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Business A-Level AQA 2024/25 (UPDATED) > 3.7 ANALYSING THE STRATEGIC POSITION OF A BUSINESS > Flashcards

3.7 ANALYSING THE STRATEGIC POSITION OF A BUSINESS Flashcards

1
Q

Define Assets

A

What the business OWNS

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2
Q

Define Liabilities

A

What the business OWES

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3
Q

Define Non-current Assets

A

Assets that provide a benefit for the business in the long-term (Over a year)

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4
Q

Give an example of non-current assets

A

Buildings and machinery

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5
Q

Define Current Assets

A

Assets that will be used up or sold in the short-term and the cash balances kept within the business

LESS THAN A YEAR / WITHIN A YEAR

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6
Q

Give an example of current assets

A

Raw materials

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7
Q

Define Current Liabilities

A

What the business owes in the short-term

LESS THAN A YEAR / WITHIN A YEAR

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8
Q

Give an example of current liabilities

A

Short-term debts

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9
Q

Define Non-current Liabilities

A

What the business owes in the long-term

MORE THAN A YEAR

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10
Q

Give an example of non-current liabilities

A

Long-term debts

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11
Q

Define Working Capital

A

Cash available to pay short term debts/liabilities

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12
Q

Equation for Working Capital

A

Current Assets - Current Liabilities

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13
Q

Define Net Assets

A

Value of assets overall

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14
Q

Equation for Net Assets

A

Net Current Assets + Non-current Assets - Long-term liabilities

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15
Q

What is Net Assets equal to?

A

Capital Employed

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16
Q

Define Capital Employed

A

Amount of long-term money put into a business

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17
Q

Define strategy and tactics

A

Strategy: how we do things, medium/long term plan of action, put in place to achieve a business objective.

Tactics: short term that helps to achieve a strategy- daily activities such as sending emails

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18
Q

Influences on the mission of a business

A
  • Size
  • What its about
  • Target market
  • £££
  • Owners
  • PESTLE (external factors)
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19
Q

Internal influences on Corporate Objectives

A
  • Business ownership
  • Attitude to profit
  • Ethical stance
  • Organisational culture
  • Leadership
  • Stakeholder influence
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20
Q

External influences on Corporate Objectives

A
  • Economic environment
  • Political / legal environment
  • Competitors
  • Social and technological changes
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21
Q

Define Strategic Position

A

Concerned with the way in which a business as a whole distinguishes itself in a valuable way from its competitors

A firm’s decisions on how to serve customers and compete against rivals

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22
Q

Define ‘short-termism’

A
  • For survival
  • Up to 1 year
  • An excessive focus on short-term results
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23
Q

Disadvantage of ‘short-termism’

A
  • Can mean forget about long term measures and not focus on them
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24
Q

Why may a business be concerned about the short term?

A
  • Stock market actions
  • Reliance on bonuses based on short-term performance
  • Changes in leadership and strategy
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25
Q

Give a contextual example of a business that has a long-term perspective

A

Unilever - doesn’t publish data to analysts and media

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26
Q

How would you evaluate the ROCE of a business?

A

The higher the percentage figure, the better.

Compare with the ROCE from previous years to see if there is a trend of ROCE rising or falling.

Based on snapshot of business’ balance sheet

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27
Q

What does ‘return on capital’ tell us?

A
  • Measure of return
  • How good a business is at converting money invested to profit
  • Provides way of comparison
  • Speculate opportunity cost - what a business could have done if they invested elsewhere
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28
Q

Mention if internal or external

What does ‘SWOT’ stand for?

A

Strengths (Internal)
Weaknesses (Internal)
Opportunities (External)
Threats (External)

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29
Q

Define ‘SWOT’ analysis

A

Method for analysing a business, its resources and its environment.

Focuses on the internal strengths and weaknesses of a business (compared with competitors) and the key external opportunities and threats for the business.

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30
Q

What does ‘SWOT’ aim to cover?

A
  • What the business does better than the competition
  • What competitors do better
  • Whether it is making the most of the opportunities available
  • How a business should respond to changes in its external environment
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31
Q

Mention examples of strengths of a business

SWOT

A
  • Reputation for high quality products
  • Seen as innovative
  • Very profitable in comparison to other organisations
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32
Q

Mention examples of weaknesses of a business

SWOT

A
  • Reputation as poor employer
  • Product portfolio full of declining products
  • High levels of staff turnover / absenteeism
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33
Q

Mention examples of opportunities of a business

SWOT

A
  • Main competitor having financial difficulties
  • Government encouraging more spending
  • Fall in exchange rates, helping exporters
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34
Q

Mention examples of threats of a business

SWOT

A
  • High levels of competition in a market
  • Innovation / USP from competitors
  • Increased interest rates
  • Products becoming obsolete
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35
Q

Define ‘opportunities’

(SWOT)

A

What a business can take advantage of

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36
Q

Give examples of an internal strategy (method of achieving a goal or target)

A
  • Delayering
  • Expansion
  • Retrenchment
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37
Q

Give examples of an external strategy (achieving a goal or target)

A
  • Analysing trends
  • Being aware of laws
  • Being aware of technical advances
  • Viewing economic conditions
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38
Q

Define an ‘incremental strategy’

A

Bit by bit

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39
Q

Give examples of an incremental strategy (achieving a goal or target)

A
  • Kaizen
  • Lean production
  • Streamlining: improvement of the efficiency of a certain process
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40
Q

Give examples of a disruptive strategy (achieving a goal or target)

A
  • Adapting to digitalisation: modern world
  • Adjusting to Covid-19
  • Becoming more environmentally friendly to ward off pressure groups
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41
Q

Why is change valuable?

A
  • Out the old, in with the new
  • To innovate products: Netflix going online
  • Expansion: target new markets
  • Become more efficient
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42
Q

Why is change valuable?

A
  • Out the old, in with the new
  • To innovate products: Netflix going online
  • Expansion: target new markets
  • Become more efficient
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43
Q

What does the Lewis Forcefield Model suggest?

A

Forces for change vs. Forces restricting change

Whichever is higher has a stronger influence

()

Change in middle and arrows on each side

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44
Q

Advantages of ‘Lewis Forcefield Model’

A
  • Easy to observe / make
  • Identifies both sides of the predicament
  • Identifies negative forces so the business can strategise how they can get around this
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45
Q

Disadvantages of ‘Lewis Forcefield Model’

A
  • Requires participation: Reliant on people scoring individually if they are ‘for’ or ‘against’ - bias
  • Could cause conflict between for and against
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46
Q

Define ‘ethics’

A

Moral principles or standards that guide the behaviour of a person / business

Being ethical = doing the right thing!

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47
Q

What makes a business ethical?

