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Business Studies > (3)External Influences > Flashcards

(3)External Influences Flashcards

1
Q

What is the definition for supply?

A

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

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2
Q

What is the definition for demand?

A

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

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3
Q

What is equilibrium?

A

Where supply equals demand

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4
Q

What will happen if there is excess demand in the market?

A

Prices will increase.

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5
Q

What happens to demand when price goes down?

A

Demand increases

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6
Q

What happens to demand if incomes rise?

A

Demand will increase

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7
Q

What factors effect demand?

A
  • income
  • population
  • price of substitutes
  • price of complements
  • expectations
  • tastes
  • wealth
  • advertising
  • habitual behaviour
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8
Q

What factors determine supply?

A

Price
Costs
Taxes and substitutes

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9
Q

When costs increase what happens to supply?

A

Supply decreases

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10
Q

What happens to supply if interest rates fall?

A

Costs decrease so supply increases

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11
Q

What is the definition of elasticity of demand?

A

The responsiveness of demand to a change in price

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12
Q

What is an example of an inelastic product?

A

Petrol

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13
Q

What determines whether the good is elastic or not?

A

If the good is a necessity or if there are many substitutes

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14
Q

What is the definition of competition?

A

Rivalry amongst sellers

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15
Q

What is the definition of a market?

A

A situation where buyers and sellers are in contact in order top establish price.

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16
Q

Why have non physical markets grown?

A

Because of the convenience that they offer. (E-commerce)

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17
Q

Why do physical markets continue to exist?

A

Because of the personalisation that they offer.

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18
Q

What is the definition of market price?

A

The price range at which consumers are prepared to pay.

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19
Q

What is the definition of mark up?

A

Difference of producing a product and the price at which it is sold

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20
Q

How does competition effect market supply?

A

If there were more producers then the market would be more saturated therefore they would lower their prices to compete on price.

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21
Q

What is a competitive market?

A

A market which there are large number of firms.

Competition is usually based on price.

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22
Q

What is a monopoly?

A

A market dominated by one seller

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23
Q

What market share do firms need to be classed as a monopoly?

A

25% market share

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24
Q

What are economies of scale?

A

Where unit costs fall when output rises

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25
Q

What is an oligopoly?

A

A firm dominated by few firms. Competition is usually based on non-price differences such as package deals etc.
They have very similar products and price.

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26
Q

What is collusion?

A

Where firms cooperate in the manipulation of production and supply to influence price levels for their own mutual benefit, preventing fair competition.

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27
Q

How might oligopolys force new entrants out of the market?

A

By lowering prices

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28
Q

What is the definition of a monopolistic competition market?

A

A market with many competing firms each of whom supplies a slightly differentiated product.
E.g. bars and night clubs.

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29
Q

What is the definition of market size?

A

The collective value of sales in that market.

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30
Q

What is the definition for market growth?

A

The percentage change in the total value of sales in that market.

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31
Q

What is the definition of market share?

A

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

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32
Q

What are barriers to entry? And examples.

A 
Factors that could prevent a firm from entering and competing in a market even if they choose to do so.
E.g. start-up costs 
- price wars
- legal restrictions
- inability to gain economies of scale.
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33
Q

What are barriers to exit and examples?

A

Factors that could prevent a firm from leaving a market, even if it wanted to.
E.g. contracts with suppliers
- redundancy payments
- difficulty selling off capital

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34
Q

What is the correlation between market power and barriers to entry?

A

Low market power = low barriers to entry

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35
Q

How might you increase market share?

A
  • sell more to existing customers
  • get rid of less profitable items
  • advertising
  • merge or takeover another firm.
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36
Q

What is the definition of market dominance?

A

A measure of market share compared to competitors.

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37
Q

What is the definition of market power?

A

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

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38
Q

What is the definition of a merger?

A

Where two companies join together to form a new larger business.

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39
Q

What is the definition of an acquisition?

A

When one company buys another companies majority shares.

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40
Q

What is the definition of a hostile take over?

A

When another business goes through the shareholders not the board of directors

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41
Q

What are the disadvantages of a hostile takeover?

A
  • may suffer from diseconomies
  • redundancies
  • could result in higher prices.
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42
Q

What does the CMA stand for?

