Unit 1 – The Business Environment P6
P6 –Describe how political, legal and social factors are impacting upon the business
activities of the selected organisations and their stakeholders.
Kellogg's are impacted by political factors as they are the decisions and actions of the
government who hold a greater powered than Kellogg's. This means Kellogg's must abide to
their decisions or they could face legal action. Similar to political factors, legal factors also
have to be abided by otherwise legal action may be taken. Social factors refer to the way
the consumers of Kellogg's act and how their activities change, which has to be quickly
adapted by Kellogg's to increase sales as the consumer’s needs are being more greatly met.
The stakeholders are therefore impacted as they are affected when Kellogg's change their
activities.
A political factor that impacts Kellogg’s activities and their stakeholders is the barriers china
creates to prevent non-Chinese businesses establishing themselves within China. For a
product to qualify for sale within China, it must receive a “CCC standard” (Chinese
Compulsory Certificate) (trade.ec.europa,2013). As China has a bias towards Chinese
companies, it makes it very hard for non-Chinese companies such as Kellogg’s to obtain this
certificate. As it may take up to 8 months for Kellogg’s to obtain a CCC, it provides an
excellent opportunity for counterfeit Kellogg’s goods to be sold within China. In 2008, this
happened to Kellogg’s and due to the low demand because similar products were already
available, Kellogg’s failed to produce a profit on the goods they sold. This impacts on
Kellogg’s activities as they may be less likely to try and penetrate Chinese markets due to
the risks of being unfavored within their economy. Kellogg’s stakeholders within China such
as customers may be less likely to purchase their cereals if they know another similar cereal
is being sold at a fraction of the price. As Kellogg’s produced a loss within China, investors
may be less likely to invest with Kellogg’s for expansion within China. A political factor
within the UK that affects the activities of Kellogg's and their stakeholders is minimum
wage. Minimum wage is currently at £5.03 and means organisations such as Kellogg's can’t
pay their employees less than the minimum. This results in Kellogg's having increased costs
so therefore they have to increase the price of their goods to maintain profits. This impacts
Kellogg’s activities as they will have a reduced budget on research and development so their
new products may not completely meet the needs of consumers. Kellogg's may also need to
increase the efficiency of the manufacturing process to reduce costs of production for their
cereal. This impacts consumers as products may cost more, reducing their likelihood of
purchasing premium products. Investors are also impacted as they will be less likely to
invest due to increased costs and therefore reduced profits.
A social factor that impacts Kellogg’s activities and their stakeholders is the cultural
difference between the markets Kellogg’s operate within currently and the Chinese markets.
The Chinese markets have different taste requirements to other markets, so Kellogg’s may
fail to sell their current product range there without adapting the taste. This affects
Kellogg’s activities as they will fail to sell their current product range at a profit because the
demand for flavours will be reduced. Kellogg’s may have to adapt the flavours which will
cause an increase in their costs. Stakeholders are affected such as Chinese consumers as
they will not be interested in Kellogg’s products and will purchase cereals from other
companies which have adapted to their tastes. Another social factor that impacts on
P6 –Describe how political, legal and social factors are impacting upon the business
activities of the selected organisations and their stakeholders.
Kellogg's are impacted by political factors as they are the decisions and actions of the
government who hold a greater powered than Kellogg's. This means Kellogg's must abide to
their decisions or they could face legal action. Similar to political factors, legal factors also
have to be abided by otherwise legal action may be taken. Social factors refer to the way
the consumers of Kellogg's act and how their activities change, which has to be quickly
adapted by Kellogg's to increase sales as the consumer’s needs are being more greatly met.
The stakeholders are therefore impacted as they are affected when Kellogg's change their
activities.
A political factor that impacts Kellogg’s activities and their stakeholders is the barriers china
creates to prevent non-Chinese businesses establishing themselves within China. For a
product to qualify for sale within China, it must receive a “CCC standard” (Chinese
Compulsory Certificate) (trade.ec.europa,2013). As China has a bias towards Chinese
companies, it makes it very hard for non-Chinese companies such as Kellogg’s to obtain this
certificate. As it may take up to 8 months for Kellogg’s to obtain a CCC, it provides an
excellent opportunity for counterfeit Kellogg’s goods to be sold within China. In 2008, this
happened to Kellogg’s and due to the low demand because similar products were already
available, Kellogg’s failed to produce a profit on the goods they sold. This impacts on
Kellogg’s activities as they may be less likely to try and penetrate Chinese markets due to
the risks of being unfavored within their economy. Kellogg’s stakeholders within China such
as customers may be less likely to purchase their cereals if they know another similar cereal
is being sold at a fraction of the price. As Kellogg’s produced a loss within China, investors
may be less likely to invest with Kellogg’s for expansion within China. A political factor
within the UK that affects the activities of Kellogg's and their stakeholders is minimum
wage. Minimum wage is currently at £5.03 and means organisations such as Kellogg's can’t
pay their employees less than the minimum. This results in Kellogg's having increased costs
so therefore they have to increase the price of their goods to maintain profits. This impacts
Kellogg’s activities as they will have a reduced budget on research and development so their
new products may not completely meet the needs of consumers. Kellogg's may also need to
increase the efficiency of the manufacturing process to reduce costs of production for their
cereal. This impacts consumers as products may cost more, reducing their likelihood of
purchasing premium products. Investors are also impacted as they will be less likely to
invest due to increased costs and therefore reduced profits.
A social factor that impacts Kellogg’s activities and their stakeholders is the cultural
difference between the markets Kellogg’s operate within currently and the Chinese markets.
The Chinese markets have different taste requirements to other markets, so Kellogg’s may
fail to sell their current product range there without adapting the taste. This affects
Kellogg’s activities as they will fail to sell their current product range at a profit because the
demand for flavours will be reduced. Kellogg’s may have to adapt the flavours which will
cause an increase in their costs. Stakeholders are affected such as Chinese consumers as
they will not be interested in Kellogg’s products and will purchase cereals from other
companies which have adapted to their tastes. Another social factor that impacts on