A
  • Responsibility for mistakes
  • Making customers aware of origins/change of products
  • Less waste
  • Following laws
  • No sweatshops
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48
Q

Advantages of a business being ethical

A
  • Gains more customers: e.g. vegans
  • Builds positive reputation through good press/media
  • MAY BE WORTH INVESTMENT
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49
Q

Disadvantages of a business being ethical

A
  • Higher cost
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50
Q

Define ‘core competencies’

A

Unique strengths of a business that cannot be easily replicated by competitors

Should be adapted to meet demands of the market

Must focus on them when developing strategies

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51
Q

Difficulties a business could face when using non-financial methods to analyse performance

A
  • Time consuming
  • May be unreliable as doesn’t look at finances which could pinpoint certain issues with cashflow
  • May be opinion based, BIAS? Disruption in accuracy
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52
Q

Common reason for short-termism

A
  • Survival
  • External environment (PESTLE) - COVID-19
  • Stock market’s influence
  • Reliance on bonuses from employees
  • Frequent changes in leadership and strategy
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53
Q

If a business focuses too much on the short term, what may happen?

A
  • Long term becomes less important, which could cause future issues
  • Distract them from overall aim of the business
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54
Q

How can you tell if a business is short-termism?

A

FINANCIAL INCENTIVES BASED ON THE SHORT-TERM, seem to be throwing all money away

  • Short-term bonuses (e.g. sell 20 houses in next 4 months for a bonus)
  • High dividends rather than reinvesting profits - satisfy shareholders - REINVESTING IS LONG-TERM TO GROW
  • Take-overs rather than internal growth - increase customers quicker and easier
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55
Q

Define ‘long-termism’

A

Tendency for management to focus on long-term gains

(1 year+)

  • Shows business’ ability to sustain/grow
    e. g. staff training (build productivity overtime) / building core competencies
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56
Q

Advantage of ‘short-termism’

A

Tackles issues promptly

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57
Q

What is the ‘Kaplan and Norton’s Balance Scorecard’?

A

Highlights range of influences on the success of a business beyond that of the traditional view of looking at profit

Combines non-financial measures with financial measure (CREATES BALANCE!)

Top-down approach

Identifies key performance indicators

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58
Q

What is the ‘Kaplan and Norton’s Balance Scorecard’ made up of?

A

FOUR MAIN PERSPECTIVES (FT. KEY PERFORMANCE INDICATORS)

Spider diagram with ‘Vision and Strategy’ in middle, then around it…

  • Financial
  • Internal processes
  • Organisational capacity
  • Customer
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59
Q

Advantages of ‘Kaplan and Norton’s Balance Scorecard’

A
  • Provides broader view of business performance
  • Provides specific targets that can be MONITORED
  • Tailored to business, accurate
  • Involves all stakeholders in the business
  • Highly flexible - KPI’ chosen by business
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60
Q

Disadvantages of ‘Kaplan and Norton’s Balance Scorecard’

A
  • Can get complicated
  • Requires a lot of data - time / money
  • Too many KPI’s to manage
  • Balancing is not easy
  • Needs updating regularly: admin costs / extra tasks for staff
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61
Q

Suggest a focus of financial performance (‘Kaplan and Norton’s Balance Scorecard’)

A

Financial performance

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62
Q

Suggest a focus of customer (‘Kaplan and Norton’s Balance Scorecard’)

A

Customer satisfaction

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63
Q

Suggest a focus of internal processes (‘Kaplan and Norton’s Balance Scorecard’)

A

Business efficiency

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64
Q

Suggest a focus of organisational capacity (‘Kaplan and Norton’s Balance Scorecard’)

A

Knowledge and innovation

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65
Q

Suggest a KPI of financial (‘Kaplan and Norton’s Balance Scorecard’)

A

ROI

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66
Q

Suggest KPI’s of customer (‘Kaplan and Norton’s Balance Scorecard’)

A

Levels of returns, service rating

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67
Q

Suggest KPI’s of internal proceses (‘Kaplan and Norton’s Balance Scorecard’)

A

New product lead times, unit costs

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68
Q

Suggest KPI’s of organisational capacity (‘Kaplan and Norton’s Balance Scorecard’)

A

Employee retention

Flow of new product development ideas

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69
Q

Define ‘The Political Environment’

A
  • The government actions that impact on the strategic and functional decisions made by a business
  • Can be by local, national or international authorities
  • Impact heavily on the competitive environment and the infrastructure that allows businesses to operate effectively
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70
Q

Define ‘legislation’

A

Involves creating and enacting laws in order to protect individuals, businesses and society

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71
Q

Define ‘legal environment’

A

Collection of legislation that impact on activities of organisations

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72
Q

Scope and effects of the UK / EU law related to competition

A
  • Promote fair competition - stop MONOPOLY happening
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73
Q

What is an ‘anti-competitive product’ ?

A

ILLEGAL

Doesn’t promote fair competition in the market

e.g. price fixing between businesses

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74
Q

Governments impact on mergers and takeovers

WITH CONTEXT

A

They are monitored and will not be allowed if it is deemed that they significantly reduce competition

e.g. TUI and Thomas Cook not allowed to merge - monopoly empire

Markets that are not competitive will be investigated

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75
Q

What does the ‘competition law’ not allow businesses to do?

A

Firms are not allowed:

  • To agree prices with competitors
  • To limit production in order to reduce competition
  • Partition markets or customers between each other (TERRITORY) - e.g. geographically where each firm takes a different region to avoid competition
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76
Q

General features of UK and EU Competition Policy

A
  • Seeks to improve the competitive nature of markets

- Seeks to alleviate market failure to protect the interests of consumers and society as a whole

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77
Q

How can the government make sure that ‘competition law’ is successful?

A
  • Curtailing monopoly power and protecting competitive markets
  • Restricting mergers and prohibited cartels (businesses group together in order to regulate supply to markets)
  • Creating fairness in markets for both businesses and consumers, so that businesses don’t abuse their dominant market position but are able to make acceptable profits that will drive innovation and increase productivity
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78
Q

Define ‘cartel’ (Competition Law)

A

Businesses working together to only supply certain businesses, to benefit them

‘We are not going to use you unless you stop supplying to…

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79
Q

Define ‘monopoly’

A

COMPLETE DOMINANCE OF MARKET

  • There is only one business in the market
  • Government refers to any business that has at least 25% market share as having monopoly powers
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80
Q

On what condition will CMA regulate markets for ‘monopoly power’ ?

A

When they have 40% market share

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81
Q

Define ‘market power’

A

Ability to set price above those that would be charged if there were competition

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82
Q

How can ‘monopolies ‘ exploit consumers? And why may this enforce regulation?

