2.3.3 External influences on business activities Flashcards
define globalisation
process by which business activities in different countries are becoming more and more connected to each other
link globalisation to the case study
- Tom’s Toys imports 70% of toys from outside UK
- Tom’s Toys is considering e-commerce
define international trade
companies in one country produce goods and services and sell them in other countries eg GG Toys Plc currently doing this, Tom’s Toys considering it
define production abroad
firms may decide to set up their own factories ad offices abroad. just GG Toys plc
list advantages of globalisation to the UK
- increased choice for customers
- lower prices
- cheaper labour
- large market for business
- economies of scale
- more jobs
disadvantages of globalisation to the UK
- lower profits (If prices have to be cut)
- lower sales (because of increased competition)
- business closures and loss of jobs
why might china not benefit from GG Toys plc locating its factory there
- exploitation of workers
- pollution
- culture
describe the pollution as a result of GG Toys moving production to china
developing countries often suffer the negative impacts of lots of production
describe the exploitation of workers as a result of GG Toys moving production to china
employees may be paid very low ages and have to work long hours in dangerous conditions
describe the culture as a result of GG Toys moving production to china
local culture is being affected by global branding
benefits to china of GG Toys plc moving production there
presence of multinationals in developing countries does create jobs and pay higher wage than local businesses
how can UK businesses compete with countries such as India and China
- provide innovative products and services
- keep prices low by increasing productivity
- create a brand
- efficient distribution so that goods can be delivered at right time
- move some activities abroad
- add value
- recruit right people
what is meant by recruiting the right people
- recruiting educated workers and investing in training will lead to highly skilled workforce who can compete in global environment
- recruiting low skilled immigrants leads to workforce gaining hard working individuals who do not demand very high wages
how does the government action of cutting corporation tax help to increase international competitiveness
helps business lower prices/ encourages inward investment
how does the government action of cutting income tax help to increase international competitiveness
productivity will increase as people work harder
how does the government action of investing in infrastructure help to increase international competitiveness
goods can be distributed more efficiently/quickly
how does the government action of investing in education and training help to increase international competitiveness
workforce become more skilled
how does the government action of grants to business help to increase international competitiveness
they’ll help businesses to invest for growth and innovate product offerings
define exchange rate
value of one currency in terms of another
describe a strengthening exchange rate
if pound increases in value said to strengthen, means pound will buy more of a foreign currency
define a weakening exchange rate
if pound decreases in value it’s said to weaken, means pound will buy less of a foreign currency
define imports
goods and services bought from other countries leads to money going out of UK
define exports
goods and services sold to other countries and lead to payments into the UK
describe SPICED
Strong Pound Imports Cheap Exports Dear
link and the weakening pound to Tom’s Toys
-pound fallen against Euro by 10 cents, weakening pound mean Tom’s Toys has to give more £’s to buy stock from EU suppliers, increases costs Tom’s toys doesn’t import all stock from EU, means only proportion of stock costs negatively impacted. approx 30-40% of Tom’s Toys costs are stock costs, means not all costs will increase as result of weakening pound
Tom’s Toys and the UK and non-EU countries
Tom’s Toys buy products from UK and non-EU. significant because means they could possibly buy more from these suppliers as way of avoiding increased costs caused by weakening pound
- they could higher prices to cope with costs
define a monopoly market
a market dominated by one seller; low number of firms, narrow choice of products, high prices. in law monopoly exists when business has market share of atleast 25%
define perfect competition market
a market in which there are large numbers of sellers; high number of firms, wide choice of products, low prices
how can GG Toys be better than their competitors
- lower prices
- provide better service
- produce higher quality of products
- use of e-commerce, more conveniet
what are the effects for GG Toys of operating in a competitive market
- customers may go elsewhere
- wider range of products for customers to choose from
- cut costs
- lose sales
how do you work out market share
(sales of business/ total sales in market) x100
how can competition increase
- new businesses entering the market
- selling new products
- cutting prices
- increasing advertising