In this essay I will be describing how three external factors are impacting upon the business activities and stakeholders of John Lewis and Oxfam. The first of the three external factors I have chosen is the credit crunch. The credit crunch is a decline in the availability of loans or a tightening of conditions required to take out a loan from banks. It also means that there are reductions on the interest rates set up by banks for saving.
Credit crunches are normally caused by a period of careless and risky lending to people who don’t necessarily fit the exact requirements, these careless decisions lead to no return and leave the banks losing a lot of credit.
Impact in business activity John Lewis The credit crunch has a big impact on all organisations but a bigger impact on department stores as they have more products to manage and must make sure that they are not losing out in profit because of the public saving back money.
This means for John Lewis a loss of total income meaning they might not be able to afford to give out certain wages, thus resulting in loss of jobs over the entire organisation. With the loss of many jobs comes a possibility of having to restructure the business’ organisation chart trying to think of what ways to manage staff is the most effective. Because of the loss of overall income there is also a reduction budget over all of the operations they can do, this means careful decision making in order to not lose money. Oxfam
The credit crunch also affects charities such as Oxfam who rely on the public for donations. Having a economical climate like the credit crunch means less people willing to donate as they need to save money due to the lack of loans and the recent cut on interest rates. Having people not donating will lose publicity for Oxfam and they will need to get the message out that it is still important that they receive donations even though in the hard financial times everyone is in. They will do this by marketing on either TV or maybe a less expensive advertisement such as local fliers handed out door to door.
The credit crunch will reduce their budget significantly and will tighten all financial operations in order to avoid losing money. Impact on stakeholders John Lewis The credit crunch also impacts the stakeholders of every organisation. For John Lewis this is relevant as the managers have to implement new business structures and attend meetings as to what structure is the best decision to act on. Shareholders have a negative impact as their shares that they bought with John Lewis will decrease with loss of profits and income.
This causes a lot of stress and panic for people who have invested a lot of money with John Lewis as they aren’t sure whether they will get it back. On the flip side, the share prices will have been lowered and for people who are looking for cheap investments can buy a lot of shares up in hope of a recline in profits and share value. The very top of the managing board (the owners) have big decisions on what managers to remove and what staff is really necessary, this is devastating as managers or even staff relationships could have been built up over many years and will now have to be fired.
The credit crunch also affects the employees of John Lewis as they must adapt to the new structures and new work mates, they must also receive training on how to avoid wasting resources as to keep to the budget given by their management. Oxfam Oxfam’s stakeholders are also affected by the credit crunch, this is evident as the mangers have to work around the new budget restrictions given to them and launch new market operations to persuade people to become volunteers. They must run more advertisements to try and get more people in hard inancial times like this as they will not have as much time to be doing volunteer work due to the extra struggle to find cash. The second of the three external factors is the entrance of new competitors into an organisations market. New competitors can bring huge amounts of pressure to organisations with their original market share to become more productive in every aspect of their business. Impact in business activity John Lewis The entrance of new competitors for John Lewis puts a lot of pressure on them to keep original customers.
They have to introduce ways of keeping them coming back to their store and not the new competitors who have just set up. They could do this by creating a club card which gains points for every purchase they use, the higher the purchase the more points they get to spend in store in return for products as a reward. If they do not come up with a decent strategy to keep customers coming back then they will more than likely loose many customers to their new competitor which could prove fatal to the financial statement figures.
There is also an increased pressure to just reduce prices for a set period in order to calm the hype of a new store being opened in the area. More advertising will also have to be done to compete and to try and fade the other store out of the market. Oxfam Although you wouldn’t expect charities to have competition, they do. A new competitor for Oxfam would result in fewer donations as the new charity will without doubt have marketing strategies to persuade people to donate to them.
The public cannot afford to donate to every charity out there therefore it increases pressure on Oxfam to make sure that they are the charity receiving the donations. In order to do this they will need to step up on their marketing activities like TV advertisements, fliers, leaflets or offers. Impact on stakeholders John Lewis New competitors entering the market will affect the stakeholders of John Lewis. The managers need to think over new marketing operations introduced to employees to implement the capture of more customers.
It will affect the customers who find better deals elsewhere and change where they do their regular shopping. The employees are under big pressure to increase customer service, making their role even more important and stressful. Oxfam It also affects Oxfam’s stakeholders. The managers have to launch big campaigns to gain publicity, also creating marketing plans to show their charity and explain why people should donate to them rather than other charities. It is vital they get across the fact that they will make good use of the money invested.
The volunteers, although working for free, are told to perform and work with more effort to really emphasise the work done by Oxfam. The very last external factor that influences every single business is the political pressure and public pressure to cut every organisations carbon footprint. A ‘Carbon Footprint’ is the total amount of greenhouse gas emissions used by one organisation, event or product. The main gas that is reported and spoke about in the news is ‘Carbon Dioxide’ and many governmental projects have been undertaken in order to rise awareness to business heads and every day people about how important the situation is.
Impact in business activity John Lewis The impact of having to cut their carbon footprint for John Lewis is large as they are such a big organisation and therefore will make a large change if they implement eco-friendly ways. John Lewis will have to change training of the staff to make them aware on how to cut down on waste products; this could be in store by recycling product packaging instead of disposing of it. They would have to buy in recyclable paper, bags, printers etc. from new suppliers rather than the previous un-eco friendly suppliers.
Also, with all the new activities going on about cutting their footprint, John Lewis should take the time to create their brand and advertise on TV or on products packaging bragging about how eco-friendly they are. Oxfam Oxfam will need to do just the same as John Lewis. They will need to produce a cascade level of training for volunteers to carry out their projects in an eco-friendly way. They will also need to change their supplier to someone who can offer recyclable products or products that last longer and are energy efficient. This could be new cars that are solar powered or adding solar panels to company buildings.
Also running activities telling the public that Oxfam is the dominant charity as its projects are eco-friendly and effective at the same time. Impact on stakeholders John Lewis The carbon footprint appeal has a big impact on John Lewis’ stakeholders. Their managers have to produce more training plans for employees so that they know what they are doing and that they are recycling /acting correctly. The management team also get more money to invest in other areas after they break even from all of the eco-friendly investments, for example this could be saving on petrol with new company vehicles that are more efficient.
It also affects employees who have to attend more training sessions to learn how to operate new assets and new processes within the organisation. Finally, the customers are also affected as they have a positive change of attitude towards the John Lewis brand. Oxfam The managers of Oxfam are affected by the pressure to cut their carbon footprint. They have to produce more training sessions and look at how they will invest money for eco-friendly assets for example recyclable paper and packaging.
The volunteers are also affected as they have to attend the training sessions to know what the new processes are and what to do. The customers, like John Lewis, have a positive change of attitude towards the Oxfam brand. Conclusion In conclusion, external factors have a big impact on all aspects of businesses and can also affect certain stakeholders significantly. Organisations like John Lewis and Oxfam need to be aware of their business environment because if an unexpected external factor should arise they can act quickly before it can harm business figures.
Cite this Business Environment
Business Environment. (2016, Oct 12). Retrieved from https://graduateway.com/business-environment-2/