External Factors (Macro Environment):
There are a number of influences of FPD which are beyond the control of the industry, these are called external factors.
The economic environment:
- Economic activity usually fluctuates. The influences on the fluctuations are complex and several factors determine economic growth and stability. These are:
A weak Australian dollar makes foreign exchange investment and export trade appealing. Primary produce and manufactured goods are very competitive on the international market and often cheaper.
Fluctuating interest rates:
Fluctuations in interest rates creates uncertainty for investors. Low interest rates may encourage food organisations to invest in capital such as equipment, expansion, improved technology.
Inflation and recession involves an increase or decrease in the cost of living. This then influences one’s buying behavior. Fluctuations in disposable income will influence the types of products purchased. High inflation often results in a greater consumption of more value-added products and meals being eaten out. However, during recession consumption of generic brands or staple food items increases.
Unemployment creates an increase in the number of people living off welfare and social security. These people have less money to spend on food and generally purchase less processed products like cheap off cuts of meat.
High unemployment can mean that there is a larger burden on governments pay people on welfare, meaning that less money is left to spend on research, law enforcement and education.
Includes the type of taxes and level of taxation. This impacts price, available income and purchasing power. The GST aims to ensure equal tax is paid by all consumers on the items or services they purchase.
The economic cycle:
Economic stability is important to the AFI. Fluctuations are often described as the economic cycle. The four stages are; recession, expansion, boom and contraction.
The Political Environment:
- Changes often occur when a new government is elected and new polices involving the economy, industry, environment and technology.
- Food manufacturers should develop contingency plans to minimise the impact of such changes. For example, newly elected government may change food regulations, industrial relations, import and export policies and thus a business may have to change it’s activities so abide by such polices.
- The government also influences price (levels of tax, competition, trading rules, licensing), the environment (air, water, noise, use of chemicals in food production), education (food and nutrition education, food standards, food handling and safety) and working conditions (awards, trading hours, WH&S).
Community influences and lobby groups:
- Communtiy can lobby politicians to bring changes in an industry.
- This can come from organized groups with vested interest in changes eg in Feb 2013 three farmer lobby groups combined forces to lobby banks and the federal govt to urge them to support Dairy Farmers and represent them in court.
- The use of natural resources and energy are important in the promotion of a highly valued ‘clean green’ food supply.
- With increased concern for environmentally friendly behavior, food producers are constantly checked for environmentally friendly decisions.
- Ecological issues can include: use of natural resources, farming procedures, waste management and packaging.
- Enviro friendly actions are often not the most cost effective but manufacturers can receive popular support from consumers that can increase sales.
- Improved technology has lead to improved productivity and increased choice.
- The size of a company is significant in determining what technology is used.
- Technology can greatly influence the quality of a product and can be…