3.2 Influences on business

• Technology such as e-commerce lets a small business sell beyond its local area, but it costs money to set up and keep up to date.
• Ethical behaviour goes beyond what the law requires, for example paying workers more than the legal minimum. It can raise costs in the short term.
• When interest rates rise, borrowing costs more and spending usually falls. In a recession, sales of luxury items tend to fall more than sales of basic goods.
• A weaker pound makes imports dearer and exports cheaper for a UK business.
• New laws, such as a rise in the minimum wage, can raise a business's costs.
• Businesses compete on price or on non-price factors such as quality and customer service.

E-commerce

Buying and selling goods and services over the internet.

Globalisation

Businesses and markets around the world becoming more connected.

Recession

A sustained period when the overall level of economic activity falls.

Interest rate

The cost of borrowing money, or the reward for saving it.

Exchange rate

The price of one currency in terms of another.

Legislation

Laws that businesses must follow, such as minimum wage law.

Non-price competition

Competing on things like quality or service, not on a lower price.

• Thinking that acting legally is always acting ethically. A business can follow the law and still behave badly.
• Saying that matching a rival's lower price is non-price competition. It is price competition.
• Getting the exchange rate effect backwards. A weaker pound makes imports cost more pounds.

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