How are Businesses Managed? Learning Outcome: What Influences Decisions?

1. How are Businesses Managed?Learning Outcome: What Influences Decisions? Standard Grade Business Management Units 4.2

2. Influences • Owner/business needs • Customer needs • Competition • Legal environment • Social environment • Economic environment • Political environment

3. Legal Environment • Minimum wage – the least employees can be paid • Competition laws - egFair Trading Act 1973 - through this, the Director of Fair Trading can ask the Monopolies and Mergers Commission to investigate any type of ‘unfair’ competition • Advertising Standards Authority (ASA). This ensures that British advertising and sales promotion is legal, decent, honest and truthful • The Sex Discrimination Act 1975 • The Race Relations Act 1976 • The Equal Pay Act 1970 • The Health and Safety at Work 1974 lays down standards of health and safety that must be met. There have been updates to this Act - dealing with the use of computer VDUs or with RSS (Repetitive Strain Syndrome) • It is essential that each employee has a Contract of Employment

4. Social Environment • Changing work patterns eg more working mothers, more part-time workers • Green issues – effect of pollution on the environment • Recycling – use of recycled materials to make products or packaging for products • Pressure groups – eg anti-smoking groups led to new laws

5. Economic Environment Credit only Credit only

6. Political Environment –Decisions made by Governments Credit only Credit only

7. EXAMPLE • A car manufacturer decides to produce a completely new model of car • What are the factors which will influence the manufacturer’s decision about what kind of car to produce?

8. Manufacturer’s Needs • Low costs • High profits • High demand • Availability of finance to expand • Availability of skilled labour force

9. Customer Needs • Good-looking car • Reliability • Good price • Low running cost • Safety eg air bags

10. Competition • Prices • Models • Advertising campaign

11. Legal Requirements • Exhaust system which meets anti-pollution requirements • Seat belts

12. Social Environment • Condition of infrastructure ,ie roads • Environmental issues – emissions, environmental pressure groups, use of alternative fuel sources • Living standards of potential customers

13. Economic Climate Credit only • Interest rates for borrowing • Employment levels • Value of pound sterling

14. Political Environment Credit only Government/local council attitudes: • Taxation levels • Small cars • Motorway tolls • Road fund licence (car tax)

15. To sum up, the factors influencing decisions include: • The owner/business needs, eg do they have enough finance, is there availability of labour • Customer needs – price and quality • Competitors – how competitors actions can affect business (reduces price, launch new advert) • Legal environment – eg minimum wage, competition laws, HR laws, smoking ban • Social environment – green issues, recycling, pressure groups • Economic environment – eg inflation, unemployment, recession • Political environment – eg taxation changes, interest rates, EU regulations