A

Charging high prices as customers have NO other choices… therefore they are regulated, to stop this happening

FREE AND FAIR COMPETITION MUST BE ACHIEVED

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83
Q

Benefits of UK and EU ‘Competition Policy’

A
  • Lower prices: no monopoly utilising, lots of other options
  • Improved quality: businesses strive to improve quality and customer service as MORE RISK of losing market share
  • Innovation: businesses invest in R&D to compete - allowing new products for society
  • Competitive advantage: more efficient businesses that have better understanding of the requirements of the consumer
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84
Q

What does the ‘competition policy’ allowing more room for innovation benefit the most?

A

New / small businesses to grow

Consumers gaining better products

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85
Q

Define ‘labour market’ / ‘employment legislation’

A

Aims to ensure that employees and employers act fairly in dealing with each other by defining their rights and obligations

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86
Q

What aspects comes under the ‘Equality Act 2010’

A
  • Age
  • Disability
  • Gender reassignment
  • Marriage and civil partnership
  • Pregnancy and maternity
  • Race
  • Religion and/or belief
  • Sex
  • Sexual orientation
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87
Q

What is the main disadvantage of having the ‘Equality Act 2010’ ?

A

Difficult to regulate

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88
Q

What are all of the rights given to employees?

A
  • Employment Relations Act: allowing trade union membership
  • Employment Act: relating to dispute resolution
  • Children and Families Act: shares parental leave and paternal pay. Allows flexible working for all employees
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89
Q

Define ‘Children and Families Act’

A
  • Allows maternity / paternity leave

- Allows flexible working for all employees

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90
Q

Define ‘Employment Relations Act’

A

Allowing trade union membership

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91
Q

Define ‘Employment Act’

A
  • Dispute resolution

- Mediate the relationship between workers, employing entities, trade unions and the government.

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92
Q

Define ‘Labour Market Law’

And what it covers

A

Designed to protect the worker from discrimination within the workplace and to make it easier for businesses to recruit workers

It covers:

  • Wage discrimination
  • Discrimination
  • Labour market reforms: reduction in trade union power and influence
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93
Q

Should the national living wage be increased?

ARGUMENTS FOR

A
  • Reduces inequalities
  • Increases demand in the economy (GDP)
  • Improves standard of living
  • Less pressure groups
  • Makes staff more productive and satisfied
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94
Q

Should the national living wage be increased?

ARGUMENTS AGAINST

A

INCREASE IN BUSINESS COSTS

  • May create unemployment: business tries to survive
  • Lower supply of goods and services as workers become too expensive
  • If goes up, price for everything else goes up
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95
Q

What does the UK and EU law related to the environment relate to?

A

Water + Land

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96
Q

What does the ‘environmental law’ enforce?

And specify…

A

Ensures businesses don’t have negative impact on environment

  • Limits to emission levels to sea, rivers and air
  • Guidelines, limits and bans on waste disposal (e.g. plastic bags)
  • Quotas on use of finite resources (e.g. fishing)

GOVERNMENT CAN INSPECT AND FINE THOSE WHO FAIL TO COMPLY

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97
Q

Why was introducing a cost to plastic bags a good strategy by the UK government?

A

Changed the way you think about using them

Anything of a cost makes customers think

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98
Q

Main disadvantage of following ‘environmental laws’ for a business

A

Compliance can often increase costs

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99
Q

What are the two types of environmental law?

A
  • Environmental Protection Act
  • Environment Act

BOTH PUT COSTS UP

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100
Q

What is the ‘Environmental Protection Act’ (Environmental Law)

A

Businesses must improve the control of pollution arising from industrial and other processes

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101
Q

What is the ‘Environmental Act’ (Environmental Law)

A
  • A business must clean up any contaminated sites that it owns
  • Environment Agency able to oversee environmental protection
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102
Q

Businesses being environmentally friendly

A
  • New environmentally friendly production
  • New products that meet higher environmental standards
  • Greater use of recycling
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103
Q

Why do the government promote enterprise in the economy?

A
  • Creates jobs

- Leads to economic growth

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104
Q

Reasons why the government support start-ups

A
  • Provide employment and large businesses of the future
  • Future tax receipts, increasing government income
  • More environmentally-friendly future
  • Support moves into export markets, helping UK businesses to become globally competitive THEREFORE BRINGING MORE MONEY INTO UK ECONOMY
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105
Q

Over the pandemic, how did the government use grants?

A

Survival, kept employment and businesses alive

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106
Q

Where is the finance for ‘grants’ sourced from?

A

Tax money (from public)

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107
Q

The government can provide training to start up businesses in a variety of areas…

A
  • Financial (e.g. small business accounts)
  • Marketing (e.g. how to target market segments)
  • Operations management (advice on location)
  • People (how to recruit a suitable workforce)
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108
Q

What are the 3 types of grant?

A
  • Local
  • National
  • European Government
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109
Q

What is an SME?

And defined by what?

A

Small and medium size enterprises

Defined by number of employees, turnover and net worth shown on balance sheet

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110
Q

What makes up a medium enterprise?

A

No. Employees: < 250m

Turnover in Euros: < 50m

Net worth shown on balance sheet: < 43m

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111
Q

What makes up a small enterprise?

A

No. Employees: < 50

Turnover in Euros: < 10m

Net worth shown on balance sheet: < 10m

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112
Q

What makes up a micro enterprise?

A

No. Employees: < 10

Turnover in Euros: < 2m

Net worth shown on balance sheet: < 2m

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113
Q

How do entrepreneurs and SME’s impact on the economy?

A
  • Provide employment
  • Pay taxes
  • Create competition
  • Supply goods and services
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114
Q

What are ‘regulators’ and their role?

A

Watch over the actions and choices made in a market

  • Complaints should be made to regulators (OFCOM - TV&Media Faye Love Island)
  • Monitor prices
  • Maintain high standards of customer service
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115
Q

Why does the government undertake regulation?

A
  • Create competitiveness in the market
  • Greater choice of lower prices
  • Ensure fair environment in all sectors
  • To create conditions for continued investment
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116
Q

Define ‘regulation’

A

Creation of rules and sanctions within an industry to modify the economic behaviour of firms

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117
Q

Why does privatisation lead to monopoly power?

