Unit 7 Business Systems
BTEC Level 3
Market Sector, Company Information,
Laws & Costings
p4- Explain the external factors and economic
environment that affects the way in which an
engineering company operates.
EXTERNAL FACTORS - External factors affect the operation of all engineering
companies. Some can be predicted or planned, others can be seen as opportunities or
considered to be threats.
• *Costs of Raw Materials •
Political Regional Factors
• Government Legislation *Global
• Factors
• Technological Advances •
*Physical Location New
• *Customer Base Labour Market •
Development Customer
• *Weather •
Development
• Sport (Olympics) Environmental Supply
• & Demand
• Constraints Balance of Payments Tourism
• Consumer Confidence and customer Innovation Change
• relationships Demographic and social
• trends
• Competitive products and
services
COSTS OF RAW MATERIAL - The supply of raw materials to engineering companies and
parts suppliers could be interrupted for a variety of reasons, including availability and
pricing. Prices for raw materials necessary for production have fluctuated significantly in
the past and increases could affect the Company’s results of operations and profit
margins. While the Company generally attempts to pass along increased raw material
and component parts prices to its customers in the form of price increases, there may be
a time delay between the increased prices to the Company and the Company’s ability to
increase the prices of its products, or it may be unable to increase the prices of its
products due to pricing pressure or other factors. Consequently, its results of operations
and financial condition may be materially adversely affected.
CUSTOMER BASE - The customer base is really important to an engineering business as
they rely on repeatable orders and services of the business. These customers are a
main source of revenue for a company. The customer base may be considered the
business's
, Unit 7 Business Systems
target market, where customer behaviours are well understood through market
research or past experience. Relying on a customer base can make growth and
innovation difficult and I feel engineering companies should see the bigger picture in
thinking their customer base may change suddenly or slow down over a period of time
depending in what industry they are in at the time.
WEATHER - Oil is one reason why weather impacts just about all businesses. Since oil
demand is increased during colder winters, oil prices increase making transportation
more expensive. All products require transportation and prices suffer as a result of this.
Another way weather can impact engineering businesses is planning and consistency.
Weather delays can cause some businesses to lose days at a time either directly
impacting sales or stopping production completely. This causes projects to be delayed
requiring expensive catch-up work and late deliveries to customers. It is important to
maintain a level of planning and flexibility to limit these problems.
GLOBAL FACTORS - Global warming is one example that is affecting engineering
business. In an effort to contain global warming, governments and engineering
businesses worldwide are focusing on sustainability by encouraging environmentally
friendly practices. Going green is a powerful global force that comes at a cost to small
business. Every company product must have a stamp of approval proclaiming its
production and disposal processes are green. The engineering industry must observe
stringent environmental laws that add to administrative overheads. The net effect is a
rise in production costs incurred by the manufacturing sector and the business
community as a whole.
PHYSICAL LOCATION - There are many reasons why an engineering company might
decide to open new premises or relocate its existing operations. It might want to expand
the business, so it will open up areas in cities where the organization did not previously
have a site. A business might also want to restructure its operations. It might do this by
bringing together some existing departments into new purpose built premises. It might
decide to shut its less profitable operations and open branches in locations that offer
more business potential. A business will have to consider many factors when determining
where to locate a new branch or operation. Usually, it will have to balance several factors
in making a decision. Sometimes one factor may sway the decision. It may choose a site
with the cheapest land or buildings, and then it may decide on a location that is perfect
for key employees. A business needs to be able to recruit staff with the right skills base;
it might choose a site that has easy access to raw materials I think the key factor would
be many engineering firms require easy access to good roads and railway links and
linked to modern telecommunication services. These ensure that they can meet
customer’s demands and achieve all delivery requirements.
ECONOMIC ENVIRONMENT - The economic environment is important in finding out
the financial abilities in which an engineering company operates. The state of the
economy often goes side by side in the amount of profitability in an engineering
company.
