Scribd
Upload
4 views8 pages

EXTERNAL INFLUENCES ON BUSINESS (2)

The document discusses various external influences and constraints on business activities, including technological changes, social factors, environmental concerns, political factors, and sustainable development. It highlights how advancements in technology can enhance productivity but may also lead to unemployment and increased costs. Additionally, it emphasizes the importance of adapting to societal changes, addressing environmental responsibilities, and navigating political landscapes for successful business operations.

Uploaded by

ANUSHKA SINGH
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
4 views8 pages

EXTERNAL INFLUENCES ON BUSINESS (2)

The document discusses various external influences and constraints on business activities, including technological changes, social factors, environmental concerns, political factors, and sustainable development. It highlights how advancements in technology can enhance productivity but may also lead to unemployment and increased costs. Additionally, it emphasizes the importance of adapting to societal changes, addressing environmental responsibilities, and navigating political landscapes for successful business operations.

Uploaded by

ANUSHKA SINGH
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 8

EXTERNAL INFLUENCES AND CONSTAINTS ON BUSINESS ACTIVITY

Definitions
A constraint on a business is something that limits or controls its actions or decisions
A. TECHNOLOGICAL CHANGES THAT INFLUENCE BUSINESSES

New technology results into new products which in turn provide new market
opportunities. Also new technology means production becomes more capital intensive.
Modern technology changes are impacting heavily on businesses. For example, the use
of flow production methods, batch production, Kaizen, JIT, CAM, EFTPOs make
production more capital intensive, therefore reducing costs of production,
New technology provides more choice for the customers and also makes work easier.
It leads to higher productivity at a lower cost because new technology makes work to
be done faster and output is much larger. It improves health and safety at work; tasks
are made easier for workers and also it improves communication in terms of speed and
accuracy.
Examples of technological changes
1. In primary sector, the use of combine harvesters in agriculture, power saws in
lumbering, and trawlers in fishing. All these have resulted in large scale production
resulting in lower average costs.
2. In secondary sector, the introduction of computers, computer aided designs (CAD)
and computer aided manufacturing (CAM), Computer integrated manufacturing
(CIM), Automation in flow production and use of robots on the production line.
3. In tertiary sector, the use of e-commerce, e-retailing, electronic point of sale (EPOS)
and electronic funds transfer at the point of sale (EFTPOS).
4. In management, computers can carry out many routine tasks like book-keeping,
stock control, data analysis, storage and transfer.
Advantages of new technology
1. High levels of productivity.
2. Greater job satisfaction since boredom and monotony arising from repeated
jobs is taken over by machines
3. Workers are more motivated to undergo training for the new skills required in
the use of new technology
4. Better quality products are produced due to better production methods and
quality control
5. Larger output leading to lower costs of production.

Disadvantages of new technology


1. Creates unemployment since machines replace human labour.
2. It is expensive form of production since the machines are costly.
3. Technology changes very fast and it is expensive for a firm to keep pace with new
technology.
4. Workers will need re-training.
5. Overdependence on technology can be a disaster if the machines fail since the
entire production has to come to a standstill.

B. SOCIAL FACTORS INFLUENCING BUSINESS ACTIVITY


Businesses have to adapt to changes that occur in society. Examples are: -
1. Increased consumer awareness: Through the internet and modern methods of
communication including the social media, customers are quite well informed on
what products are being produced, where and at what price.
2. Changing roles and lifestyles: Women no longer carry out the roles of house-wives
as many are now engaged in employment and businesses. With increasing incomes
people prefer products and services that satisfy their unlimited wants other than
just the basic needs.
3. Urbanization: All over the world, people are moving from the rural areas to live in
urban areas. The demand for housing and associated compliments like household
furniture and equipment’s, urban transport has created additional markets for
goods and services.
4. Demographic changes – This refers to changes in the composition and
characteristic of human population e.g. education level, age composition, gender
and migration. For example, highly educated and skilled labour provides cheap,
productive labour to businesses. Age determines what kind of products should be
produced. Same to gender.
5. Pressure groups: This is a group or organization that tries to influence the opinions
of ordinary people and persuade the government to do something e.g. the
wGreenpeace movement, consumer organizations, trade unions and environment
activists.
6. Changes in tastes and preferences: Business have to adjust to changing tastes and
preferences of customers. Changing lifestyles like online shopping and delivery.
Changing shopping patterns from corner-shops to supermarkets and the use of
credit cards. This leads to constant change in demand patterns and even the
methods of delivery. Businesses have to keep changing their marketing mix.