A

Competition markets authority

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43
Q

What is the European body called that also investigates mergers etc.

A

The European regulatory commission

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44
Q

What does the CMA do?

A

Promote competition for the benefit of consumers, both within and outside of the UK. Making markets work well for consumers, businesses and the economy.

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45
Q

What are the CMA responsibilities?

A
  • they investigate mergers which could restrict competition
  • conducting market studies
  • bring cartel offences to justice
  • enforce consumer protection .
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46
Q

What is organic growth?

A

Growth from within the business

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47
Q

What are examples of organic growth??

A

Launch new products, franchising, exporting and opening new stores.

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48
Q

What is globalisation?

A

The increased integration and interdependence of national economies.

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49
Q

What are the reasons for increased globalisation?

A
  • reductions in trade restrictions
  • cost of production abroad
  • ease transportation
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50
Q

What have facilitated globalisation?

A
  • e-commerce
  • communication technology
  • easy movement of capital
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51
Q

What are multinationals?

A

A business that has operations in more than one country.

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52
Q

What are the advantages of being a multinational?

A
  • benefit from economies of scale
  • ability to take advantage of a lack of legal constraints
  • new markets with less competition
  • ability to take advantage of lower wages.
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53
Q

What are the benefits multinationals give to LEDC’s ?

A
  • creates jobs for LEDC’s
  • develops a skilled workforce
  • reduces poverty
  • investment in local infrastructure
  • utilisation of local materials
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54
Q

What are the negative effects multinationals have on LEDC’s?

A
  • most jobs are unskilled
  • wages are low
  • unsafe working practices and conditions
  • child labour
  • local companies usually driven out
  • income goes back to the domestic market
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55
Q

What is a global strategy?

A

Companies that are keen to operate on a global scale must consider how to build a competitive global advantage i.e. choose the best locations to produce products in.

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56
Q

What is glocalisation?

A
  • globalisation but taking into account local needs.
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57
Q

What is a brand?

A
  • a distinctive product created by the use of a logo, symbol, name, design, packaging. The key in designing and building a brand is to differentiate from competitors.
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58
Q

What is the definition of a global brand?

A

Global brands that are recognised throughout much of the world.

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59
Q

What are the opportunities created by globalisation?

A
  • more affluent customers looking to buy more expensive goods
  • out source abroad
  • off shoring
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60
Q

What threats does globalisation create?

A
  • threat to secondary selector jobs

- cultural difference

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61
Q

What is the European single market?

A

It seeks to guarantee the free movement of goods, capital, labour and services (the four freedoms)

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62
Q

How do Uk businesses currently benefit from the European single market?

A

Free to trade with other members at no additional taxation helping keep prices low.

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63
Q

What does STEEPLE stand for?

A 
Social 
Technological 
Environmental 
Ethical 
Political 
Legal 
Economic
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64
Q

What does the STEEPLE model do?

A

Assesses the changes in the external environment.

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65
Q

What is the EU?

A

It is the economic and political union of most European states aimed at reducing trade barriers and harmonising Europe.

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66
Q

What is the eurozone?

A

Countries in the EU that use the euro as their currency.

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67
Q

What are tariffs?

A

A duty paid on imports.

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68
Q

What are quotas?

A

A limit on the quantity of a good that can be imported into a country at a given time.

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69
Q

What is the definition of demographics?

A

The characteristics of human population groups e.g. size of the population.

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70
Q

What are examples of social changes?

A
  • more Ethnic diversity
  • population growth
  • increased women participation in the labour market.
  • more old people
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71
Q

Examples of social factors

A
  • social habits i.e. eating out more
  • changes in employment patterns
  • changing role of women
  • changing attitudes to work
  • educational changes
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72
Q

What is the definition for ethics?

A

Whether something is morally right or wrong.

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73
Q

What are examples of ethical issues?

A

Animal testing
Medicine costs
Guns
Child labour

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74
Q

What are the benefits of ethical behaviour?

A
  • attract new customers
  • encourages investment
  • positive publicity
  • increased sales and profit
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75
Q

Examples of political factors that could effect a business?

A 
Brexit
EU
CMA
Privatisation 
Minimum wage decisions
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76
Q

How would political uncertainty impact businesses?

