Changes to the External Environment

by Business Case Studies on Wednesday 17th October, 2007

Changes to the External Environment

There are potentially significant changes affecting transport costs for consumers and businesses this week. Oil prices have recently reached record price levels, breaking the $83-a-barrel mark on Friday 28th September (BBC, 28th September 2007). In addition, UK fuel prices are set to increase as a 2p rise in fuel duty is introduced. It is widely anticipated that this will result in petrol pump prices breaching the £1 per litre mark (BBC, 30th September 2007). Duty on diesel now accounts for more than half of its cost, the highest in Europe. Road Haulage Association chief Roger King is reported as saying”We believe the government has chosen not to understand the plight of British hauliers” (Road Transport, 30th September 2007).

Whilst the increase in fuel duty is a painful expense to businesses given the high price of oil, it has been anticipated by industry. The September increase was first announced in Gordon Brown's budget earlier in the year, along with another planned increase for April 2008. Organisations wanting to undertake accurate business planning monitor changes in their external environment. In the Times 100 case study focusing on McCain, the use of SLEPT analysis is explained. This analysis provides a framework for the key external factors that affect a business, categorised into Social, Legal, Economic, Political and Technological factors.

Sources:

The Times 100 – McCain Case Study – How McCain responds to changes in the external environment

BBC News – Weak dollar holds oil prices firm, 28 September 2007

BBC News – Tax rise fuels petrol price fears, 1 October 2007

Road Transport.com – RHA and FTA make final fuel duty plea to Treasury, 26 September 2007

Potential Study Questions:

  • For economists: How can the increase in fuel duty be represented on a supply and demand diagram for the market for fuel?
  • What are the advantages and disadvantages of the Government increasing the level of fuel duty?
  • What is the likely impact on a UK transport company in the short term, and in the long term?

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