Basic Business Terminology PDF

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Summary

Basic definitions and concepts used overall...

Description

Business- 1.5: External Environment

STEEPLE S- Social T- Technological E- Economic E- Environmental P- Political L- Legal E- Ethical -

Affect all businesses and aren’t in control of any one organization Used to analyze decisions STEEPLE is easy to use because it’s thorough and logical  Good for brainstorming

PEST ANALYSIS -

Include political, environment and ethical, social opportunities/threats, legal opportunities/threats

OPPORTUNITIES AND THREATS -

Opportunities = external chances for a business Threats = external harms like recession If opportunities outweigh threats, business is likely to take that option External factors are always changing though

SOCIAL OPPORTUNITIES AND THREATS -

Social, cultural, demographical factors all affect businesses Attitude of society towards organizations rub off on the firm  Growing support: environmental protection wins the admiration of society businesses recycle and manage their waste  Liberal social attitudes: modern attitude towards working women means a more diverse and flexible workplace  Acceptance of multiculturalism: firms need to be ok with the diversity  Societal Pressures: society pressures business to act more ethical and cut high prices

 Changes in Demographics: recruitment practices, women on mat. Leave  Language: can create language barriers OR more enhanced customer care TECHNOLOGICAL OPPORTUNITIES AND THREATS Opportunities -

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High cost comes with staying up to date with the most recent gadgets Tech can malfunction and delay the production of a production Internet plays a huge part in businesses now  HR: Use it for recruitment  Marketing: use it for e-transactions, online advertising  Finance: use it for annual online reports  Operations: use it to check data People working from now, using video calls to communicate with global partners Robots and machines reduce labour, make products more accurately and faster Automated stock control to automatically reorder stocks when they run out Creates jobs = tech support and maintenance, new types of engineers Tech can create new products/market, come out with wireless stuff, smart phones, etc Tech costs bare at first but the sales collect profit overtime

Threats -

Tech isn’t always reliable because stuff can be hacked It has shorter product life span; can get ruined Can be costly to always update and upgrade Jobs get lost because tech takes over the primary and secondary industry  Farmers, oil extraction, car manufacturing

Considerations -

Costs: how much it cost and where is the funding coming from Benefits: will it be more efficient, productive, maximize product? Human Relations: how will people react to this change/replacement Recruitment and Training: how are we gonna train workers to handle the tech equipment Opportunities

Quick access to info that is recent Lessens language/cultural barriers since stuff can be translated Reduce costs of a store since there is etransferring Globally available so you can do business to a foreign scale

Threats You can’t tell if what you’re paying for is falsely advertised Online crimes such as hacking and fraud High production costs to maintain the tech and train workers how to use it Reduces productivity since workers use the tech for personal activities

ECONOMIC OPPORTUNITIES/THREATS -

Refers to the economy in which business operates

Four Key objectives Control inflation -

Inflation means increasing prices, which affects how much raw materials are, wages, sales costs, etc. It’s essentially a threat that needs to be avoided Inflation occurs when there is too much demand in the economy/too much spending

Reduce Unemployment1 -

Gov’t wants to avoid this because then they’ll have to pay social costs of unemployment If local community is mainly jobless, they won’t have money to stimulate sales revenue for local businesses Gov’ts paying for worker training and education will help make future workers more skilled

Economic Growth -

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Economic Growth is the country’s growth in economy overtime Measured to show the value in of the economy’s output  Aka. GDP/ per year = value of goods and services produced in a country per year  value = profit (sales revenue) Higher economic growth means people are earning more income, which means more spending 

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Peak/Boom = investment, economy is at it’s highest lvl  Recession2 = fall in GDP for half a year, declining demand, falling exports, rising unemployment  Trough/Slump = lowest point of the economy, last stage of decline, low lvl of consuming, many businesses close down Recovery/Expansion = GDP rises again, lvl of purchasing and investing rise slowly

Barriers of growth include lack of infrastructure: poor traffic, laws, education

Healthy International Trade Balance -

Maintaining exportation earnings Gov’t wants to avoid debt in exports, want to always export import Change exchange rate to avoid this  Exchange rate = value of the money when the currency is converted Higher er = prices are higher, reducing exporters costs

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Lower er = customers m=pay less but importers pay more Hard to predict trade trends Protectionist measures = gov’t policy used to restrict imports from other countries by implementing tariffs, quotas and other regulations