A

Customer confidence effects sales as people would be less confident which means less sales for the business

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77
Q

What are the disadvantages of ethical behaviour?

A
  • increases costs
  • less competitive in term of price
  • lowers output
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78
Q

What does sustainability mean?

A

The endurance of resources refers to preventing negative impacts from economic systems and production on the earth and its environment.

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79
Q

What is GDP?

A

Total value of output produced in an economy in one year

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80
Q

What is economic growth?

A

The annual percentage change in GDP.

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81
Q

How might the government increase GDP and economic growth?

A
  • encourage investment in capital by offering subsidies or lowering taxation.
  • improve infrastructure
  • improving the quality of human capital by investing in education
82
Q

What is the definition of inflation?

A

Persistent general tendency of prices in the economy to rise.

83
Q

What is CPI?

A

A measure that examines the weighted average of prices of a basket of consumer good/services
(Consumer price index)

84
Q

What is standard of living?

A

The amount for goods and services a person can bu with their income in a year.

85
Q

Why does high inflation make UK exports uncompetitive?

A

Because they appear more expensive to foreign buyers

86
Q

Why does inflation create uncertainty around profits?

A

Because the value of the profit falls

87
Q

What is an exchange rate?

A

The value of one currency in terms of another.

88
Q

Where does capital go in an export and import?

A

Export - money enters the UK

Import - money exits the UK

89
Q

What does SPICED stand for?

A 
Strong
Pound
Imports 
Cheap
Exports
Dear
90
Q

What determines the value of the pound?

A

Hot money flows

91
Q

What are hot money flows?

A

Where people put their money in bank accounts to take advantage of the high interest rates.
E.g. high interest rates = increased hot money flows which increases the value of the pound because demand for the pound has increased.

92
Q

What are interest rates?

A

The cost of borrowing ad the reward for saving expressed as a percentage.

93
Q

Who sets interest rates in the UK?

A

The Bank of England (MPC)

94
Q

What happens to inflation if the MPC increases interest rates?

A

Interest rates go up, people have a greater incentive to save to demand decreases, therefore inflation decreases

95
Q

What is unemployment?

A

A situation in which people who are able and willing to find work are not able to find employment.

96
Q

What is the balance of payments?

A

The difference between the value of exports and imports

97
Q

Why might a government want low levels of unemployment?

A
  • high levels of employment aids economic growth
  • reduce welfare payments
  • more tax revenue
  • waste of Human Resources.
98
Q

What does a trade deficit mean?

A

If imports are greater than exports.

99
Q

What is an indirect tax? And an example of an indirect tax?

A

Taxes on expenditure, paid to the tax authorities not by the consumer, but indirectly the suppliers of the good or service.
E.g. VAT

100
Q

What is a direct tax?and an example of a direct tax?

A

These are taxes on income and profit paid directly to the tax authorities.
E.g. income tax and corporation tax

101
Q

What is income tax?

A

A tax taken out of a persons income, it is a progressive tax (earn more you get taxed more)

102
Q

What is national insurance?

A

Taken as a contribution towards state pension and treatment under the NHS.

103
Q

What is VAT? And how do businesses benefit from being VAT registered?

A

Value added tax it is included into the price of goods, and business can reclaim VAT, competitors also don’t know your annual income.

104
Q

What is the standard rate of VAT?

A

20%

105
Q

What is corporation tax and what is the current rate?

A

A tax on profits made by companies.

19% in the UK.

106
Q

What is a duty?

A

A tax on products.

107
Q

What is stamp duty?

A

Tax on newly bought homes. Also used to increase and decrease the demand for houses.

108
Q

What is a levy?

A

It is a tax on products such as alcohol that depends on factors such as how much the price rises and other things such as consumer attitudes.

109
Q

What is a subsidy?

A

Payments by the government to suppliers that reduce their cost - the effect of a subsidy is to increase supply and therefore reduce the market price.

110
Q

What are the benefits of subsidies?

A
  • lowers costs
  • decreases prices
  • helps business survival
111
Q

What is monetary policy?

A

Manipulation of the level of demand in the economy using the rate of interest.
Controlled by the MPC

112
Q

What is fiscal policy?

A

Conducted by the government through taxation and government spending controlled by the government and led by the chancellor of the exchequer.
Affects the levels of demand.

