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Business Studies A Level > 1. External Influences > Flashcards

1. External Influences Flashcards

Term 1 Miss Blackwell (Until Globalisation)

1
Q

Demand

A

The amount of a good/service that customers are willing and able to buy at any given price

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2
Q

Supply

A

The amount of a good/service that sellers are willing and able to sell at any given price

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3
Q

Equilibrium Price

A

The situation in a market where demand is equal to supply

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4
Q

What are the factors affecting demand? (8)

A 
Price
Income
Wealth
Demographics
Government action
Advertising, offers and public relations
Tastes
Price of substitutes and complements
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5
Q

What would happen to demand if prices were to be reduced?

A

Demand would increase

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6
Q

What is the relationship between income and demand?

A

Higher incomes result in higher demand

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7
Q

Define wealth

A

Wealth is the total value of an individual’s assets minus his liabilities

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8
Q

Define demographics

A

Demographics relate to the characteristics of the human population

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9
Q

Define advertising

A

Drawing attention to a product

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10
Q

Define promotional offers

A

A technique which involves reducing the price to attract more customers and increase sales volume

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11
Q

Define public relations

A

The maintenance of a favourable public image

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12
Q

How can government action affect demand?

A

Government can promote types of lifestyle through campaigns, e.g. keep fit campaign

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13
Q

Define tastes

A

The public perception of a product/service and how fashionable it is

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14
Q

Define substitutes

A

Products that can be used instead of another one because it has a similar function

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15
Q

Define complements

A

Products that are in joint demand, (when one product is brought, so is the other)

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16
Q

What is the impact on price, if there is excess demand in the market?

A

The price would increase as people are willing to pay more

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17
Q

What is the impact on demand of price increasing?

A

Demand would decrease as less people are willing and able to buy the product at the higher price

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18
Q

What are the factors affecting supply? (5)

A 
Price
Costs
Tax
Subsidies
Price of other products
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19
Q

What would happen to supply if prices were to be increased?

A

Supply would decrease

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20
Q

What is the impact of costs being reduced on supply?

A

Supply would increase as the business can afford more

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21
Q

Define a tax

A

A payment to government on top of the product price

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22
Q

What are subsidies?

A

Payment from the government to the supplier for every unit supplied

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23
Q

What is the price of other products also known as?

A

Competitive supply

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24
Q

What direction does the demand/supply curve move when there is an increase in demand/supply?

A

to the right

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25
Q

How does a change in price affect the demand curve?

A

It leads to a different quantity demanded. The curve does not shift, the equilibrium changes.

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26
Q

Elasticity of Demand

A

How sensitive quantity demanded is to a change in price

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27
Q

What is inelastic demand? Example?

A

Quantity demanded is insensitive to a change in price

Petrol

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28
Q

What is elastic demand? Example?

A

Quantity demanded is sensitive to a change in price

Newspaper

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29
Q

What makes a product inelastic?

A

Not many substitutes

Necessity

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30
Q

What makes a product elastic?

A

Lots of substitutes

Luxury

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31
Q

Define an excess

A

Demand for a product is less than the amount that the business potentially could supply to the market.

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32
Q

What to do if there is an excess?

A

Reduce the price in order to clear the stock

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33
Q

Define a shortage

A

Demand for a product or service exceeds its supply in a market

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34
Q

What to do if there is a shortage?

A

Increase the price to reduce the demand for the product

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35
Q

Market

A

Any situation where buyers and sellers are in contact in order to establish price

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36
Q

Competition

A

Rivalry amongst sellers

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37
Q

2 types of market?

A

Physical and non-physical

38
Q

Why do physical markets continue to exist?

A

Because of the personalisation that they offer

39
Q

Why has the number of non-physical markets grown rapidly?

A

Because of the convenience that they offer

40
Q

Market Price

A

The price range in a market at which consumers are prepared to pay

41
Q

Mark up

A

The difference between the cost of producing an item and the price at which it is sold

42
Q

Market Size

A

Collective value of the goofs/services that buyers purchase

43
Q

Market Growth

A

The percentage change in the size of the market, measured over a specific period

44
Q

Market Share

A

The percentage of total sales (by value) that a business has in a specified market

45
Q

What are the 4 market structures?

A

Competitive market
Monopolistic competition
Oligopoly
Monopoly

46
Q

Define a competitive market

A

A market in which there are a large number of sellers. Competition is mainly based on price

47
Q

Describe 2 features of a competitive market?

A

High number of firms

Low prices

48
Q

Define monopolistic competition

A

A market structure with many competing firms each of whom supplies a slightly differentiated product

49
Q

Describe the features of a monopolistic competition market structure

A

Higher number of firms than an oligopoly
Price are fair
Compete on non-price differences

50
Q

Examples of non-price differences?

A

Wifi

Disabled access

51
Q

Define an oligopoly

A

A market that is dominated by a few firms which have some diversity

52
Q

Describe the features of an oligopoly

A

Few firms
High similar prices
Interdependence - 1 business changes prices, others follow
Collusion

53
Q

Define collusion

A

Rival companies co-operate for their mutual benefit.