A

Most firms privatised operate in markets with barriers to entry

This can be countered through regulation and deregulation

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118
Q

Arguments for regulation

A
  • Protecting consumers against the abuse of monopoly power that would lead to higher prices
  • To create an environment that will encourage businesses to strive for efficiency through reduced costs: achieved through CAPPING PRICES
  • To ensure quality and choice are maintained
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119
Q

Define ‘de-regulation’

A

Opening up of markets to new competition through the removal of rules and regulations that created barriers to entry

‘Fishermen can fish anywhere’ > Costs decrease > Benefit the customer

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120
Q

Arguments for ‘de-regulation’

A

The creation of competitive markets will lead to greater efficiency:

  • Businesses strive to reduce costs in order to compete effectively
  • Businesses strive to meet consumer demand by reducing price and providing a greater range of products
  • Less government intervention allows businesses to produce to the needs of the market, FLEXIBILITY
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121
Q

Examples of infrastructure

A
  • Transport network (e.g. rail, road and air)
  • Provision of utilities (e.g. gas and water)
  • Provision of information (e.g. broadband)
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122
Q

Contextual examples of the government improving infrastructure

A

HS2

Heathrow 3rd runway

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123
Q

Advantages of Heathrow 3rd Runway being built (CONTEXT)

A
  • Needed to trade / transport more people
  • Facilitates increase in air travel in UK
  • More employment
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124
Q

Disadvantages of Heathrow 3rd Runway being built (CONTEXT)

A
  • More pollution (environmental)

- Destruction of homes / houses (previous infrastructure) to make space

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125
Q

What is a ‘pollution permit’?

A

Allows businesses to produce a legal level of pollution every year

THESE ARE TRADEABLE ON THE MARKET

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126
Q

What is ‘UKTI’?

A

UK Trade and Investment

  • Helps businesses export to foreign markets and helps foreign companies in setting up production in UK
  • Identifies opportunities around the globe, providing advice and networks for UK businesses
  • This might include overcoming issues such as cultural and language problems
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127
Q

Define ‘Elkington Triple Bottom Line’

A

A way of assessing business performance based on three important areas:

  • Profit (Internal)
  • People (Internal)
  • Planet (External)

FOCUSES MORE ON OTHER STAKEHOLDERS (Bigger Picture)

  • Profit will come when sustainable
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128
Q

Define ‘people’ (‘Elkington Triple Bottom Line’)

With a disadvantage

A

Measures extent of which business is socially responsible.

Hard to calculate and report reliability and consistency

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129
Q

Define ‘profit’ (‘Elkington Triple Bottom Line’)

A

Familiar to managers identified from income statement.

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130
Q

Define ‘planet’ (‘Elkington Triple Bottom Line’)

A

Measures of business’ impact on environment

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131
Q

Where is ‘Elkington Triple Bottom Line’ used? (Marketing and Operating)

A
  • Used in marketing to market a product in a sustainable way, increasing sales as a business meets all criteria
  • Used in operations so a business can operate in a sustainable way, becoming more ethical which will create a better brand image
  • Strategic planning tool for the future – long term approach
132
Q

Context for ‘Elkington Triple Bottom Line’

A
  • SPORTSDIRECT: have a lack of use of Elkington’s Triple Bottom Line as they focus mostly on a singular stakeholder, in their shareholders, rather than other stakeholders such as employees which causes a lack in employee morale as they focus on maximising profits through the exploitation of staff.
  • Therefore, there is an imbalance between all features
  • Make no action to work towards a more improved environment
133
Q

What does ‘Elkington Triple Bottom Line’ suggest and aim to achieve?

A

SUSTAINABILITY

  • There is more to a business’ success than profit
  • Aims to measure the financial, social and environmental performance of a business over a period of time
134
Q

Benefits & value of the triple bottom line

A
  • Encourages businesses to think BEYOND narrow measure of performance (profit)
  • Encourages corporate SOCIAL RESPONSIBILITY
  • Can improve brand image if becoming more ethically sustainable through improving these factors
135
Q

Drawbacks of ‘Elkington Triple Bottom Line’

A
  • Not very useful as an overall measure of business performance, only focuses on three factors out of many
  • Hard to reliably and consistently measure People and Planet bottom lines, expectations constantly changing
  • No specific guidelines on what a business should report on
136
Q

Define ‘globalisation’

A

Process through which an increasingly free flow of ideas, people, goods, services and capital leads to the integration of economies and societies worldwide.

137
Q

‘Business is the main driver of globalisation’

Argue for this statement.

A
  • Going multi-national means increase sales, profit and shareholder value
  • Barrier to international business are lower and falling, meaning easier to become international
  • Government want to encourage domestic businesses to expand, to improve UK economy
138
Q

Define ‘market liberalisation’

A

Markets freeing up, less communism

139
Q

Ways of ‘going global’

A
  • Establish production sites overseas
  • License technology and other IP (intellectual property) - allowing other organisations to use your tech
  • Joint ventures (mergers/takeovers)
  • Franchising
  • Offshoring / outsourcing
140
Q

Define ‘licensing technology’

A

Allowing other organisations to use your technology

141
Q

Advantages of ‘Globalisation’

A
  • Gain better understanding of global markets
  • Tax evasion
  • Increase brand image
  • Higher profits and stronger position
  • Unit costs lower in poorer countries
  • EXTEND LIFE OF OBSCELETE PRODUCTS IN POORER COUNTRIES, as less advanced (Apple do this)
  • Opportunities for staff to work abroad
  • More intense competition - keep on toes and innovative
  • Access cheaper goods and services from emerging countries
  • More investors available
  • Creates jobs abroad
142
Q

Disadvantages of ‘Globalisation’

A
  • Initial cost is expensive - complex to set up
  • Takes time, don’t focus on other tasks
  • Have to change products to meet cultures of other countries. MCDONALDS’ INDIAN MENU
  • Increased transportation costs - tariffs / tax
  • Can create unemployment (not needed anymore in UK)
  • Increased global trade / output = more CO2 emissions
143
Q

Define ‘tariffs’ (Globalisation) and what does it cause

A
  • Tax imposed by a government of a country on imports or exports of goods
  • Causes the level of imports into a country to fall
144
Q

Define ‘quotas’ (Globalisation)

A

Restriction imposed by a government on the amount or number of goods or services that may be exported within a given period

145
Q

Define ‘TradeBloc’ (Globalisation)

A

Intergovernmental agreement, barriers to trade (tariffs and others) are reduced / eliminated

146
Q

Define “balance sheet”

A

A snapshot of the business’ assets and liabilities on a particular day / time

147
Q

Define “depreciation”

A

The fall in value of an asset over time

148
Q

Why may a business produce a financial statement?

A
  • Get an overview of the value of a business - good if wanting to sell it
  • Notice financial issues
  • Make quick + easy decisions, snapshot at any time
  • Forecast if investments will be necessary / will work
149
Q

What does an “income statement” show?

