What does the External Influences on Business module cover?

It covers the outside forces a business cannot control but must respond to. The topics are government economic objectives and how fiscal and monetary policy and legislation affect business, the stages of the business cycle (boom, recession, slump and recovery) and how firms respond, globalisation and international trade including multinationals and trade barriers, exchange rates and how a rise or fall affects exporters and importers, and environmental and ethical issues including corporate social responsibility.

What is the difference between fiscal and monetary policy?

Fiscal policy is the government's use of taxation and government spending to influence the economy; for example, cutting taxes or raising spending to boost demand. Monetary policy is the control of interest rates and the money supply, usually by the central bank; for example, raising interest rates to slow demand and curb inflation. Both affect businesses through their impact on consumer spending, borrowing costs and confidence.

How does the business cycle affect a business?

The business cycle is the regular movement of the economy through boom, recession, slump and recovery. In a boom, demand and sales are high but costs and inflation may rise; in a recession and slump, demand falls, sales drop and unemployment rises, so firms may cut output, costs or staff; in recovery, demand picks up again. Businesses respond by adjusting output, prices, marketing and staffing to suit the stage.

How does a change in the exchange rate affect exporters and importers?

When the local currency appreciates (rises in value), exports become more expensive abroad, which can reduce export sales, while imports become cheaper, helping importers and lowering the cost of imported materials. When the currency depreciates (falls), exports become cheaper and more competitive abroad, helping exporters, while imports become dearer, raising costs for importers and firms that buy materials from overseas.

What is corporate social responsibility (CSR)?

Corporate social responsibility means a business acting in a way that considers its effect on society and the environment, not just its profit. Examples include reducing pollution, treating workers and suppliers fairly, and supporting the local community. CSR can raise costs in the short term but can also improve reputation, attract customers and staff, and reduce the risk of fines or boycotts, so its benefits and costs must be weighed.

SingaporeBusiness Studies

External Influences on Business overview: O-Level Business Studies (SEAB 7085) on government economic objectives and policy, the business cycle, globalisation and international trade, exchange rates, and environmental and ethical issues

A complete overview of the External Influences on Business module in O-Level Business Studies (SEAB 7085): government economic objectives and policy, the business cycle, globalisation and international trade, exchange rates, and environmental and ethical issues including corporate social responsibility.

Generated by Claude Opus 4.88 min readSEAB-7085Updated 2026-06-13

Reviewed by: AI editorial process; not yet individually human-reviewed

Jump to a section

Why this module matters
Government economic objectives and policy
The business cycle
Globalisation and international trade
Exchange rates and business
Environmental and ethical issues
How this module is examined
Check your knowledge

Why this module matters

No business operates in isolation. The External Influences on Business module of O-Level Business Studies (SEAB 7085) covers the outside forces a firm cannot control but must read and respond to: government policy, the ups and downs of the economy, the opportunities and threats of global trade, the swing of exchange rates, and the rising expectation that firms behave responsibly. For a small, open and trade-dependent economy like Singapore's, these influences are especially important, and the module rewards applying them to a specific firm's situation.

This guide ties together the matching dot-point pages, each with its own worked examples and practice. See the whole syllabus at /sg-o-level/business-studies/syllabus and the subject hub at /sg-o-level/business-studies.

Government economic objectives and policy

The module begins with government economic objectives and policy: the main objectives (low unemployment, low inflation, economic growth and a healthy balance of payments), how fiscal policy (taxation and spending) and monetary policy (interest rates) work, and how legislation affects business activity.

The business cycle

The business cycle covers the stages of boom, recession, slump and recovery, how each affects demand, costs and employment, and how businesses can respond as conditions rise and fall.

Globalisation and international trade

Globalisation and international trade covers international trade (imports and exports), the opportunities and threats globalisation brings, the role of multinational companies, and the effect of tariffs and trade barriers.

Exchange rates and business

Exchange rates and business covers what an exchange rate is, the difference between appreciation and depreciation, and how a change in the currency affects the prices and profits of exporters and importers.

Environmental and ethical issues

Finally, environmental and ethical issues covers pollution and sustainability, ethical behaviour, corporate social responsibility, and the costs and benefits of acting responsibly.

How this module is examined

The module appears in Paper 1 (short-answer and data-response) and the Paper 2 case study of SEAB 7085, assessed across Knowledge and Understanding, Application, Analysis and Evaluation.

Trace the effect. Show the chain from an external change (for example, a higher interest rate or a stronger currency) to its impact on the specific firm.
Identify winners and losers. External changes help some firms and hurt others, so say which and why for the business in the question.
Reach a balanced judgement. On CSR or globalisation questions, weigh benefits against costs before concluding.

Effect of a currency change

A Singapore firm exports furniture priced at $\text{S\textdollar}1{,}000$ per item, and the Singapore dollar appreciates against the US dollar. Show how this affects the firm's overseas price and likely sales.

Step 1: Identify the type of firm

The firm is an exporter: it sells goods abroad and is paid in or competes against foreign currency.

Step 2: Work out the effect on the overseas price

When the Singapore dollar appreciates, each Singapore dollar buys more foreign currency, so foreign buyers must pay more of their own currency to buy the same $\text{S\textdollar}1{,}000$ item. The furniture becomes more expensive abroad.

Step 3: Judge the likely effect on sales

Because the furniture is now dearer for overseas customers, demand for it may fall, reducing export sales and revenue unless the firm cuts its Singapore-dollar price (lowering its margin) or competes on quality and brand instead of price. Appreciation therefore tends to hurt exporters while helping importers, whose foreign goods become cheaper.

Check your knowledge

A mix of recall and application questions covering the module. Attempt them before checking the solutions.

State two government economic objectives. (2 marks)
Explain how a rise in interest rates might affect a business. (3 marks)
State what happens to sales for most businesses during a recession. (1 mark)
Explain how a depreciation of the local currency affects an exporter. (3 marks)
State one benefit and one cost to a business of acting in a socially responsible way. (2 marks)

Solutions

Step 1: Government objectives

Q1. Any two of: low unemployment, low and stable inflation, economic growth, and a healthy balance of payments.

Step 2: Higher interest rates

Q2. A rise in interest rates makes borrowing more expensive, so the firm's loan and overdraft repayments cost more, and it may delay investment. It also leaves consumers with less to spend (as their own borrowing costs rise), so demand for the firm's products may fall, reducing sales.

Step 3: Recession and sales

Q3. Sales usually fall during a recession as demand drops.

Step 4: Depreciation and an exporter

Q4. When the local currency depreciates, the firm's goods become cheaper for overseas buyers in their own currency, so they are more price-competitive abroad. This tends to raise the exporter's overseas sales and revenue, which is good news for exporters (though imported materials become dearer).

Step 5: Social responsibility

Q5. Benefit: a better reputation that can attract customers and staff and reduce the risk of fines or boycotts. Cost: acting responsibly (for example, cutting pollution or paying suppliers fairly) can raise the firm's costs, at least in the short term.

Sources & how we know this

Singapore-Cambridge GCE Ordinary Level Business Studies (Syllabus 7085) — Singapore Examinations and Assessment Board (2026)