Unit 19 External Business Environment

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This unit enables learners to gain understanding of the impacts of socio-economic change, legal and political environments and statutory requirements on business and service industries.

 Unit abstract

This unit investigates the external factors that affect the operation and strategic development of commercial organisations, with a focus on business and services operations such as hospitality and catering, hairdressing and beauty therapy, sports and leisure, and travel and tourism. It is a broad-based unit covering the diverse range of external influences that affect business development, such as socio-economic change, legal and political issues, and the statutory requirements for establishing and developing a business operation. The unit provides the basis for more specific specialist study of aspects of business management. Learners must ensure that their evidence relates to the hospitality industry.

Learning outcomes

1 Understand the impact of socio-economic change on the development of commercial organisations in a business and services industry context

  • Structure and operation of UK economy: market structure; perfect/imperfect competition; oligopoly; duopoly and monopoly; national/local factors; determinants of free-market economy
  • Government economic policy: aims and influence; effects on employment policy; inflation; balance of payments; economic growth in industry sector; current issues
  •  Income, wealth, employment and occupational distribution: structure and composition of business and services industry; patterns of demand for business and services; the socioeconomic framework of demand; labour demand in industry sector
  • Demographic trends: geographical pattern of labour demand; nature of employment in business and services industries; employment profiles eg age, sex
  • Social structures: types of people employed; geographical variations; self-employed; unemployed; labour turnover; levels of pay
  • Industry context: contexts eg hospitality and catering, hairdressing and beauty therapy, sports and leisure, travel and tourism

2 Understand the effect of legal and political environments on business and service industries

  • Structure, operation and influence of local government: structure; areas of control; limits of authority; interface with national government; powers affecting business and services industries
  • Role and influence of the EU: history of the EU; relationship with national and local government; influence of the EU directly/indirectly on business and services industries
  • Pressure groups: role; types; political influence; why they emerge; reasons for existence; memberships; influence of pressure groups on government; national and local issues; overall impact
  • Legal framework within the UK: role of legislation within the UK; regional variations; English system versus Scottish system; legal influences directly affecting business and services industries; impact of national parliaments/assemblies
  • Legislative process: the structure of the legal system; the legislative process in relation to national and local government; the legislative process and the individual

3 Understand the statutory requirements for establishing and developing a business and services operation

  • Business and services operations: types eg private ownership, partnership, companies, public, private, limited by shares, limited by guarantee, unlimited companies, business names
  • Registered companies: formation; structure; processes; dissolution; memorandum of association; articles of association; statutory declaration; statutory list; responsibilities and control eg agents, directors, senior executives, different types of company meetings, voting rights.


Essential requirements

The section on legal and political environments will require formal input to present a comprehensive summary of issues, such as the structure, operation and influence of local government and the role and influence of the EU. Support from local political networks will be useful, but must be handled sensitively to avoid any risk of political bias. Once this has been achieved, further discussion and debate will extend learners’ thinking and enhance their approach to the development of knowledge and understanding. Statutory requirements will require formal input to establish the frameworks for different types of businesses and the procedures for establishing and dissolving businesses. Visiting speakers can be drawn from legal advisers such as solicitors and other sources of advice such as business counsellors and banking experts, as well as local business people who have direct experience of such activities. Debate and discussion can highlight advantages and disadvantages of different approaches. Most clearing banks offer business packs which would serve as a useful teaching resource. Additionally, Learning and Skills Councils and Chambers of Commerce can provide a wealth of information to complement learning activities.

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