A

Shows a business’ revenues and costs, thus its profit and loss

150
Q

Define a “ratio”

A

How much there is of something compared to something else

Ratios in business can also be presented as %

151
Q

List all “financial ratios”

A
  • Current ratios
  • Gearing
  • Return on capital employed
  • Payable days
  • Receivable days
  • Inventory turnover
152
Q

Define “ratio analysis”

A

It is a technique for analysing a business’ financial performance by analysing different pieces of data from company accounts

153
Q

Define “liquidity” and the ratio used for it

A

Firm’s ability to pay their short term debts (current liabilities)

Current ratio used for it

154
Q

What does “current ratio” measure?

And suggest ideal measurement

A

Ability of a business to meet its short term liabilities (debts) and it’s expressed in the form of a ratio

Should be higher than 1:1

1.5 : 1 —> 2:1 (ideal)

Measure below 1.5 : 1 suggests a liquidity problem

155
Q

What does a firm with a high current ratio suggest?

A

May not be investing enough cash into non-current assets to further expand the business to generate additional profit

156
Q

When will firms often experience poor liquidity?

A

When growing due to the extra costs incurred so before expansion, a company will want a healthy current ratio.

157
Q

What is the gearing ratio measured in? (units)

A

%

158
Q

What does ‘high gearing’ suggest?

A

Firm has borrowed a lot of money compared to their total capital

159
Q

What does “gearing” show?

And suggest ideal figure

A
  • What proportion of the capital invested in the business has come from loans
  • No ideal figure!
160
Q

What is judged as ‘high gearing’ ?

A

Value of +50?

161
Q

What is judged as ‘low gearing’ ?

A

Below 25%

162
Q

What does ‘low gearing’ suggest?

A

Firm raised most capital through alternative sources of finance

Missing potential opportunities

163
Q

Benefits of ‘high gearing’

A
  • Less need to raise finance through share capital when bank loans are used, so there will be less shareholders - making it easier to control the company and make long-term strategic decisions
  • Less dividend payments will be required as share capital will not be needed - more retained profit and investment rather than payments to shareholders
164
Q

Benefits of ‘low gearing’

A
  • Company will have lower interest and loan repayments positively impacting its liquidity
  • Makes the business more attractive to investment of potential shareholders
  • Firm will not be as vulnerable to the cost impact of interest rate changes
  • Reduced risk as the business has less debt and fewer creditors who could put the business into liquidation if these debts go unpaid
165
Q

What does “ROCE” measure?

A
  • Relative profitability
  • Evaluate business performance
  • Lets owners/investors understand how efficient the business is at producing profit, based on capital invested in the business.
166
Q

What does “Inventory (stock) turnover” measure?

A

How quickly inventory (stock) is converted into sales

167
Q

What is ‘inventory (stock) turnover’ measured in?

And what does the figure represent?

A
  • As a number and not a ratio

- Figure represents number of times in a year that the firm sells average value of its stock held

168
Q

Ideal ‘inventory (stock) turnover’ figure

A

Higher the figure, the better

As implies they are selling goods and shifting stock more quickly

But no overall ideal number as depends on the business

169
Q

Factors influencing inventory (stock) turnover

A
  • Popularity of product
  • Type of product (perishable goods will need high turnover figures)
  • Type of business (retailers need to hold stock)
  • Changes in consumer tastes and fashions
  • Quality of research
  • Product portfolio
170
Q

What does “receivables (debtors) days” show?

A

Number of days it takes to convert receivables into cash

i.e. how long it takes to collect debts from customers

171
Q

What is ‘inventory (stock) turnover’ measured in? (units)

A

Days

172
Q

How will firms get HIGHER receivable days?

A

TRADE CREDIT

Offer long credit periods

173
Q

How will firms get LOWER receivable days?

A

Businesses that deal mainly in cash or do not offer credit sales will have lower figures

174
Q

What does “payables (creditors) days” show?

A

Number of days it takes to pay any payable owed

i.e. how long it takes to pay suppliers

175
Q

What is ‘payables (creditors) days’ measured in?

A

Days

176
Q

What is a firm’s preference to payables and receivables?

A

Will want a higher figure, preferably higher than their receivable days, so they are not paying their debts too quickly and not before they receive the revenue.

This should improve their liquidity and cash flow control

RECEIVING MONEY BEFORE PAYING IT OFF !!!

177
Q

What does ‘GDP’ measure?

A

Gross domestic product

Measures value of all goods and services produced by an entire economy over a period of time (usually goods)

Used to measure economic performance of a country

178
Q

Define ‘economic environment’

A

Consists of key economic factors that influence the behavior of businesses and their customers

179
Q

How can economic growth be supported by the government?

A
  • Government spending
  • Cutting interest rates
  • More exports than imports
  • Training/development of staff (uni incentives)
  • Lower taxes (more grants)
180
Q

Positive effects of economic growth on businesses

A
  • Growth of GDP means higher revenues and higher profitability
  • Gives potential for economies of scale
  • Sustained growth, increase confidence and therefore supports business’ plans for the future
  • Supports strategic decisions
181
Q

Negative effect of economic growth on businesses

A

If growing too fast, can lead to recession

182
Q

How is GDP measured?

And how much should the economy grow by per quarter?

A

Quartley (3 months)

0.6 per quarter / 2.4% a year

183
Q

What contextually helped boost GDP?

A

‘Eat out to help out’ - COVID-19

184
Q

Describe the ‘business cycle’

A
  1. Boom
  2. Recession
  3. Slump
  4. Recovery
185
Q

Define ‘business confidence’

A

Describes the forward-looking expectations of firms.

No confidence = no investment
Confidence = more risks taken

186
Q

Describe ‘boom’ (‘business cycle’)

A

GDP HIGH! - high consumer spending

Period characterised by high levels of consumer spending, business confidence, profits and investment as the same as rising costs, increasing prices and at full capacity (capacity utilisation)

187
Q

What factors does ‘boom’ (‘business cycle’) lead to?

A
  • Dividends increase
  • Shortage of resource - selling more
  • Overheads high, so have to charge higher price to facilitate
  • Higher GDP
188
Q

Describe ‘recession’ (‘business cycle’)

A

Period characterised by falling levels of consumer demand, profit and business confidence, lack of investment and more people unemployed.

A fall in GDP for two consecutive quaters

189
Q

How is a national recession measured?

A

A fall in GDP for two consecutive quarters

190
Q

What does ‘recession’ (‘business cycle’) lead to?

A
  • Income starts to go down
  • Falling demand lead to reduced prices
  • Business closures
  • Low investment
  • Focus on survival
  • Lack of business confidence
191
Q

Describe ‘slump’ (‘business cycle’)

A

Period characterised by very low levels of consumer demand, investment and business confidence, an increasing number of businesses failing and high unemployment

192
Q

What does ‘slump’ (‘business cycle’) lead to?

