Effects of External Influences on a Business

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External Influences include factors over which a business cannot control. Such factors force business management and owners to adjust production operations accordingly. External influences include financial, economic, social, legal, political and technological development. Businesses are inclined to adjust to these environmental influences in order to keep a strong hold on sales and profits while tending to the needs of an evolving society. The economy experiences cycles of ‘booms’ and ‘busts’. Economic activity does not remain at the same level as total production, income; spending and employment continue to fluctuate. A boom period can lead to prosperity in terms of employment, income and spending however periods of recession can lead to the downfall of a business. High unemployment levels, high inflation, lower wages and low consumer spending all contribute to a business’ failure. In order to prevent this, entrepreneurs may involve themselves in businesses which are popular even in a recession. Such businesses include education, finance and telecommunication. Deregulation of Australia’s financial system continues to undergo change. This has caused the financial sector to become more flexible and market orientated. The introduction of banking products has helped open the financial industry to competition. Due to globalisation it is no longer necessary for large businesses to use national financial institutions for raising finance. Australia’s geographical location and globalisation are the two main factors which effect business activity. They provide challenging opportunities for business expansion. Further changes have an intense influence on business activity. These changes may alter a population’s demography and thus the demand of the population. For example Australia’s aging population has been the source of shortages in the workforce and a high demand of age related services. Population growth and decline may also effect economic growth. Globalisation...
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