37. Introduction to external influences

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Chapter 37

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37. Introduction to external influences
1 The impact of external influences on firms
1.1 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
1.2 They can also have adverse effects. e.g cuts on the police may force jewellers to spend more on private security guards.
1.3 New laws and regulations
1.3.1 i.e seat restraints for children. Britax and Halfords benefitted.
1.4 Demographic factors
1.4.1 Refers to change to the size, growth and age distribution of the pop.
1.4.2 Immigration -> 2004, EU expanded. Rented -> house prices doubled. Kept wages in check. UK plumbers -> cut prices.
1.5 Technological factors
1.5.1 Competition by hundreds of channels for ITV, BBC, CH4. Also, advances in the internet = new entertainment (YouTube)
1.5.2 Created opportunities (Google)
1.6 Commodity prices
1.6.1 Internationally traded goods (oil, copper, wheat). Oil prices affect cost of transport.
1.7 Economic factors
1.7.1 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?
2.1 Make the most of favourable external influences while they last
2.1.1 However, ask 'what if' questions
2.2 Minimise the impact of unfavourable external influences
2.2.1 Successful firms make compensating internal changes to offset external contraints
2.2.2 Improve internal efficiency
3 Issues for analysis
3.1 Regular customers = predictable sales. Poor managers may drive them away.
3.2 Whole existence can be thrown into question e.g HMV.
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