C. ENVIRONMENTAL FACTORS INFLUENCING BUSINESS ACTIVITIES


The concerns about the environment has become a key external influence on
businesses. The following are emerging environmental concerns: -
 Carbon emissions
 Waste disposal
 Product packaging
 Sustainability
 Environmental laws
The major concerns involve the following: -
1. Global warming and climate change: Businesses contribute to global warming due
to large emission of greenhouse gases such as carbon-dioxide. Businesses have a
social responsibility to reduce the emissions.
2. Habitat destruction: Businesses have a social responsibility to protect natural
environments such as forests, rivers, oceans and the natural landscape.
3. Resource depletion: Many of the natural resources are at the risk of running out
e.g. oil, coal, gas and a number of minerals. Similarly, fish stocks are falling in all the
oceans in the world and so are forest resources. Agricultural land resources are
being eaten up by urbanization.
How are businesses affected by environmental factors?
Businesses undertake varied measures to meet the environmental concerns. Among
them are:
1. Carbon emissions: Many high polluting businesses are required to use carbon
capture and carbon sink methods to reduce the amount of carbon release into the
atmosphere and hence avoid paying carbon taxes. Moreover, firms are encouraged
to use renewable energy such as solar energy, geothermal and wind energy.
2. Waste disposal: Firms are required to manage their waste disposal by either
dumping it in dump-pits, burning in close circuit areas or recycling.
3. Sustainability: this refers to adopting production methods that have no overall
negative impact on the environment and therefore will not compromise the quality
of life of future generations.

With all these controls in place, firms may have to increase prices to cover for the costs
of implementing environmental friendly policies. This may reduce the number of
customers and affect profits. Consumers are becoming socially aware and are
increasingly demanding products from environmentally friendly firms. Pressure groups
like “Greenpeace” publicize the damaging activities of companies that pollute the
environment.
Advantages of an environmentally friendly business climate:
i. Longer life of assets especially capital resources that undergo depreciation.
ii. Increased trading opportunities with organization that demand environmentally
friendly suppliers.
iii. Improved company image and customer loyalty.
iv. A social benefit to society
Disadvantages of an environmentally disastrous business environment
i. Firms that do not conform to environmental laws, rules and regulations are likely
to suffer higher taxes and sometimes court fines.
ii. Firms are required to incur additional cost of waste disposal
iii. Cost of buying equipment’s and installing waste treatment machines.

Exam question

D. POLITICAL FACTORS INFLUENCING BUSINESS ACTIVITIES


Businesses cannot stay away of political activities going on within the country and
outside the country. For example
1. The conflict between Russia and Ukraine, the Syrian war conflict has oil export
repercussions that affect the entire business world.
2. In 2016, the UK voted to leave the EU, the Brexit. This has had trade implications
with all the firms doing business with UK because of the effects on the exchange
rate.
3. Political instability affects businesses. For example, during election period in Kenya,
there is always some anxiety about political instability.
4. Pressure groups such as ASH, which aims to eliminate the harm caused by smoking,
can harm tobacco manufacturing businesses.
5. Government fiscal and monetary policies can have far reaching implications on
businesses.
6. Government laws and regulations can also have far reaching implications on
businesses.
7. Different governments have varying political orientation that include fiscal and
monetary policy. For example, high or low taxes, high or low interest rates will
affect budgets and cash flows of most businesses.

E. SUSTAINABLE DEVELOPMENT
This means using resources in a manner that the resources will be available for a longer
period of time and for the future generation. This can be done by:
 Designing packaging that can be reused or recycled
 Use more energy –efficient equipment’s or renewable energy sources
 Explore ways of selling waste products to other firms as a by-product
 Use kaizen methods in production
END OF EXTERNAL FACTORS AFFECTING BUSINESSES

You might also like