External influences on business activity

Every business is affected by external influences 外部影响 — things outside the business that it cannot control, such as the economy, the law and the environment. A good business watches these and plans for them.

Interest rates, taxes, unemployment and inflation all affect business

The business cycle

The economy does not grow at a steady pace. It moves in a repeating pattern called the business cycle 经济周期, with these stages.

The business cycle moves through growth, boom, recession, slump and recovery

In hard times a business may cut costs, lower prices, or sell cheaper products.

Government economic aims and how they affect business

Governments try to keep the economy healthy. Their main aims are stable prices, plenty of jobs, steady growth, and a stable currency. To manage the economy, a government uses or watches several economic factors. Each one affects every business.

Business activity can harm the environment, raising ethical questions for firms and governments.

External costs and external benefits

When a business acts, other people can gain or lose.

• external costs 外部成本 are costs paid by other people or by society, not by the business — for example pollution 污染, noise and heavy traffic.
• external benefits 外部收益 are gains for others — for example new jobs and better roads.

A business activity can create external costs and external benefits felt by other people

Sustainable development

Sustainable development 可持续发展 means meeting today's needs without harming the ability of future people to meet their own needs. A business can harm the environment 环境 — through waste, pollution, and using up resources — or protect it, through recycling, clean energy and less packaging.

Pressure groups

A pressure group 压力团体 is a group that tries to influence businesses and governments, for example to cut pollution. Pressure groups use the media, protests and boycotts. A business may change its behaviour to avoid bad publicity.

Ethics and profit

Ethical behaviour 道德行为 means doing what is morally right, even when no law forces it — for example fair pay, safe products, and no child labour. Acting ethically can cost more in the short term, so it may conflict 冲突 with profit. But it can also win loyal customers and a good name, which raise profit in the long term.

Shipping containers: businesses trade with the wider international economy.

Globalisation

Globalisation 全球化 is the growing trade and movement of goods, money and people between countries, so the world acts more and more like one single market. It has grown because of cheaper transport, better communication, the internet, and fewer trade barriers such as tariffs 关税 (taxes on imports).

Multinational companies

A multinational company 跨国公司 makes or sells its products in more than one country.

Exchange rates and trade

An exchange rate is the price of one currency in another. A change affects businesses that import 进口 (buy from abroad) and those that export 出口 (sell abroad).

• If the currency gets stronger (rises), exports become dearer for foreign buyers, so they sell less, while imports become cheaper.
• If the currency gets weaker (falls), exports become cheaper and sell more, while imports become dearer.

A useful memory aid is SPICED: Strong Pound → Imports Cheaper, Exports Dearer.

How a stronger or weaker currency changes the price of imports and exports

Worked example. A UK firm exports a machine priced at £20,000. The exchange rate moves from £1 = 1.50 USD to £1 = 1.20 USD. What happens to the price a US buyer pays, and is that good for the exporter? Convert the UK price at each rate: at the old rate 20,000 × 1.50 = 30,000 USD; at the new rate 20,000 × 1.20 = 24,000 USD. The pound has weakened, so the machine is 6,000 USD cheaper abroad and the firm should sell more - good for an exporter. Check it against SPICED: a weak pound is the reverse of it, so exports are cheaper. Convert the actual figures rather than only reciting the mnemonic, and notice that the UK price never changed at £20,000 - it is the foreign price that moves.

• Learn the business cycle (growth, boom, recession, slump, recovery) and how each stage changes sales, profit and jobs.
• Trace each economic factor to the business: higher interest rates → dearer loans, so less borrowing and spending; higher tax → people have less to spend; inflation → higher costs.
• External costs (pollution, noise) fall on other people, not the business; external benefits (new jobs, better roads) help others.
• Use SPICED for exchange rates: Strong Pound → Imports Cheaper, Exports Dearer.
• Ethical behaviour can cost more in the short term (so it may conflict with profit), but it can win loyal customers and a good name that raise profit later.