113
Q

What is the multiplier affect?

A

The effect of changes in economic activity in one factor on other factors, if one business experiences a fall or rise in demand for its products, this has a knock on affect on the business supplying it.

114
Q

What are supply side policies designed to do?

A

They aim to improve the economies overall productive capacity.

115
Q

What are examples of supply side policies?

A
  • investment in education and training - increasing output

- reducing welfare benefits - encouraging more people to get a job

116
Q

In the business cycle where will spending, confidence, inflation and income be high?

A

During a boom period

117
Q

During slump and recession periods what do firms do? And what does the MPC do?

A
  • cut back on investment - as they will be getting less of a return
  • make redundancies
  • MPC lowers interest rates to stimulate spending.
118
Q

What do firms do during a recovery/boom period?and what are the characteristics of this period? And what does the MPC do?

A
  • firms increase investment
  • inflation is high because of demand pull inflation
  • the MPC may increase interest rates to reduce demand
119
Q

How can a business use the business cycle to its advantage?

A
  • business could buy shares during a slump and sell them for a profit when the economy picks up
  • could launch essential products during a slump
  • expand during a slump or recession stage when its cheaper. (Buy real estate)
120
Q

What is a legal factor a business has to comply with?

A

The national minimum wage

121
Q

What is the national minimum wage?

A

It is the minimum pay per hour workers of school leaving age are entitled to . Reviewed annually by the government.

122
Q

What is the national living wage?

A

This is a new minimum wage for those aged 25 and over

123
Q

What happens if a business breaches civil law?

A

They can be fined

124
Q

What is copy right?

A

Legal ownership of materials such as; books,music and films which prevent these being copied by others

125
Q

When would you need planning legislation?

A

If you build something new.
Make a major change to a building
Change the use of the building

126
Q

What would happen if you failed to comply with planning legislation?

A

Undo the work done

127
Q

Example of environmental legislation and what does it do?

A

Clean air act.
- designed to protect human health and the environment from the effects of air pollution.
It stops dark smoke from chimneys etc

128
Q

What is the consumer rights act?

A

Consumers have the right to complain for up to 6 years after buying.
- this can happen if a good isn’t as described or fit for purpose.

129
Q

What is the data protection act and what happens if businesses fail to comply with it?

A

It is where all data given to a business must be kept confidential and not sold to third parties.
- could be fined up to 500,000 pounds

130
Q

What is a trade mark?

A

Stops others using same colours, names, fonts or slogans.

131
Q

What is the FCA?and what do they do?

A

It is the financial conduct authority, they regulate the conduct of businesses, making markets work well.
They regulate 58,000 businesses.
- regulate financial institutions

132
Q

What are the FCAs main objectives?

A
  • protect consumers
  • protect financial markets
  • promote competition
133
Q

What is PPI?and what does it do?

A

Payment protection insurance, protects a market if a consumer falls ill or loses their job, it gives them the chance to shop around and make a rational decision.

134
Q

What are examples of technological factors?

A
  • computer hardware
  • computer software
  • computer calculation
  • internet connectivity
  • wireless charging.
135
Q

How could technology be used at Starbucks?

A

Free WiFi
Automation
Starbucks app

136
Q

What is international trade?

A

Refers to the selling across borders

137
Q

Why is it beneficial for countries to trade internationally?

A
  • increases the variety of goods that can be obtained
  • economic efficiency (economies of scale)
  • growth (bigger markets)
  • specialisation
  • international co-operation
138
Q

What is free trade?

A

Trade without barriers.

139
Q

Why are trade barriers put into place?

A

To promote domestic trade as it avoids additional costs

140
Q

What are the purpose of trade barriers?

A

Make it less attractive to import goods, promoting domestic trade.
Effectiveness of trade barriers depends on other countries trade barriers, income tax rates and the state of other economies

141
Q

What is the relationship between increased globalisation and international trade?

A
  • globalisation increases competition so firms need to buy cheaper materials from other countries, leading to firms buying resources from other countries
  • globalisation increases infrastructure investment making it easier to trade.
  • globalisation increases communication and awareness of business opportunities making it easier to trade
142
Q

Source of financial support for businesses who trade internationally

A

Export factoring

Export insurance

143
Q

What is export factoring?

