2.10 External influences Flashcards
What external factors can influence a business?
Inflation
Exchange rates
Interest rates
Taxation
Economic cycle
What impact can inflation have on businesses?
There are going to be higher costs as well as less sales as people will have less disposable income.
What impact can exchange rates have on a business?
Stronger pound will reduce their costs but could reduce their sales as it is cheaper for consumers to import their goods.
How can interest rates impact a business?
High interest rates means they wont be able to borrow as much and there will be less sales.
What impact can taxes have on a business?
It can decrease their profit but it can also lower sales as the goods are set at a higher price unless the firm decides to take on the costs.
How can the economic cycle have an impact on businesses?
In a boom they will have more sales but higher wages to pay employees and the opposite in a recession.
What are the effects of consumer protection laws on a business?
They will have to invest more into a safe and usable work environment and training as well as having to pay employees above a minimum wage.
What are the effects of environmental protection on a business?
They need to carry out an environmental survey as well as having more sustainable packaging and manufacturing processes.
Effects of the competition policy in business?
Making sure they dont collude with other firms and therefore are not breaking any laws for the market.
What is it when one business has a lot of power in a market?
A Monopoly
What are positives and negatives of a Monopoly?
There is less choice for consumers and prices tend to be higher as their PED is inelastic as there are no substitutes.
What is it when a few firms own the market?
An Oligopoly
What are pros and cons of an oligopoly?
Consumers usually get a bargain but there is a lot of legal issues as business collude.
What is a collusion?
When firms work together to agree a price which will benefit both of them more than competing.
What is a mass market
When it is a large market with lots of consumers.
