External Factors That Can Affect A Business

Last Updated: 18 Jun 2020
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Macro environment- Retailers are endangered to external effects over which they have no control. These external influences are also recognized as macro-environmental factors and can include the alterations in consumer and business confidence and Changes in the housing market Successful retailers are the ones that get ahead and react for that reason. External factors must not be ignored as they might position a risk to the long-term survival of an association. A retailer’s macro environment may be affected by the resulting external impacts; altering customers’ tastes, Retailers giving similar goods at reduced prices, quickly changing market.

Government policy- This can have an impact on the macro- environment of retailers. For instance, political choices can effect on crucial factors such as education and health issues affecting the workplace, trade barriers, legislation and economic infrastructure. Other government are going to be explained in the following sections.

Trading hours- The Sunday Trading Act 1994 rules a retailer exact to trade on a Sunday. The act permits shops to open, but limits opening times of bigger stores of more than 280m squared to a limit of 6 hours. Furthermost shops opening on Sundays have a habit of opening at 10am to 4pm. The legislation was met with significant opposition. Nonetheless, the shop workers trade union USDAW {union of shops, distributive and allied workers} finally decided to care the 6 hour Sunday trading in reoccurrence for a trust that Sunday working would be harshly voluntary and premium pay would be given. Sunday trading has been derestricted in Scotland and such stores are able to open at any time of the day. But, the right of workers in Scotland to decline to work on a Sunday was later discussed by the Sunday working act 2003.

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Planning guidance- The Town and Country Planning Act lead local authorities to make local structure strategies. These plans show how shopping areas are possible to be established over a ten year period. In this day and age, retailers have to go with a particular sequence when looking for consent to create out-of-town centres. If a retailer puts forward a plan, it must reflect its store placement option in this instruction; the town centre, a reputable edge of town centre, a local centre, and Out-of-town place which can be made voluntarily available by a selection of transport choices. This act makes it much more complicated for developers to get planning permission for out-of-town developments. Local planners are mainly concerned that any expansion would not damage the vitality and viability of any close by town centre.

Implementation of legislation- The Office of Fair Trading (OFT) was well-known by the Enterprise Act 2002, which applies both consumer protection and competition law. The OFT’s aim is to make markets work well for customers by making sure forceful competition. The OFT has three key operational sectors which all distress retailing. Competition enforcement- applies the Competition Act 1998. The OFT looked into the fusion between Morrison’s and Safeway. One of the recommendations was that Morrison’s sold a few former Safeway shops to other superstores operatives. Consumer regulations enforcement- enforces the Enterprise Act 2002. The operational merchant of computers, software and IT services, Dell corporation Ltd collaborated with the OFT and decided to better its consumer settlements. Markets and policies initiatives- the OFT has been inquired by groups on behalf of independent retailers to examine the movement of superstore chains such as Tesco into the convenience store retail market.

Social changes- As the community’s social situation alters, the retail area also needs to change. Stores must stock up products that join the community’s needs and anxieties. An example of this would be supermarkets now supplying more-free- range poultry goods to meet the strains of society.

Demographics- Retailers also need to be cautious of their own social responsibilities and take into consideration the modifying demographics of society. They have to look at the way they act towards the other parts of society that they come into linking with. The populace of the UK continues to rise and people are starting to live longer: more persons are living the age beyond the 65 population and there is an upsurge in people living to. All of these demographic drifts have significant effects in the retail economy. They influence both on the level of demand and also the shape of demand for other services and products.

Household structures - The layout of households in the UK has altered suggestively in recent years. With the decline traditional clan, and the rise in single individual households and co-habitation, retailers have had to aim their goods to suit other circumstances. Superior correspondences for families and smaller people packs for single people have become the normal way for retailers to give their goods.

Mobility- Superior mobility of the consumers has broadened the selection of retailers and location that they can pick from. Out-of-town retail centres have caught a massive share of the expenses. Shopping has become a leisure activity with more people travelling larger distances to shop rather than go shopping locally.

New technologies- Technology is fundamental for making sure a competitive benefit in a worldwide marketplace. New technologies allow services and products to be made cheaply and to a fine quality and they give the customer a selection of innovative services and products, such as internet banking. Flight, theatre and games tickets can all be purchased on the web getting rid of the need to queue up or telephone a reservation. These recent technologies have also had an impact on traditional industries such as publishing-books can now be downloaded from the web to a PC, an iPod or handheld digital book reader. Likewise, technology allows businesses to converse with the consumer through customer relationship management, poster ads and personalised messaging.