A

Provided by most banks. The bank arranges to obtain payment directly from the importer and agrees to pay the exporting company the value of the invoice

144
Q

What is export insurance?

A

Uk government offers assistance in the form of insurance to uk exporters against the rise of non payment by overseas buyers

145
Q

What is free trade?

A

Trading with no barriers

146
Q

What are the advantages of free trade?

A
  • cheaper to import materials
  • makes businesses work more efficient
  • increased competition means lower prices (consumers)
  • economies of scale
147
Q

Disadvantages of free trade?

A
  • reduces jobs in domestic industries
  • businesses may not be able to compete on price
  • puts local businesses out of business
  • environmental damage
148
Q

What is an example of non-financial support?

A

Passport to export

149
Q

What does passport to export do?

A

Offers to help small and medium sized businesses that want to start exporting.

  • includes help with market research
  • includes an action plan for exporting
  • helps visit potential markets
150
Q

Reasons for the government deciding to make imports tariff free?

A
  • stops costs being passed onto consumers
  • prevents monopolies
  • stops increases in business costs
151
Q

How do tariffs provide protection to some industries?

A
  • encourages domestic trade (steel industry)
152
Q

What are trade blocs?and an example?

A

A group of countries within a particular geographical region that protect themselves from imports from non-members. E.g. NAFTA, EU

153
Q

What are the benefits of trading blocs?

A
  • trade creation - access to new markets
  • cost of production will bee cheaper
  • increases a business stability (Spreading the risk)
  • economies of scale
154
Q

What are the Disadvantages of trade blocs?

A
  • membership may hinder trade with other countries
  • easier for domestic countries to be taken over
  • have to abide by the rules of the bloc
  • more competition from foreign companies
155
Q

What is an emerging market?

A

A country that is achieving rapid growth and industrialisation.

156
Q

What does BRICS stand for?

A 
Brazil
Russia
India
China
South Africa
157
Q

What are the advantages of emerging markets to businesses?

A
  • take advantage of lack of legislation
  • can move production into these markets and take advantage of cheap labour
  • move production closer to the markets being served
  • can access markets possibly with higher incomes
158
Q

What are the disadvantages of emerging markets?

A
  • unskilled workforce
  • goods can be made more cheaply making it hard to compete on price
  • reduces jobs in devolved countries
  • emerging markets are no longer reliant on developed countries for their products.
159
Q

What is the digital revolution?

A

Shit from analog and mechanical technology to digital technology

160
Q

Examples of digital technology?

A
  • VR
  • QR codes
  • mobile wallets
  • digital price tags
  • video conferencing
161
Q

What is the Information Age? And an example of a business using it?

A

A time where large amounts of information is widely available.
E.g. Tesco pulls information from customers smart phones to create a data base where they walk in stores.

162
Q

What are the opportunities for businesses that have arisen due to the digital revolution?

A
  • cost savings for information
  • market research is easier
  • feedback from customers is easier.
163
Q

What are threats to the business that have arisen due to the digital revolution?

A
  • expensive to prevent fraud on security systems
  • requires training
  • may provide reputation as damage (false reviews)
164
Q

Why are some businesses more affected by the digital revolution than others?

A
  • the market in which a business operates
  • how rivals responded to the digital revolution
  • the type of product that is being sold
  • the budget of the business
165
Q

What are 2 advantages of technological change for customers?

A
  • better and easier shopping experience

- lower prices

166
Q

What is a market?

A

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

167
Q

What is markup?

A

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

168
Q

What is a physical and non physical market?

A

Physical - where buyers and sellers come into contact face to face
Non physical - where sellers compete with each-other but do not meet or interact physically with buyers at all

169
Q

What are the characteristics of a competitive market?

A
  • large number of firms
  • price takers
  • competition is based on price
  • homogenous products
170
Q

What are the characteristics of a monopoly?

A
  • one supplier of a product
  • high prices
  • little choice
  • high barriers to entry and exit
  • 25% of market share
171
Q

What are the characteristics of a monopolistic competitive market?

A
  • products are very similar

- competition is based on non-price differences e.g. loyalty cards

172
Q

What are the characteristics of an oligopoly?