ENVIRONMENTAL THREATS AND OPPORTUNITES -

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Firms have to be more considerate of environmental factors, otherwise society won’t support them If compliance costs for eco-friendly methods are too high, firms will reject the concept Weather can produce opportunity or threat; natural disasters can affect business within an instant  Flooding = bad for theme parks, carwashes, agricultural  Weather conditions in Russia reduced GDP by more than 1% in 2010 Global health issues also affect business interactions  Swine flu, SARS

POLITICAL OPPORTUNITIES/THREATS -

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Laissez-faire gov’t takes on free market approach = doesn’t poke into businesses or economy  This approach induces more foreign direct investment Most gov’t poke though to manage economy through policies to keep an eye on overseas business activities Fiscal Policy = using taxations3 and gov’t policies to oversee business activity. Uses the revenue from taxes to pay for other things like healthcare, social security, transportation, infrastructure Deflationary Fiscal Policy = used when economy has high growth rate so it needs to be slowed down by higher taxes Expansionary Fiscal Policy = used to boost business activity, maybe to get out recession, by cutting taxes to increase public spending Monetary Policy = using interest (lone) and exchange rates to influence businesses  If economy is growing fast, they boost these rates to increase the amount of loans so that borrowing money becomes more expensive which is a threat to investing Deregulation = removing gov’t rules/bureaucracy to make business industries more efficient and competitive Corruption = corruption, poverty, international competition are all interrelated  Scale of honesty: Denmark, Singapore … Sudan, Somalia

LEGAL OPPORTUNITIES AND THREATS -

Gov’t has rules and laws to regulate business activity Consumer Protection Legislation = laws that make it illegal for businesses to false advertise and that their product must meet the standards of their claims  Businesses are responsible if their defective product causes injuries

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Employee Protection Legislation4 = protect workers’ safety and interests; Ex: anti-discrimination, respective of diversity Competition Legislation = laws ensuring appropriate competitive conduct is practiced and that monopoly businesses don’t misuse their power  Copyright rules, watermarks… all are used to staple a business’ product so that competitors don’t trademark it Social/Environmental Protection Legislation = laws to prevent demerit goods from being consumed. Demerit purchases are higher than private ltd. Purchases  Alcohol, smoking, tobacco, pollution, crimes, fines

ETHICAL OPPORTUNITIES AND THREATS -

Business ethics = morals considered during decision making; what is right or wrong There are costs that come with acting ethically Benefits include quality and loyal workers, new supportive customers, CSR generates good publicity Being ethical looks good on social audit reports = report on social and ethical performance within and out of the business’ community

CHANGE -

Change in ethics, tech, economy, etc. is always occurring Ability to deal with change depends on:  Size of business = how it copes with shock, and if it has money to fix it  Business’ management skills = how they react to change and crises  Degree of customer loyalty = businesses with loyal customer base are exposed to less threats  Diversity of goods = hit to one product doesn’t affect another  Lvl of dependence = how much a business relies on external factors to stimulate business operations

Foot Notes 1

Types of Unemployment -

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Copping with Recession -

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Frictional U.E: when ppl change their job and there is a time gap between the shift of leaving and starting the new job Seasonal U.E: demand for good/service hits peak during a certain time; resorts Technological U.E: machines taking place of labour workers Regional U.E: unemployment rates in different areas; remote areas have less jobs than ubran areas Structural U.E: when demand drops and it affects in the infrastructure of the business in the long run Cyclical U.E: caused by lack on demand in the community. Affects all industries and it most severe

Cost Reduction: cut bills, finding alternate supplies to replace these things Price Reductions: increase sales, Non-pricing Strategies: cover excess costs by repackaging to have more sales than useless production costs Branding: maintain sales as loyal customers continue to buy from ‘them’ Outsourcing: get stuff from overseas where things are cheaper

Types of Taxes -

Income Tax: pulled from wages, rents, dividends. Key source of tax revenue from gov’t Corporate Tax: pulled from profits. Smaller business are charged less on this Sales Tax: “plus tax” value added tax Capital Gains Tax: taxes on more big things; property, shares Inheritance Tax: tax added when something is passed down Excise Duties: taxes on demerit goods; alcohol, tobacco, petrol, gambling Custom Duties: tax on foreign imports to help gov’t raise revenue and give local businesses price advantages Stamp Duty: tax paid when residential property is brought; higher the property value, higher the tax...