Module 2 • Management
This act firmly places the responsibility for ensuring adequate standards of goods and services in the hands of those who provide them.
While the provisions of the Act imply more risk, more admin and more hard work for many businesses, businesses that provide quality products and excellent service have little to fear. However, the consequences of not complying can be serious: every business needs to take a long, hard look at their products, services, business methods and terms of trade.
Activity 7
Given your own business plan (or use any business example), identify any opportunities or threats that may develop because of government intervention? Give at least three of each.
3.3 Indirect external environment 3.3.1 Economy
The economy of the country indirectly affects most businesses. If the economy is in a growth phase more people become employed. This will increase the disposable income of households, which means that your customers have more money to spend. The opposite of this is also true. Businesses that provide luxury services such as nail care and gardening services are the first to suffer if the economy goes into a recession. Other factors such as interest rates and inflation will also influence your business.
Activity 8
Can you explain how interest rates can affect your business or any business that you are familiar with? Describe at least three direct consequences.
3.3.2 Political forces
A society is regulated by political and legal systems and it is important to understand how this will influence the way a business operates. The political system extends beyond the government and includes many other groups (see table). Any of the above-mentioned can influence business decisions. These bodies could increase or reduce the customer base, depending on the nature of a business or how it is managed. As mentioned earlier, the government itself is a major customer of goods and services. Serious labour malpractices or decisions, which can negatively affect the environment, are two examples where you can expect resistance.
• Other political parties • Interest groups or lobbies – e. g. Women Rights Groups • Institutions of power like the Competition Commission • Trade Unions • Major shareholders • Environmental groups like Green Peace
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