A
  • Deflation (falling price) across entire economy
  • GDP low
  • Unemployment is high
  • Lots of redundancies
  • Low level / lack of demand (prices decrease to entice purchases)
193
Q

Describe ‘recovery’ (‘business cycle’)

A

Period classified by slowly starting to rise levels of consumer demand, rising investment, patchy but increasing business confidence and falling levels of unemployment.

194
Q

What does ‘recovery’ (‘business cycle’) lead to?

A
  • Production starts to increase
  • Employment increases
  • Business confidence grows
  • Potential shortages of resources and materials
195
Q

How will times of economic growth impact a business’ decision making?

A
  • HR: more need for staff
  • Maximise shareholder returns - dividends
  • Pay off debts from the recession
  • Build relationship with suppliers - allows deals and bulk
  • More capital available for investment and retained profit - more likely to invest/expand
196
Q

Ideal business confidence figure

A

95%

197
Q

What does the ‘Average Rate of Return’ do?

A

Compares the average yearly profit from an investment with the cost of the investment and is stated as a percentage.

198
Q

Advantages of ‘Average Rate of Return’

A
  • Balance risk
  • Helps justify investment
  • Helps choose investment opportunity
199
Q

Disadvantages of ‘Average Rate of Return’

A

Based on forecast, don’t know for sure (doesn’t counter in external factors)

200
Q

Ideal ‘Average Rate of Return’ figure

A

High as possible

201
Q

What should a business consider when considering an investment?

And what is this concept called?

A

INVESTMENT APPRAISAL

  1. What are the total profits likely to be earned by the investment in the foreseeable future
  2. How quickly the investment will cover its costs
202
Q

What does the ‘Payback (period)’ calculate?

And what does it involve?

A

Time taken for an investment to generate sufficient returns to pay for its initial cost

Involves subtracting net returns gained from investment each year until nothing is left to pay of the initial investment

203
Q

Ideal ‘Payback’ figure

A

SHORTEST POSSIBLE

204
Q

How to work out the precise ‘payback’ (Months and Years)

A
  1. Work out how many cumulative you need to reach 0
  2. Look at net cash flow from the next year
  3. Divide (1) by (2)
205
Q

Advantages of ‘Payback’

A
  • Simple to calculate
  • Quick screening tool for analysis
  • Early return is especially important when liquidity is more important than profitability
206
Q

Disadvantages of ‘Payback’

A
  • Disregards all cash flow beyond the payback period so fails to measure overall profitability
  • It ignores the time value of money
  • It discriminates against projects that involve a long payback period
207
Q

Advantage of calculating GDP

A

Calculated in real time, adjusted so inflation is ignored

208
Q

Define the term ‘economic environment’

A

Consists of key economic factors that influence the behaviour of businesses and their customers

209
Q

What is economic growth proportionate with?

A

A good economic environment

210
Q

How can economic growth be supported by the government?

A
  • Cutting interest rates
  • Government spending/investment
  • Lower taxes
  • More grants
  • More exports/imports
  • SUPPORTING SMALL BUSINESSES
211
Q

How can economic growth be supported by businesses?

A
  • Change objectives to growth

- Training/development of staff: increasing quality of labour

212
Q

Positive effects of economic growth on businesses

A
  • Growth in GDP = higher revenues and higher profitability
  • Gives potential for economies of scale
  • Increased business confidence: supporting plans for the future (strategic decisions)
213
Q

Negative effect of economic growth on businesses

A

If growing too fast, can lead to recesion

214
Q

Contextual examples of GDP increasing (2)

A

After COVID-19 lockdown, people spend their savings

RECOVERY FROM RECESSION

or

‘Eat out to help out’, encouraged GDP increase to combat recession

215
Q

How is GDP measured?

A

Quarterly (every 3 months)

216
Q

What is the expected growth rate for an economy?

A

0.6 per quarter

or

2.4% per year

217
Q

What may consumer spending influence?

A

Business confidence

218
Q

What may consumer confidence affect?

A

Business confidence

219
Q

How will times of economic growth impact a business’ functional decision making?

(Short to medium-term)

A
  • Maximise shareholder return
  • Pay off debts from recession
  • HR, more staff needed
220
Q

How will times of economic growth impact a business’ strategic decision making?

(Long-term)

A
  • Improve product portfolio
  • More capital available for investment and retained profit (build business gradually): more likely to invest/expand
  • Build relationship with suppliers overtime
  • Marketing
  • Training schemes
221
Q

Define ‘functional’

A

Short/medium term

or Departmental

222
Q

Define ‘strategic’

A

Long term

222
Q

Define ‘exchange rates’

A

The price of one country’s currency, in terms of other currencies

223
Q

When must a business consider exchange rates?

A

When businesses export / import goods

223
Q

How do exchange rates impact business activity?

A
  • Impact if they bring goods into the country
  • May only sell in selected countries: as fluctuating exchange rates may reduce business confidence
  • May influence domestic businesses (in own country)
224
Q

Define ‘appreciation’

A

An increase in the value of a currency is called an appreciation. This meaning the currency is worth more

e.g. £1 = $1.60

225
Q

What does ‘SPICED’ stand for?

businesses impacted by changes in exchange rates

A

Strong Pound: Imports cheaper, exports dearer

226
Q

What does ‘WPIDEC’ stand for?

businesses impacted by changes in exchange rates

A

Weak Pound: Imports Dearer, Exports Cheaper

227
Q

What does ‘SPICED’ suggest?

businesses impacted by changes in exchange rates

A
  • Business that import will be able to buy cheaper raw materials and finished goods
  • Business that export may see less demand as looks less attractive to customers
228
Q

What does ‘WPIDEC’ suggest?

businesses impacted by changes in exchange rates

A
  • There will be greater demand from abroad for UK goods
  • Input prices will increase if raw materials are imported
  • If the business has a price inelastic product, it will be able to pass the increase in costs onto the consumer

MORE EXPENSIVE TO BUY IN STUFF (IMPORT) BECAUSE POUND WORTH LESS THAN OTHER CURRENCY, SO GETTING WORSE VALUE

229
Q

Define ‘exchange rate uncertainty’ (with context)

A

UK exchange rates are determined by supply and demand, this means they fluctuate on a regular basis

230
Q

What issues can ‘exchange rate uncertainty’ give international businesses?

A
  • Hesitant to invest

- Low business confidence

231
Q

How can international businesses overcome ‘exchange rate uncertainty’ ?

A
  • Consider loans to get them through a few months
  • Slightly reduce spending/costs to minimise risk
  • Pull out of international market all together
  • R&D to find best nations
232
Q

Define ‘inflation’

A

General rise in prices or a fall in the value of money

A sustained increase in the average price level of an economy

AS PRICES GO UP, MONEY IS WORTH LESS

233
Q

What does the ‘rate of inflation’ show?

