In task D3 I will be suggesting and justifying ways in which my two chosen businesses Ikea and Richards Paints could respond to changes in external influences.

To keep a track on competitors and Ikeas customers, Ikea should monitor their customer levels and profit margin to see if there is a drop in sales

Economic Conditions

If interest rates go up or down this will affect the functioning of Ikea and they must do a few changes to alter what the change of interest rates did.

If interest rates go up customers will then have less disposable money to spend at Ikea. To help more customers be able to afford their products Ikea could do many things. For example Ikea could lower prices on some products for example kitchen products. Ikea could also introduce a buy now pay latter policy with those who can not afford to buy the product now.

Ikea itself is not affected with interest rates because they have their own bank so does not pay interest rates.

If exchange rates go up or down this will affect the functioning of Ikea and they must do a few changes to alter what the change of exchange rates did.

If exchange rates go down products will then be more expensive to buy abroad. Since Ikea must send a majority of their profit to Sweden, and Sweden's currency is the Krona Ikeas around the world must change their currency to the Krona. If exchange rates are high the pounds value will be worth less in Krona. To get as much money as possible Ikea must wait until exchange rates go down so the pounds value is worth more when changed into Krona.

If income rates go up or down it will affect the functioning of Ikea and they must do a few changes to alter the affect of the income tax rising or decrease.

If income taxes rise, customers will then have less money to spend on products such as a new kitchen. If this does accrue Ikea may need to decrease their products on certain products or could introduce a buy now pay later offer to customers who are affected by the raise of interest rates.

On the other hand Ikea could higher prices or even cut sales if interest rates fall. This will mean more profit for Ikea, so will have more money to distribute else where.

Cooperation Tax does not affect Ikea if they do fall or rise because they are a charitable organisation.

The rise or fall of unemployment may cause Ikea to do a few changes which will make the effect of unemployment to their advantage.

Low levels of unemployment and good occupation is a good thing for Ikea because if more customers have a steady high paid job they will more likely to purchase such things a new kitchen. If this occurs Ikea could rise prices or produce more expensive products to sell.

Nevertheless high levels of unemployment or not good occupation situations is a bad thing for Ikea because if more of Ikeas customers have no jobs or bad occupations will mean customers they will have less money to spend on products , so will spend the money they do have of necessities like food. For this reason Ikea may need to introduce lower prices, sales or introduce a buy now pay later policy or Ikea could introduce the same kind of products but use cheaper materials so it will cost less to manufacture and will be less to buy.

Environmental constraints

If there is a new act of parliament (law) about the amount of waste you can produce or the amount of recycling you must do Ikea will be affected. The affect of this is not good for Ikea because Ikea would then have to pay a firm to dispose of the excess waste by recycling. This will cost Ikea dearly because they have many outlets which will need this service.

If there is new act of parliament (law) about the amount of vehicles on the road or the type of fuel used to power vehicles which include liquid patrolmen gas or electricity. Ikea will be affected by this because they have many delivery tucks around the world so may need to change the fuels they use which may be much more expensive, so Ikea will have less money to spend on improvements or designing new products.

If there is new act of parliament (law) about the hours you can use noisy machinery, this will affect Ikea. Ikea will be affected because they would have to limit the amount of products they make which will lead to loss of profit.

If there is a new act of parliament (law) about smoking Ikea would be affected because many customers may smoke, and may not go to Ikea because of the smoking band.

If there is a new act of parliament (law) about the amount of space Ikea can take up, Ikea must then build their stores tall and thin to save the environments landscape. If this does accrue Ikea must then spend more money on the structure of the building so there will be less money to spend on refurbishing.

Richards Paints

Competitors

If Richards paints has a new competitor which has bought a plot near their site which also sold bespoke industrial paint, Richards Pants would be affected. This affect on Richards Paints would be bad because their prices are quite high and will lose all their customers so will be out of business. Richards Paints could prevent this from happening by lowering prices; they could provide lowered prices by buying cheaper raw materials so could sell paint for less money.

Richards Paints could also advertise more in local trade magazines which will make their business better known so customers will most likely buy paint from them if they know the company.

On the other hand if there are fewer competitors Richards paints will make more profit so will have money to spend on improvements.

Economic Conditions

The rise or fall of interest rates may affect Richards paints in a bad or good way.

If Interest rates raise this will be a bad thing for Richards Paints because the owners will the have to pay more money back to the bank because of their mortgages and bank loans. To pay for the bills Richards paints could higher prices, buy cheaper raw materials or even advertise so more customers will purchase more paint, so their will more money to distribute on the bills.

Another way they are affect is their customers will also have tom pay more to the bank so will have less money to spend on a new paint job. Richards Paints could lower prices to make it possible for other businesses will pay for paint.

Furthermore if interest rates fall Richards Paints will be affected in a good way because they have to give less money to the bank and their customers will also have more money to spend on a new paint job. Because of this Richards Paints could rise prices a little so will then have more money to spend on paying their bills.

The rise or fall of exchange rates may affect Richards's paints in a bad or good way.

If exchange rates fall the pound will be worth less, when Richards's paints purchase their raw materials from Asia. So if exchange rates fall the pound may be worth less in rupees, so Richards Paints will have to pay more for their raw materials. Because of this Richards Paints could wait until exchange rates rise so they have to pay less for their raw materials.

Income tax may affect Richards Paints if the Income taxes fall or rise. The effect on Richards Paints could be good or bad. If income taxes fall this will mean many customers will have more money to spend, which means more profit. However if income taxes raise many customers will not be able to afford to buy industrial paint. Richards's paints could lower prices which will mean less profit but could mean more customers.

Cooperation tax affects Richards Paints; this can be good or bad.

If Cooperation tax raises Richards paints must pay more money to the council from their profit which means less money for improvements.

However if Cooperation tax falls Richards paints must then pay less money to the council.

Unemployment or occupation does not affect Richards Paints because other companies buy the industrial paint and not the public so can afford to pay for paint.

Environmental constraints

If there is a new act of parliament (law) about the amount of waste you can produce or the amount of recycling you must do Richards Paints produce a lot of waste but is not really affect because they already recycle their waste.

If there is new act of parliament (law) about the amount of vehicles on the road or the type of fuel used to power vehicles which include liquid patrolmen gas or electricity. Richards paints could also use fewer delivery trucks, but this will mean less business.

If there is new act of parliament (law) about the hours you can use noisy machinery, this will affect Ikea.

Richards Paints will be affected because they would have to limit the amount of paint they make which will lead to loss of profit.

Laura Tomlin 10BD Unit 1 - Assessment Investigating Businesses