Influences on business: a complete overview for WJEC GCSE Business

What this covers

Influences on business (the external environment) covers the outside forces a business cannot control but must react to. This overview ties the dot points together: the economic climate, globalisation and international trade, ethical and environmental considerations, legislation, and technology. These influences shape demand, costs, decisions and reputation across every other function of the business.

The economic climate and globalisation

The economic climate is the state of the economy. Interest rates change borrowing costs and spending, inflation raises costs and cuts spending power, unemployment affects demand and recruitment, taxation affects spending and profit, and exchange rates change the price of imports and exports. The business cycle swings between boom and recession, so firms expand in a boom and cut costs in a downturn. Globalisation is the growing connection of economies worldwide: it opens larger export markets and cheaper supplies but brings tougher competition, with imports bought from abroad, exports sold abroad, and multinationals operating in many countries.

Ethics, the environment and the law

Business ethics are the moral principles guiding behaviour, and there is often a trade-off between ethics and short-term profit, though acting responsibly can pay off in reputation. Sustainability means not harming future generations, and firms reduce waste, emissions and packaging. Legislation sets the rules: consumer protection law (quality, honest pricing, refunds), employment law (fair pay, no discrimination, holiday and sick pay) and health and safety law (a safe workplace). Following the law costs money but builds trust and avoids fines and reputational damage.

Technology

Technology has transformed production (automation: faster, more accurate, consistent), communication (instant, worldwide) and selling (e-commerce: online, around the clock, global reach). Its benefits are higher productivity, lower long-term costs and a wider market; its drawbacks are the up-front cost, the need for training, the risk to some jobs, and disruption from breakdowns or cyber-attacks. Technology can both replace jobs and create new ones needing different skills.

Check your knowledge

1. How does a rise in interest rates affect a business? (2 marks)
2. What is the difference between an import and an export? (2 marks)
3. What is a multinational? (1 mark)
4. What is meant by business ethics? (2 marks)
5. State two ways a business could be more sustainable. (2 marks)
6. State two laws a business must follow. (2 marks)
7. What is automation? (1 mark)
8. State one benefit and one drawback of new technology. (2 marks)