37. Introduction to external influences

37. Introduction to external influences

1. The impact of external influences on firms

   • Some external influences have a favourable effect on firms. e.g SAGA holidays specialises in providing holidays for the elderly and the UK is currently experiencing an ageing population
   • They can also have adverse effects. e.g cuts on the police may force jewellers to spend more on private security guards.
   • New laws and regulations
     • i.e seat restraints for children. Britax and Halfords benefitted.
   • Demographic factors
     • Refers to change to the size, growth and age distribution of the pop.
     • Immigration -> 2004, EU expanded. Rented -> house prices doubled. Kept wages in check. UK plumbers -> cut prices.
   • Technological factors
     • Competition by hundreds of channels for ITV, BBC, CH4. Also, advances in the internet = new entertainment (YouTube)
     • Created opportunities (Google)
   • Commodity prices
     • Internationally traded goods (oil, copper, wheat). Oil prices affect cost of transport.
   • Economic factors
     • No influence over economic growth, level of unemployment, rate of inflation. Firms will also be affected by government fiscal and monetary policies.

2. What can firms do about external influences?

   • Make the most of favourable external influences while they last
     • However, ask 'what if' questions
   • Minimise the impact of unfavourable external influences
     • Successful firms make compensating internal changes to offset external contraints
     • Improve internal efficiency

3. Issues for analysis

   • Regular customers = predictable sales. Poor managers may drive them away.
   • Whole existence can be thrown into question e.g HMV.