A
  • market dominated by a few large firms
  • very similar prices
  • interdependence between firms
  • firms compete on non-price differences
173
Q

Why is competition regarded as beneficial?

A

Because it forces businesses to be efficient in terms of keeping costs as low as possible.

175
Q

How might a business increase its market share?

A
  • being aware of customer needs and meeting them
  • selling more to existing customers
  • finding out why “old” customers no longer use your products
  • having a clear marketing plan
  • using promotion techniques
176
Q

What are examples of barriers to entry?

A
  • start up costs
  • marketing budgets
  • legal barriers (patents)
  • inability to gain economies of scale
  • price wars
177
Q

What are examples of barriers to exit?

A
  • difficultly of selling off capital
  • redundancy costs
  • contracts with suppliers
178
Q

What are the definitions of barriers to entry and exit?

A

Entry - factors preventing a business from entering and competing in a market
Exit - factors preventing a business from leaving a market, even if it would like to

179
Q

What is free trade?

A

Trade without tariffs or quotas being imposed

180
Q

What is a single market?

A

A market in which there is a single Set of laws and regulations relating to the movement of products, people and money; all businesses in the single market have to abide by these rules

181
Q

What is the eurozone?

A

The name for all the countries that have adopted the euro as their single currency.

182
Q

What are the disadvantages associated with UK businesses joining the Euro?

A
  • loss of control over monetary policy

- outer countries get left behind

183
Q

What is the definition for an emerging market?

A

Refers to developing countries that are achieving rapid growth and industrialisation.

184
Q

What are the disadvantages of globalisation?

A
  • benefits felt by developed countries
  • lack of laws mean LDC’s have poor working conditions
  • pollution
  • loss of culture
  • local businesses cant compete
185
Q

What determines the demand for a currency?

A
  • Hot money flows
  • demand for exports
  • FDI
186
Q

What determines the supply of Pounds?

A
  • U.K. investment abroad
  • demand for imports
  • hot money flows going abroad
187
Q

What are some examples of effects of political factors on functions of business?

A
  • marketing - marketing legislation
  • financial - government economic policy
  • people - employment policy
  • operations - “price freezes”
188
Q

What are examples of the effects of social issues on areas of business?

A
  • Marketing - age and income distribution will effect the type of product sold
  • financial - changes in social habits will effect sales
  • people - changes in employment patterns
  • operations - changing attitudes to work
189
Q

What is a trading bloc?

A

Where countries in a particular area agree to remove tariffs, quotas and in exchange they can trade freely with eachother

190
Q

What is the circular flow of income?

A

Shows the continuous flow of income from businesses to households as payment for work, and from households to businesses as payment for products.

191
Q

What is the business cycle?

A

Rises and falls in economic activity; these follow a pattern that can be identified as boom, recession, slump and recovery.

192
Q

What is the balance of trade?

A

Difference between the value of exports and imports

193
Q

What are the effects of a fall in the rate of interest on businesses?

A
  • investment will increase
  • consumer spending will increase
  • exchange rate will fall
194
Q

How might you evaluate the effects of a change in economic policy?

A

T - trend in variable
E - extent of the change
D - duration of change

195
Q

What is civil law?

A

Law concerned with the rules that govern the relations between businesses and people

196
Q

What is a contract?

A

Legally binding agreement between two or more parties. Most business relationships are of contractual nature.

197
Q

What are the conditions under the sale of goods act?

A

The product must be:

  • satisfactory quality
  • as described
  • fit for purpose
198
Q

What are the benefits to the business of complying with the law?

A
  • avoidance of fines
  • avoidance of compensation
  • avoidance of bad publicity
199
Q

What does obsolescence mean?

A

Existing capital equipment is replaced by new developments in technology.

200
Q

What does sustainability mean?

A

The endurance of systems and processes. It refers particularly to preventing a negative impact from economic systems and production on earth and its environment

201
Q

What is an employment tribunal?

A

A special type of court that only deals with employment related issues such as victimisation by an employer, unfair dismissal and discrimination

202
Q

What are some threats that have arisen due to the digital revolution?

A
  • hard to keep up
  • involves trining staff
  • allows customers to make an informed decision
  • fraud and crashing
203
Q

What is the digital revolution?

A

Shift from analog and mechanical technology to digital technology.

Business Studies (10 decks)

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