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Business A level > 3.7.4 Political / Legal / Economic Change > Flashcards

3.7.4 Political / Legal / Economic Change Flashcards

1
Q

What does the political environment cover and what are their actions designed for

A

Political environment cover the actions taken by national and international authorities and their actions are designed to maximise economic activity whilst protecting businesses, individual and the environment

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2
Q

Factors influenced by political environment

A 
Regulating marketing
Enterprise
Environmental issue 
National infrastructure 
International trade
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3
Q

What do UK and EU political decisions aim to do and what may it include

A

Aim to encouraging an enterprise friendly environment for businesses. This includes:

  • making finance accessible for small businesses
  • providing funding for research and development
  • support on establishing new businesses
  • guidance on running a new business
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4
Q

Specific policies and schemes created by government to encourage enterprise ?

A

Enterprise allowance
Funding for Lending
Enterprise finance guarantee (epg)

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5
Q

What May infrastructure include and how may businesses be benefitted from it

A

Infrastructure includes transportation, utilities, communication and energy

Benefits:
Speeding up communication
Makings transportation goods faster and easier
Allowing access to new markets
Attraction new business to the UK - potential customer and suppliers

Recent infrastructure spending in the UK includes the High speed rail line connecting south to north

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6
Q

Aim of regulators and its focuses

A

Aims to support businesses with compliance and conducting business in an appropriate ways.

Regulators focus on:

  • promoting free competition between businesses
  • regulation of specific industries, such as the financial conduct authority (FCA)
  • regulators of privatised monopolies (e.g British Gas)
  • self regulation - businesses agreeing and operating code of conduct
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7
Q

What opportunities can be developed from the uk setting policies for a business on the environment

A

Businesses can specialise in environmental products e.g renewable energies, recycling and developers of old ‘brownfield’ sites

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8
Q

Increased exports brings ……

A

Revenue and employment opportunities

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9
Q

International trade initiatives include:

A

‘Open to export’ initiative
UK trade and investment
The world trade organisation

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10
Q

What does increased international trade do for a business

A

Makes it easier for UK businesses to sell their products, particularly high quality specialist products

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11
Q

What does the legal environment cover

A

Covers the laws that govern how our society operates.

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12
Q

Factors influenced by the legal environment

A

Environment
Labour
Competition

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13
Q

Why is competition legislation put in place and what does it set out to do

A

Put in place to protect the interests of consumers and businesses.

Aims to control:
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 anti competitive mergers and acquisitions

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14
Q

Examples of uk legislations governing competition

A

Competition act 1998
Enterprise act 2002
Enterprise and regulatory reform act 2013

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15
Q

What do labour laws aim to prevent? What issues do they legislate for? How have trade unions been affected through these legislations

A

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

Legislation also governs the powers of trade unions and has diminished those powers over the past 30 years - as result trade union membership has fallen considerably

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16
Q

Aims of environment legislation? And what are businesses blogged to do

A

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

17
Q

What do specific environmental legislations include?

A

The environmental protection act 1990

The environmental act 1995

18
Q

How may a businesses decision making be hindered through political and legal change

A

Political and legal change can impose costly change on businesses which might have to adapt their processes in order to meet legal standards. If a business fails to implement the necessary changes it may limit competitiveness, damage the business reputation and worse. E.g could lead to bad publicity and a loss of trust in a business that has been fined for breaking the law

19
Q

What is GDP

A

A measure of a country’s total output of goods and services over a period of time

20
Q

What is a boom

A

High rates of economic growth and production

21
Q

Features of boom

A

High profits
Low unemployment
High inflation
Shortages in supply

22
Q

Impact on strategic and functional decisions when there is a boom

A
  • Firms make strategic decisions to expand into new markets through market development
  • functional decisions to expand workforce and increase recruitment
  • Businesses seek opportunities for efficiencies and costs reductions as a result of economies of scale.
23
Q

What is a recession

A

Output starts to fall and growth declines

24
Q

Features of a recession

A
  • production declines as demand falls
  • government use policies to stimulate growth
  • consumer/business confidence starts fall
25
Q

Impact on strategic and functional decisions when there is a recession

A
  • expansion plans are ‘shelved’
  • market penetration strategies become more appealing as they are less risk.
  • businesses stockpile products
  • functions try to increase efficiency and cut costs - such as flexible working implemented
26
Q

What is a slump

A

Prolonged period of economic decline

27
Q

Features of a slump

A
  • high levels of unemployment
  • high rates of business failure/closure
  • low levels of interest rates
  • low levels of spending and investment
28
Q

Impact on strategic and functional decisions when there is a slump

A
  • businesses adopt strategy of rationalising
  • functional decisions may include redundancies,scale down of production and reduction in capacity
  • businesses reduce price and focus on their more profitable product lines
  • business may decide to cease trading or leave certain markets
29
Q

What is meant recovery

A

Economy starts to pick up after a period of decline

30
Q

Features of a recovery

A

Increasing consumer confidence
Businesses start to invest/take on new employees
Spare capacity is used up

31
Q

Impact on strategic and functional decisions when there is a recovery

A
  • new business start-ups emerge
  • business investment rise - product development strategy
  • business 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
32
Q

How may exchange rates affect business decision making when importing

A
  • May switch international suppliers when the exchange rate is less favourable
  • stockpile raw material and products when currency is strong
33
Q

How may exchange rate affect business decisions when they are exporting

A
  • Lower prices to limit the impact of a strong currency

- increase promotion to foreign markets when currency is weak

34
Q

Consequences of high inflation for a business

A
  • may have to increase prices to pass on costs to consumers or decide to absorb the cost themselves
  • may look to reduce internal costs to protect profits
  • price rises may fuel further inflation
35
Q

How may low inflation benefit a business

A
  • Businesses feel confident in a stable economic environment
  • Businesses May look to invest and grow
36
Q

Consequences of deflation for a business

A
  • May struggle to pay debts / assets may have to be sold to pay off debts if deflation persists
  • Low demand may lead to redundancies and rationalisation
37
Q

Why may businesses want a steady rate of inflation

A

Business will want a steady rate of inflation to manage the rise in costs without having to increase their prices sharply, which could have a negative impact on demand. High inflation may cause a fall in demand as households will cut down on purchases of non essential items

Business A level (62 decks)

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