A

How prices have changed, based on the same period a year earlier

An indication of the cost of living changing

234
Q

What are the two measurements of inflation?

A
  • Retail Price Index

- Consumer Price Index

235
Q

Define ‘Retail Price Index’ (RPI)

A

Measurement of ‘basket’ of goods and services representative of what people buy in the UK

236
Q

Define ‘Consumer Price Index’ (CPI) and how its measured

A

Picks 600/700 of most commonly purchased goods/services from UK households, classes them as a ‘basket’.

It then takes this basket, as a whole, and compares current from last measurment to find the CPI which measures inflation.

237
Q

The two causes of inflation

A
  • Cost push inflation

- Demand pull inflation

238
Q

Define ‘Cost push inflation’

A

Occurs when there is an increase in the costs of production (including wages, raw materials, fuel, taxation), which causes firms to increase their prices

238
Q

Define ‘demand pull inflation’

A

Process by which prices rise because there is excess demand in the economy. An increase in demand means an increase in price.

239
Q

Define ‘inflationary expectations’

A

Views about what will happen in the future, regarding inflation

240
Q

Advantage of ‘inflationary expectations’

A

If aware in advance what will happen regarding inflation, a business can plan ahead and save themselves from potential recession

241
Q

Disadvantages of ‘inflationary expectations’

A
  • Could be wrong

- Only a prediction

242
Q

Define ‘deflation’

A

Opposite to inflation

When there’s not enough demand (GDP decrease), companies reduce their prices

243
Q

What can ‘deflation’ cause?

A
  • Fall in productivity
  • Lower prices
  • Rise in unemployment (cutting costs to facilitate lower prices)
244
Q

Impacts of low inflation on UK economy

A
  • Business confidence increase
  • Business more successful
  • Imports/exports successful
  • Low prices: increasing morale of consumers as they get more for their money
  • Employees earn more: increasing motivation
245
Q

Impacts of high inflation on UK economy

A
  • Lack of confidence (both business and consumer)
  • More unemployment
  • Wages decrease, less motivation
  • Cost of living goes up
  • Prices go up (encourage saving)
  • Business struggles with imports/exports
246
Q

Define the ‘fiscal policy’

A
  • Sets tax rates

- Sets government spending

247
Q

Contextual example of ‘fiscal’

A

Government’s

248
Q

What ‘monetary’ control?

A

Interest rates

249
Q

List 3 types of tax

A
  • Income tax
  • Corporation tax
  • VAT
250
Q

Define ‘income tax’

A

Tax on how much someone earns (their income)

251
Q

Define ‘corporate tax’

A

Taxes paid by a business

252
Q

Define ‘VAT’

A

Tax paid on a product or service

253
Q

How does an increase in ‘income tax’ affect GDP?

A

People have less money, meaning that GDP goes down as they spend less

254
Q

How does a decrease in ‘income tax’ affect GDP?

A

People have more money, so they spend more, which boosts the GDP

255
Q

How does an increase in ‘corporation tax’ affect a business?

A

May put them into a phase of retrenchment

256
Q

How does an increase in ‘VAT’ affect GDP and business confidence?

A

Prices going up to facilitate the VAT, so the business can still make profit

So, customers are less attracted so spend less

Meaning that business confidence and GDP go down

257
Q

What must the government do when considering the ‘fiscal policy’ ?

A

BALANCE SPENDING AND TAX !

258
Q

How will raising taxes affect a business?

A
  • May have to change objectives
  • Decrease confidence (consumer+business)
  • Borrow more money? Borrow less money?
259
Q

How will cutting taxes affect a business?

A
  • Increase spending (GDP)

- Increase confidence

260
Q

How is ‘Fiscal Policy’ used to achieve objectives?

A
  • Keep inflation on target (2%)
  • Stimulate economic growth and employment, during times of recession
  • Maintain stable economic cycle that minimises ‘boom and bust’
261
Q

How does the government spend its money?

A
  • NHS
  • Education
  • Infrastructure (HS2)
  • Aid abroad
  • GRANTS + SUPPORT
  • Emergency services
  • Defence
262
Q

Benefit of government spending

A

Help areas of economy that the current business environment can’t help

263
Q

Disadvantages of government spending

A
  • Might not benefit everyone

- Expensive to cover

264
Q

Define ‘expansionary fiscal policy’

A

Helps to lower unemployment, cutting taxes - giving more money to spend. However, can cause inflation

265
Q

Define ‘contractionary fiscal policy’

A

Reduction of government spending and increase taxes as a measure to control inflation in the economy.

Does the opposite to expansionary, reins in economic growth on a sustainable level

266
Q

N/A

A

N/A

267
Q

How does the ‘monetary policy’ work?

A
  • ‘Monetary Policy Committee’ (MPC) meet every month to decide level of interest rates
  • MPC consider wide range of economic factors such as: GDP, unemployment and exchange rates
267
Q

N/A

A

N/A

268
Q

Define ‘more open trade’

A

A.K.A. international trade

  • Free trade / no restrictions
  • No government interventions
269
Q

Benefits of ‘More Open Trade’

A
  • Cheaper costs (as no tariffs)
  • Job creation in imports and exports
  • Economic growth
  • Can reach more customers / go international
270
Q

Define ‘protectionism’

A
  • When a government protects domestic businesses and jobs from foreign competition by giving them subsidies, while improving tariffs and quotas on imported goods.
  • Encourages sale of domestic products, which increases GDP of the country.
271
Q

Define ‘non-tariff barriers’

A

Subtle controls by government without being ‘obvious’ such as constantly changing regulations or forcing imports to use only one entry point.

272
Q

Define ‘embargos’

A

Forbidding trade with a particular country.

273
Q

Advantages of ‘protectionism’

A
  • Countries develop a variety of new industries, adding local jobs and boosting economic growth
  • Allows small businesses to grow
274
Q

Disadvantages of ‘protectionism’

A
  • Prices of imported goods rise due to decreased supply, therefore the price of domestic rise as less competition
  • If you restrict a country’s trading in your country, they may restrict from you… RETALIATION
275
Q

What is liquidity all about?

A

Cash flow

276
Q

What is needed to evaluate liquidity?

A

Balance sheet

277
Q

How is liquidity determined?

A

Relationship between current assets and current liabilities (current ratio)

278
Q

What is the minimum acceptable liquidity? (current ratio)

A

1.5 - 2.5

279
Q

What is considered a low current ratio? And what could this mean?

A

Below 1, liquidity problems

280
Q

What would a high current ratio suggest?

A

Too much working capital tied up in inventories and debtors

281
Q

When looking at the current ratio, why is it important to look at trends rather than actual figures?

