3.7.4

Question 1

The political environment covers

Answer 1

the actions taken by national and international authorities. Their actions are designed to maximise economic activity, whilst protecting businesses, individuals and the environment.

Question 2

factors influenced by the political environment

Answer 2

regulating markets
enterprise
environmental issue
national infrastructure
international trade

Question 3

UK and EU political decisions are aimed at encouraging an enterprise friendly environment for businesses. This includes:

Answer 3

making finance accessible for small businesses
providing funding for research and development
support on establishing new businesses
guidance on running a new business.

Question 4

Specific policies and schemes include:

Answer 4

Enterprise Allowance, Funding for Lending, and Enterprise Finance Guarantee (EFG).

Question 5

infrastructure includes

Answer 5

transportation, utilities, communication and energy.

Question 6

Government spending on infrastructure may benefit businesses by:

Answer 6

speeding up communication
making transportation of goods faster and cheaper
allowing access to new markets
attracting new business to the UK - potential customers and suppliers.

Question 7

Recent infrastructure plans in the UK include

Answer 7

the investment in a high-speed rail line connecting the south and north (HS2).

Question 8

The UK and EU have established a range of regulators. Their aim is to

Answer 8

support businesses with compliance and conducting business in an appropriate way.

Question 9

In particular regulators focus on:

Answer 9

• promoting free competition between businesses
• regulation of specific industries, such as the Financial Conduct Authority (FCA)
• regulators of privatised monopolies (such as
  British Gas)
• self-regulation - businesses agreeing and operating a code of conduct.

Question 10

regulation can sometimes limit what

Answer 10

the actions of a business and slow down the speed at which strategies can be implemented. However,
regulation also creates a stable
environment for businesses to operate in.

Question 11

environment opportunities

Answer 11

Similar to regulation, the government may develop policies to protect the environment. This can create a number of opportunities for businesses that specialise in environmental products, for example, renewable energies, recycling

Question 12

The UK government implements a number of policies to support UK

Answer 12

exporters

Question 13

increased exports =

Answer 13

revenue and employment opportunities

Question 14

international trade initiatives include

Answer 14

• ‘Open to Export’ initiative
• UK Trade and Investment (UKTI)
• the World Trade Organization (WTO).

Question 15

Increased international trade makes it easier for UK businesses to

Answer 15

sell their products, particularly high-quality specialist products.

Question 16

The legal environment covers

Answer 16

the laws that govern how our society operates. Businesses must abide by legislation set out by the UK government and the EU.

Question 17

factors influenced by the legal environment

Answer 17

environment
labour
competition

Question 18

Competition legislation is put in place to

Answer 18

protect the interests of consumers and businesses.

Question 19

legislation aims to control

Answer 19

cartel activity - businesses working together to manipulate the market and limit competition abuse of market power - such as imposing unfair conditions on small suppliers
anti-competitive practices - such as anticompetitive mergers and acquisitions.

Question 20

Examples of UK legislation governing competition include

Answer 20

Competition Act 1998, the Enterprise Act 2002

Question 21

labour laws aim to prevent

Answer 21

exploitation of workers at an individual level and at a collective level. They legislate for issues such as pay, working conditions and grievances.

Question 22

Legislation also governs the powers of

Answer 22

trade unions and has diminished those powers over the past 30 years. Consequently, trade union membership has fallen considerably.

Question 23

Labour laws include

Answer 23

• Trade Union Act 1984
• the National Minimum Wage
• Equality Act 2010

Question 24

Environmental legislation aims to

Answer 24

internalise any negative externalities associated with business activity. Therefore, businesses are made to pay for the full cost of production, such as the cost to clean up or repair damage caused by pollution.

Question 25

environmental legislation examples

Answer 25

the Environmental Protection Act 1990
* the Environment Act 1995.

Question 26

Political and legal change can impose

Answer 26

costly change on businesses which might have to adapt their products and processes in order to meet legal standards.

Question 27

Where a business fails to implement the necessary changes, this could limit

Answer 27

competitiveness, damage the business’s reputation or worse. For example, it could lead to bad publicity and loss of trust in a business that has been fined for breaking the law.

Question 28

political and legal change can create

Answer 28

opportunities for some businesses

Question 29

the economic environment includes a range of economic variable such as

Answer 29

GDP, inflation, unemployment and consumer confidence

Question 30

what is GDP

Answer 30

a measure of a country’s total output of goods and services over a period of time. GDP changes over time are represented by the business cycle.

Question 31

boom

Answer 31

high rates of economic growth and production

Question 32

recession

Answer 32

output starts to fall, growth declines

Question 33

slump

Answer 33

prolonged period of economic decline

Question 34

recovery

Answer 34

economy starts to pick up after a period of decline

Question 35

features of boom

Answer 35

high profits
low unemployment
high inflation
shortages in supply.

Question 36

features of recession

Answer 36

• production declines as demand falls
• governments use policies to stimulate growth
• consumer/business
  confidence starts to fall.

Question 37

features of slump

Answer 37

• high levels of unemployment
• high rates of business failure/closure
• low interest rates
• low levels of spending and investment.

Question 38

features of recovery

Answer 38

• increasing consumer
  confidence
• businesses start to invest/take on new employees
• spare capacity is used up.

Question 39

impact of a boom

Answer 39

• Firms make strategic decision to expand into new markets through market development.
• Functional decision to expand workforcel increase recruitment.
• Businesses seek opportunities for efficiencies and cost reductions as a result of economies of scale.

Question 40

impact of recession

Answer 40

• Expansion plans are
  ‘shelved’.
• Market penetration
  Strategies become more attractive as they are low risk.
• Businesses stockpile products.
• Functions try to increase efficiency and cut costs - such as flexible working implemented.

Question 41

impact of slump

Answer 41

• Businesses adopt a strategy of rationalisation.
• Functional decisions may include redundancies, scale down of production and reduction in capacity.
• Businesses reduce prices and focus on their most profitable product lines.
• Businesses may decide to cease trading or leave certain markets.

Question 42

impact of recovery

Answer 42

• New business - start-ups emerge.
• Business investment rises - product development strategy.
• Businesses take on new employees and increase contracts to meet growth in demand.
• Functional decisions focus on ways to increase productivity
• training, growth in production, increased marketing activity.