the issues are very significant. For example:

Should businesses profit from problem gambling? Should supermarkets sell lager cheaper than bottled water? Is ethical shopping a luxury we cant afford?

Corporate social responsibility (CSR)- CSR is about responsibility to all stakeholders and not just shareholders A business cannot claim to be ethical firm if it ignores unethical practices e.g.

Use of child labour and forced labour Production in sweatshops Violation of the basic rights of workers Ignoring health, safety and environmental standards

Pressure for businesses to act ethically Businesses and industries increasingly find themselves facing external pressure to improve their ethical track record. Pressure groups are a good example of this. Pressure groups are external stakeholders they

Tend to focus on activities & ethical practice of multinationals or industries with ethical issues Combine direct and indirect action can damage the target business or industry

These are times when they are likely to take action: They have popular public support and has a lot of media coverage. The group is well organised and financed. These are times when they are less likely to take action: What a company is doing is unpopular but not illegal. (e.g. testing drugs on rats) The cost of making the company cleaner is more than losses that could be made by losing image and sales. The firm supplies other firms and not customers, public support will be less effective.Direct consumer action is another way in which business ethics can be challenged. Consumers may take action against:

Businesses they consider to be unethical in some ways (e.g. animal furs) Business acting irresponsibly Businesses that use business practices they find unacceptable

Consumers are becoming more socially aware, and many of them will stop buying goods from companies which pollute the environment, harming a business' reputation and image. Bad publicity means lower sales. If they want to keep their sales revenue up firms would have to adapt to more environmentally friendly production processes again. As with all issues in business studies, there are two sides to every argument: The advantages of ethical behaviour include:

Higher revenues demand from positive consumer support Improved brand and business awareness and recognition Better employee motivation and recruitment New sources of finance e.g. from ethical investors

The disadvantages claimed for ethical business include:

Higher costs e.g. sourcing from Fairtrade suppliers rather than lowest price Higher overheads e.g. training & communication of ethical policy A danger of building up false expectations

THE SOCIAL ENVIRONMENT The social environment relates to change in society and social structures. The social structure and the values that a society cherishes have a considerable influence on the functioning of business firms.

INFLUENCES ON THE CUSTOMER

URBANISATION

BUYING HABITS

FASHION TRENDS
CHANGING CUSTOMER PREFERENCES AND EXPECTATIONS

RELIGION AND CULTURE

POPULATION

LITERACY RATES

URBANIZATION Businesses benefit from urbanization, because they can take advantage of the development in infrastructure and communication that it brings. This new infrastructure makes the customers more mobile, and businesses can position themselves along the new routes to gain access to more customers.Also, if more people move to the city, then the number of customers and labour for businesses increases. However, Urbanization can lead to POVERTY. When people are poor, they can't buy as much and they want lower prices. Businesses who want to stay successful have to figure out what their customers will buy, and how to keep the prices as low as possible. POPULATION The population in general is increasing. That means that demand for products will rise and businesses will make more profit. THE WORKING POPULATION These are people aged between 16 and 65 in that area, who are able to work.This is important to businesses since it will determine the number of workers available to them. POPULATION STRUCTURE-Different age groups buy different products so changes in the population affect the demand for products that firms make. e.g. If young families have stopped moving into an area, a business may have to change its focus to provide products or services for older customers CHANGE IN POPULATION-Population is changing e.g. At one time in the United States, people were mostly white and Christian. They spoke English and shared the same culture. Over time the states have attracted immigrants from around the world, and they have their different religions, languages and culture. How do social and cultural factors affect businesses India consists of a large amount of Muslims so pork products and other products considered haram have to be avoided by businesses. They have many different languages so businesses have to be careful when using certain words because they may be unethical to them. LITERACY RATES

Customers: Due to increase in literacy rate, the consumers are becoming more conscious of the quality of the products, so businesses have to be increasingly careful with their services. Workers: Businesses compete in a global economy that requires increasingly higher levels of education and training. Illiteracy among workers threatens the ability of businesses to compete properly. If a country falls behind in education and training for its workforce illiteracy will put businesses of that country at a disadvantage in competing with other businesses. BUYING HABITS AND FASHION TRENDS Changes in fashion trends can affect the garment and textile business. New inventions change social and cultural preferences.Trends can affect a business as tastes and likes can change.E.g. if a business sells a lot of junk and unhealthy food and the nation is becoming more health conscious then the demand for junk food will decrease and that business will make less profit. INFLUENCES ON THE CUSTOMER-Because people are social beings, each person has people around him who influence his decisions in some way. Family members, relatives, neighbors, friends, co-workers and seniors can influence buying habits. Well-known and respected idols and celebrities in society can also serve as examples in lifestyle, values and buying habits.Being aware of and finding the major reference groups, people or family structures in a society and building on them can help businesses achieve success. CHANGING CUSTOMER EXPECTATIONS AND PREFERENCES Consumers expectations are higher than ever. Todays customers want products and services on demand. They are not prepared to wait.Customers now want more variety in their products and services.Many customers like to try a product before they make a purchase, so customer interaction with products should also be a key feature of businesses.