Q: To what extent are external influences likely to have a greater impact
on the company’s financial objectives than internal influences?
On one hand, it could be argued that to a greater extent, external influences have a greater
impact on financial objectives, as these could change consumer purchasing behaviour.
However, it could be argued that internal influences have a greater impact such as the
culture of the business/ its marketing strategy.
External influences greatly affect financial objectives because consumer behaviour could
change. For example, as current interest rates stand at 5.25%, this is high. When interest
rates are high, this means that loans and larger purchases become more expensive, and
mortgage repayments (contract dependent) can increase. Therefore, for an estate agents
business (like Caudwell or Taylor Wimpey), their target may be to increase their sales
volume by 20%. However, because of high interest rates, this means that less people are
willing to undertake buying a new home because it is more expensive. This then means that
Caudwell and Taylor Wimpey have less customers, which means that their target of greater
sales volume cannot be met. Therefore, this objective will have to change to suit the current
economic climate, which results in less sales and therefore less revenue; decreasing
shareholder satisfaction. However, it could be argued that as houses are an essential people
need, this means that regardless, people will still buy. Therefore, there will always be a
demand. This then means that the financial objectives may not change , as housing is
something people will always need; it is price inelastic. Having said this, this could mean that
other factors (like company ethos and culture) play a bigger part.
On the contrary, it could be argued that internal influences have a greater effect on financial
objectives, as they can directly dictate business finances. As the case study mentions that
the owner of a chilli peppers business, named Mark, is willing to be patient as he awaits his
business to make a profit, this means that because the owner/CEO is taking a more lenient
approach to performance, his employees will do the same. This then leads to a more relaxed
business culture, where profit isn’t intended in everything the business does. This then
means that because the business’ culture isn’t solely profit-concentrated, the objectives
won’t be; Mark instead will focus on other business areas (quality,marketing) because he
has expressed he is okay to be patient. Therefore, this finally results in financial objectives
being more relaxed, because the CEO has shaped the culture to the belief that profit isn’t
everything. However, despite the owner expressing he can afford to be patient, this could still
create a pressure to perform well to ensure the business survives in a forever fast-paced,
changing environment. This could then mean that Mark’s stance quickly changes due to
competition, or a fall in chilli pepper price, which means that the culture may not play the
biggest influence, but instead the changing environment (like new competitors mentioned in
the case study) that poses a threat to the business.
In conclusion, whilst internal influences can directly influence financial objectives by
increasing capacity utilisation and business output, external factors (like changing economic
climates) directly influence customer purchasing behaviour. Therefore, even if (internally)
product output is high, if costs are rising meaning the product price increases, customers will
on the company’s financial objectives than internal influences?
On one hand, it could be argued that to a greater extent, external influences have a greater
impact on financial objectives, as these could change consumer purchasing behaviour.
However, it could be argued that internal influences have a greater impact such as the
culture of the business/ its marketing strategy.
External influences greatly affect financial objectives because consumer behaviour could
change. For example, as current interest rates stand at 5.25%, this is high. When interest
rates are high, this means that loans and larger purchases become more expensive, and
mortgage repayments (contract dependent) can increase. Therefore, for an estate agents
business (like Caudwell or Taylor Wimpey), their target may be to increase their sales
volume by 20%. However, because of high interest rates, this means that less people are
willing to undertake buying a new home because it is more expensive. This then means that
Caudwell and Taylor Wimpey have less customers, which means that their target of greater
sales volume cannot be met. Therefore, this objective will have to change to suit the current
economic climate, which results in less sales and therefore less revenue; decreasing
shareholder satisfaction. However, it could be argued that as houses are an essential people
need, this means that regardless, people will still buy. Therefore, there will always be a
demand. This then means that the financial objectives may not change , as housing is
something people will always need; it is price inelastic. Having said this, this could mean that
other factors (like company ethos and culture) play a bigger part.
On the contrary, it could be argued that internal influences have a greater effect on financial
objectives, as they can directly dictate business finances. As the case study mentions that
the owner of a chilli peppers business, named Mark, is willing to be patient as he awaits his
business to make a profit, this means that because the owner/CEO is taking a more lenient
approach to performance, his employees will do the same. This then leads to a more relaxed
business culture, where profit isn’t intended in everything the business does. This then
means that because the business’ culture isn’t solely profit-concentrated, the objectives
won’t be; Mark instead will focus on other business areas (quality,marketing) because he
has expressed he is okay to be patient. Therefore, this finally results in financial objectives
being more relaxed, because the CEO has shaped the culture to the belief that profit isn’t
everything. However, despite the owner expressing he can afford to be patient, this could still
create a pressure to perform well to ensure the business survives in a forever fast-paced,
changing environment. This could then mean that Mark’s stance quickly changes due to
competition, or a fall in chilli pepper price, which means that the culture may not play the
biggest influence, but instead the changing environment (like new competitors mentioned in
the case study) that poses a threat to the business.
In conclusion, whilst internal influences can directly influence financial objectives by
increasing capacity utilisation and business output, external factors (like changing economic
climates) directly influence customer purchasing behaviour. Therefore, even if (internally)
product output is high, if costs are rising meaning the product price increases, customers will