Economic growth- This is measured by the yearly change in Gross Domestic Product and is typically uttered as a percentage. It can be inclined by many factors such as higher business savings and improved productivity. For retailers and customers, economic growth gives advantages including extra disposable income, formation of jobs and decrease in less paid jobs. There are disadvantages of economic growth such as Additional pollution due to higher production stages, Decrease in non-renewable resources such as oil and the rich society might be the only ones that promote.

Recession- This can have a big impact on the retailing trade and use mostly accompanied by a reduction in the value of the stock market, a rise in unemployment and a decline in the property market. A recession is usually measured less harsh than dejection while if a recession carries on for a long period of time it is regularly then classified as a depression.

Typical features of a recession include Increasing unemployment as businesses make workers disused/lay off contract staff to manage their costs, a sharp drop in business confidence and a succeeding decline in takings, and a decline in customer spending as people become aware of costs

Whilst in a recession, people are likely to cut back on many luxury services and products. But, some actions such as trips to the movies knowledge growth whilst a recession.

The competitive environment- The retailing environment is more passive than much other business sectors, even though it is always worth looking into different classes of retail activity and making own judgement. For example, some sectors with more competition are very often the ones facing the most change.

Competitors- Retailing shields a wide selection of sectors, from the price-led, value retailers through specialist teenage retailers to the more self-improving or older focused trademarks. On the surface, they might look as if they are challenging with each other. But, every retailer within a particular sector has its personalised particular appeal, for instance, Primark for competitive prices, Marks & Spencer for quality and Top Shop for style.

Barriers to entry- These are obstacles that are considered to block potential entrants or latest associations from profitably arriving in a market. The capacity of existing industries to keep hold of such obstacles will rest on their marketing and financial control. In other disputes, barriers to entry have the outcome of making a market less wanted to additional businesses. For instance, a beauty salon, which is likely a relatively less expensive market to enter because capital needs are low and the training can be achieved fairly fast, but differ this with superstores. The size of recent competitors means they benefit from economies of scale, making it tough for others to enter the market. Wal-Mart is the world’s biggest retailer and as a result of the expense of building latest stores in the UK, decided to buy the existing retailer ASDA.

Pricing- Retailers embrace a selection of tactics to pricing. The 4 main pricing approaches include the following; Premium pricing- this is used when retailers give products and services at a great price. This scheme is used when the service or product is exclusive or when a substantial competitive lead exists. Instances include luxury space such as the Savoy Hotel or executive class flights on jets. Economy pricing- this is when retailers offer services and products at a low, no add-ons price. All features of the business are saved to a minimum, including marketing.

Superstores such as Tesco have a cost brand for products such as washing powder, bread and soups. Penetration pricing- This is used by retailers when they charge considerably low prices than the competitor in order to get a market share. Once they have attained their objective, they raise their prices again. Sky TV originally uses this scheme. Price skimming- this is when the retailers charge a high price since they have a major competitive benefit. Though, the reasonable gain is not sustainable and inclines to get latest entrants into the market. Unavoidably, the prices drop because of the amplified supply to the market. Most premium technology goods are priced using this policy.

New products and services- Retailers are constantly on the lookout for recent services and products to give to their customers. Some examples are Tesco which also provide banking services, insurance, credit card services. Also Marks & Spencer by Autograph, blue harbour and other individual designer products

Development of shopping for a mobile population- The surge in mobility of the populace is making new retail openings for associations. Selected of these opportunities are discussed in the following sections.

Airports- This continues to increase as the figures of destinations being aimed by low cost carriers are on the upsurge. Airport management reflects retail as an important factor in converting revenue. For example, Heathrow airports terminal 5 gives a variety of retail outlets selling goods such as old-fashioned and modern gifts, luggage and travel-related products and jewels, accessories and watches. They too interest high street stores such as HMV, WHSmith, Accessorize and Boots the chemists’.

Railway stations- Passenger statistics are rising on the national rail system. Closeness shops, confectionary stores, tobacconist shops are all relishing an increase in claim. Goods such as DVD’s, music, electrical items, tailored and gift consumptions are accessible at the stations. They too have tested with health and beauty operatives such as Boots, The Body Shop and Superdrug. High prices accessory stores such as Vodaphone and the stationer Paper chase have also connected to the market.

Motorway service areas-These give a selection of food openings as well as Marks & Spencer, Somerfield, Waitrose and Thornton’s. They also have modern high street retail outlets such as WHSmith and Fonebiz. Retail passages within these MSAs are limited on the capacity of their stocks. They cannot flog off liquor or not can they publicize their brands. A review of these instructions would permit these outlets to develop in line with customer requests and desires.

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External Factors That Can Affect A Business. (2018, Mar 23). Retrieved from https://phdessay.com/external-factors-that-can-affect-a-business/

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