INTERNAL AND EXTERNAL BUSINESS ENVIRONMENT

INTERNAL ENVIRONMENT These are factors from inside the firm that could affect performance. Finance Available – without money the firm may not be able to do what they wish. Ability of Staff – the more capable staff are the more productive they will be. Information Available – the better the information the better the decisions made.

ICT Availability – this can influence the quality and quantity of what is produced Ability of Management – good managers will make good decisions Changes in Costs – increases in wages or raw materials can affect the profitability of the firm

EXTERNAL ENVIRONMENT This is summarised as: Political Economic Social Technological Environmental Competitive

POLITICAL Laws passed in the UK and the EU can affect the what a business does. E.g. shops are not allowed to sell alcohol on Sunday mornings or the smoking ban in public places. Failure to follow laws will result in fines. Other ways the government can influence is through setting taxation rates and investment in infrastructure.

ECONOMIC This includes changes in interest rates, exchange rates, inflation and the economic cycle. If interest rates are high this could stop firms from borrowing money also customers are less likely to borrow or use credit cards to make purchases.

If the pound is high against other currencies this makes it hard to export goods abroad, reducing the number of sales. If inflation is high, the prices of raw materials can be expensive which can reduce profits. If the economy is in recession, people tend to be unemployed or worried about losing their job, therefore not spending money on luxury goods.

SOCIAL DEMOGRAPHIC CHANGES This is to do with the size and distribution of the population of a country. E.g. The UK has an ageing population, this has led to a rise in products aimed at older people (SAGA) and firms recruiting older workers (B&Q)

SOCIO-CULTURAL CHANGES This is about changes in lifestyle and attitude. E.g. More women working has seen a rise in ready meal and later opening hours More concern about the environment, forcing firms to maybe use recycled products. People have more leisure time, changes in attitude to single mothers have also affected the types of products offered.

TECHNOLOGICAL Firms need to keep up-to-date with the latest technology in order to remain competitive. Have seen a huge growth in e-commerce (buying and selling online) Use of machinery in the production process – more efficient and cheaper.

ENVIRONMENTAL Firms are aware that they have to be more environmentally friendly, not only because that is what customers want, but can be forced by the government to do so. It can also include storms, floods, noise. All these can affect how a business operates.

COMPETITIVE What the competition is doing can affect how a business operates. Firms now not only face domestic competition but also foreign. Have to keep up or be better than your competition to keep your customers.