E.g. phones4U

54
Q

Define a monopoly

A

A market dominated by 1 seller (theoretically)

55
Q

A monopoly must have __% market share, according to the CMA

A

25

56
Q

Prices in a monopoly market are typically ___ because…

A

High

There is a lack of choice for consumers

57
Q

Why are prices in a monopoly not always high?

A

The business can utilise economies of scale, which arise when unit costs fall as output rises

58
Q

How could a business increase its market share? (6)

A 
Customer needs - meet them
Sell more to existing customers
Old customers - why don't they use product any more
Clear marketing plan
Variety of marketing techniques
Merge with a competitor
59
Q

What are barriers to entry?

A

The factors that could prevent a firm from entering and competing in a market

60
Q

What are the 5 barriers to entry?

A
  1. Large start up costs
  2. Marketing budget - to break customer loyalties
  3. Inability to gain economies of scale
  4. Price wars
  5. Legal restrictions
61
Q

What are barriers to exit?

A

The factors that could prevent a firm from leaving a market, even if it wanted to

62
Q

What are the 3 barriers to exit?

A
  1. Difficulty selling off capital
  2. High redundancy costs
  3. Contracts with suppliers
63
Q

Define market dominance

A

A measure of market share compared to competitors

64
Q

Define market power

A

The ability of a firm to influence or control the terms and conditions on which goods are bought and sold

65
Q

What is a merger?

A

The joining together of 2 companies to form a new larger business

66
Q

What is an acquisition?

A

The control of another company is achieved by buying a majority of its shares

67
Q

What are the advantages of merging to the business?

A

+ EOS
+ May gain new management with different skills
+ Increased market share and market power
+ Greater ability to meet customer needs with combination of resources

68
Q

What are the disadvantages of merging to the business?

A
  • May suffer diseconomies of scale due to size
  • Redundancies (employees)
  • Higher prices (customers)
69
Q

What does the CMA stand for?

A

Competition and Markets Authority

70
Q

What does the CMA do?

A

The CMA works to promote competition for the benefit of consumers, both within and out of the UK

71
Q

Name another organisation that is able to block UK mergers and acquisitions

A

The European Regulatory Commission

72
Q

The CMA is a __________ __________ body that is able to stop _______ and _________ going ahead

A

governmental regulatory

acquisitions mergers

73
Q

What are the CMA’s key responsibilities?

A
  1. Investigating breaches of anti-competitive behaviour
  2. Bringing criminal offences against individuals who commit cartel offence
  3. Enforce customer protection legislation
74
Q

What sanctions can the CMA appoint?

A
  1. Fines up to 10% of their global turnover
  2. Customers/competitors can sue damages
  3. Individuals may be disqualified from being a company director
75
Q

What is meant by organic growth?

A

Growth from within the business

76
Q

Give examples of organic growth

A

Launching new products
Franchising
Exporting abroad
New distribution channels

77
Q

Globalisation

A

The world coming together to trade in each other’s markets

78
Q

Which factors have facilitated the level of imports? (8)

A
  1. Reduction in trade restrictions
  2. Cost of production abroad
  3. Ease of transportation
  4. Internet
  5. Communication tech
  6. Easy movement of capital
  7. Easy movement of people
  8. The rise of multinationals
79
Q

Multinationals

A

A business that has operations in more than 1 country

80
Q

Why would a company be keen to become a multinational?

A

EOS can be obtained
Can take advantage of lack of legal restraints
New markets which may be less competitive
Lower wages abroad

81
Q

What is an LEDC?

A

Less Economically Developed Country

82
Q

What are the positives for the LEDC of multinationals operating?

A

Jobs created and skills developed
Reduced poverty
Investment in infrastructure - roads
Utilise local resources - builders/local food

83
Q

What are the negatives for LEDC of multinationals operating?

A 
Jobs are unskilled and low wages
Unsafe working conditions
Child labour
Local businesses are driven out of market
Income goes back to the domestic market
84
Q

What is a strategy?

A

A plan of action

85
Q

What is a global strategy?

A

The consideration of how to build a competitive global advantage

86
Q

What is a brand?

A

A distinctive product offering created by the use of a logo, symbol, name, design or packaging. The key is to differentiate from competitors.

87
Q

What is a global brand?

A

Brands that are recognised throughout much of the world

88
Q

What are the opportunities linked to globalisation for a business?

A

+ More affluent customers
+ Outsourcing abroad - don’t have to pay for machinery
+ Offshoring - setting up a factory abroad

89
Q

What are the threats linked to globalisation for a business?

A
  • Developing economies are making products for themselves
  • Threat to UK manufacturing jobs
  • Cultural differences
90
Q

Identify 3 reasons why some businesses are more affected by globalisation than others

A
  1. The sector of the economy
  2. Size of business
  3. Niche?

Business Studies A Level (17 decks)

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