A

Because current ratio is adapted and personal to a business, differs between businesses

282
Q

Define ‘acid test ratio’

A

Current ratio, but make a small adjustment…

  • Eliminate the current asset that is typically the hardest to turn into cash
283
Q

Effects of inflation on consumers

A
  • As prices rise (inflation), money loses its value and people become less confident in money. So saving is reduced.
  • Inflation can get out of contol - price increases lead to higher wage demands, as people try to maintain their living standards.
  • Consumers on fixed incomes (e.g. pensioners) lose out because their real income falls
284
Q

Positive effects of inflation on businesses

A
  • Industry-wide price rises, enable revenues to grow as businesses can get away with charging more
  • Depsite increase in costs, businesses can increase their prices to pass onto consumers. They are in power, however, this may cause relationship to deterorate
285
Q

Negative effects of inflation on businesses

A
  • If costs are rising due to inflation, a business may not be able to pass them into customers (if price i elastic product)
  • Can disrupt business planning
  • Associated with higher interest rates (costing more to borrow money)
  • May reduce demand as consumers exercise caution (sacrifices)
  • May make decision making more challenging
286
Q

Why has globalisation increased in the last years/decades?

A
  • Increase population
  • Rise in internet
  • Infrastructure
  • Increase competition
  • More wants and demands
  • Containerisation
287
Q

Define ‘emerging economies’

With examples of ‘emerging economies’

A

Developing countries with fast developing, but not fully developed, economies.

China, India, Brazil, Russia

288
Q

Advantages of ‘emerging economies’

A
  • Cheaper labour

- Create jobs to more countries out of poverty and therefore spending money, creating economic activity.

289
Q

Define ‘CSR’ (Corporate Social Responsibilities)

A

The idea that a company should go above and beyond what is required by law to help society, its workforce’s quality of life and the environment.

290
Q

The importance of ‘CSR’ (Corporate Social Responsibilities)

A
  • Public are more aware

- People expect CSR as part of business culture

291
Q

Context of ‘CSR’ (Corporate Social Responsibilities)

A

McDonald’s Planet Champion Program trains employees to find ways of reducing the environmental impact of the company

292
Q

Advantages of ‘CSR’ (Corporate Social Responsibilities)

A
  • Improve brand image / reputation
  • Business / consumer confidence
  • Improve employee morale
  • Increase talented applicants
  • Positive publicity (but is it a PR stunt?)
293
Q

Disadvantages of ‘CSR’ (Corporate Social Responsibilities)

A
  • Costs lots of money (will shareholders agree?)
  • These costs passed onto customers (higher prices to facilitate increase in unit costs)
  • Difficult for small businesses
294
Q

Relationship between ‘CSR’ (Corporate Social Responsibilities) and the objective of survival

A

CSR will be the first area to cut for survival

295
Q

The five areas of ‘The Stakeholder Concept’

A
  • Employee
  • Community
  • Government
  • Suppliers
  • Customers
296
Q

What does ‘The Stakeholder Concept’ do that Elikington’s Triple Bottom Line doesn’t?

A

Sees all stakeholders as important.

297
Q

Define ‘The Shareholder Concept’

A
  • Business’ responsibility aimed at meeting requirements of shareholders
  • Main corporate objectives = profit maximisation
  • Higher profits = higher dividends
  • Good performance = share price rise and market capitalisation increase
298
Q

What does ‘The Stakeholder Concept’ and the ‘The Shareholder Concept’ have in common?

A

Underpins a business’ ethical approach, suggesting who is more important to the business

299
Q

Describe the layout ‘Carroll’s Pyramid of CSR’

A

Top = Philanthropic

Ethical

Legal

Bottom = Economic

300
Q

Define ‘Carroll’s Pyramid of CSR’

A

MUST BALANCE

A model that shows what society expects from a business, splitting it up into four unique responsibilities

301
Q

What are the top 2 responsibilities of ‘Carroll’s Pyramid of CSR’ known as?

A

Voluntary capacity

Philanthropic and Ethical

302
Q

How can ‘Carroll’s Pyramid of CSR’ be used?

A

Analyse business decisions and assess whether they are made out of necessary (economic and legal responsibilities) in a voluntary capacity (ethical and philanthropic responsibilities).

303
Q

What are the bottom 2 responsibilities of ‘Carroll’s Pyramid of CSR’ known as?

A

Necessary

Economic and Philathropic

304
Q

What does ‘Net Present Value’ (NPV) show us?

A

The true value of an investment, taking into account the impact of inflation and interest rates on the time value of money.

305
Q

What aspect of an investment does interest rates and inflation affect?

A

The returns it generates overtime

306
Q

Suggest step-by-step how to calculate the NPV (Net Present Value)

A
  1. Add up discounted cash flow

2. Subtract cost of investment

307
Q

What does the discount factor suggest on the ‘NPV’ (Net Present Value) chart?

A

Shows the impact of inflation and a loss of interest has a value on the revenue generated from investment.

308
Q

What does ‘Year 0’ suggest on the ‘NPV’ (Net Present Value) chart?

A

Shows cost of the investment

309
Q

Define a ‘demographic change’

A

Change in the structure of a country’s population over-time, in terms of factors such as: age, sex and race.

310
Q

What is a diverse range of races and religions within a country proportionate to?

A

A diverse range of cultural businesses being introduced… emerging markets

311
Q

What market especially benefits from an increased population?

A

Housing market

312
Q

Benefits of demographic and population movements within a country

A
  • Higher demand

- Diverse workforce

313
Q

Contextual example of a business benefiting from an ageing population

A

Saga = over50’s cruises

314
Q

Threats of demographic and population movements within a country

A
  • Lack of new employees which bring new ideas and innovate ideas
  • Resistant to change/adapt within the business
  • Increased competition, targeting new markets
315
Q

How can migration changes and increased global population alter GDP?

A

Increased GDP in country moving to, but decreased in country they came from.

316
Q

How can businesses exploit migrant workers?

A

Pay them less as they’re used to receiving less (depending on where they came from). This is evidence of exploitation and may harm brand image as a result.

317
Q

What % of the world lives in cities? (Urbanisation)

A

50%

318
Q

Positive aspects of urbanisation

A
  • Community spirit
  • Increased footfall
  • Brings more skilled workers
  • Easier/Cheaper access to infrastructure
  • Job opportunities
  • Higher income
319
Q

Negative aspects of urbanisation

A
  • Increase in emissions (environmental)
  • Rural businesses lose out
  • Crime and poverty increase
  • Over-population (Mumbai)
320
Q

Ways that businesses can respond to urbanisation

A
  • CSR pyramid
  • Supporting low skilled workers (training)
  • More offices in rural areas as will be cheaper
321
Q

Contextual example of a business using modern technology

A

AmazonGo

Business A-Level AQA 2024/25 (UPDATED) (14 decks)

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