Inflation rates Economic growth
Prevailing interest rates Exchange rates
BTEC Level 3
Market Sector, Company Information,
Laws & Costings
p4- Explain the external factors and economic
environment that affects the way in which an
engineering company operates.
EXTERNAL FACTORS - External factors affect the operation of all engineering
companies. Some can be predicted or planned, others can be seen as opportunities or
considered to be threats.
• *Costs of Raw Materials •
Political Regional Factors
• Government Legislation *Global
• Factors
• Technological Advances •
*Physical Location New
• *Customer Base Labour Market •
Development Customer
• *Weather •
Development
• Sport (Olympics) Environmental Supply
• & Demand
• Constraints Balance of Payments Tourism
• Consumer Confidence and customer Innovation Change
• relationships Demographic and social
• trends
• Competitive products and
services
COSTS OF RAW MATERIAL - The supply of raw materials to engineering companies and
parts suppliers could be interrupted for a variety of reasons, including availability and
pricing. Prices for raw materials necessary for production have fluctuated significantly in
the past and increases could affect the Company’s results of operations and profit
margins. While the Company generally attempts to pass along increased raw material
and component parts prices to its customers in the form of price increases, there may be
a time delay between the increased prices to the Company and the Company’s ability to
increase the prices of its products, or it may be unable to increase the prices of its
products due to pricing pressure or other factors. Consequently, its results of operations
and financial condition may be materially adversely affected.
CUSTOMER BASE - The customer base is really important to an engineering business as
they rely on repeatable orders and services of the business. These customers are a
main source of revenue for a company. The customer base may be considered the
business's
, Unit 7 Business Systems
target market, where customer behaviours are well understood through market
research or past experience. Relying on a customer base can make growth and
innovation difficult and I feel engineering companies should see the bigger picture in
thinking their customer base may change suddenly or slow down over a period of time
depending in what industry they are in at the time.
WEATHER - Oil is one reason why weather impacts just about all businesses. Since oil
demand is increased during colder winters, oil prices increase making transportation
more expensive. All products require transportation and prices suffer as a result of this.
Another way weather can impact engineering businesses is planning and consistency.
Weather delays can cause some businesses to lose days at a time either directly
impacting sales or stopping production completely. This causes projects to be delayed
requiring expensive catch-up work and late deliveries to customers. It is important to
maintain a level of planning and flexibility to limit these problems.
GLOBAL FACTORS - Global warming is one example that is affecting engineering
business. In an effort to contain global warming, governments and engineering
businesses worldwide are focusing on sustainability by encouraging environmentally
friendly practices. Going green is a powerful global force that comes at a cost to small
business. Every company product must have a stamp of approval proclaiming its
production and disposal processes are green. The engineering industry must observe
stringent environmental laws that add to administrative overheads. The net effect is a
rise in production costs incurred by the manufacturing sector and the business
community as a whole.
PHYSICAL LOCATION - There are many reasons why an engineering company might
decide to open new premises or relocate its existing operations. It might want to expand
the business, so it will open up areas in cities where the organization did not previously
have a site. A business might also want to restructure its operations. It might do this by
bringing together some existing departments into new purpose built premises. It might
decide to shut its less profitable operations and open branches in locations that offer
more business potential. A business will have to consider many factors when determining
where to locate a new branch or operation. Usually, it will have to balance several factors
in making a decision. Sometimes one factor may sway the decision. It may choose a site
with the cheapest land or buildings, and then it may decide on a location that is perfect
for key employees. A business needs to be able to recruit staff with the right skills base;
it might choose a site that has easy access to raw materials I think the key factor would
be many engineering firms require easy access to good roads and railway links and
linked to modern telecommunication services. These ensure that they can meet
customer’s demands and achieve all delivery requirements.
ECONOMIC ENVIRONMENT - The economic environment is important in finding out
the financial abilities in which an engineering company operates. The state of the
economy often goes side by side in the amount of profitability in an engineering
company.
Inflation rates Economic growth
Prevailing interest rates Exchange rates
