3.7.4 Political / Legal / Economic Change

Question 1

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

Answer 1

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

Question 2

Factors influenced by political environment

Answer 2

Regulating marketing
Enterprise
Environmental issue 
National infrastructure 
International trade

Question 3

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

Answer 3

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

Question 4

Specific policies and schemes created by government to encourage enterprise ?

Answer 4

Enterprise allowance
Funding for Lending
Enterprise finance guarantee (epg)

Question 5

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

Answer 5

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

Question 6

Aim of regulators and its focuses

Answer 6

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

Question 7

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

Answer 7

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

Question 8

Increased exports brings ……

Answer 8

Revenue and employment opportunities

Question 9

International trade initiatives include:

Answer 9

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

Question 10

What does increased international trade do for a business

Answer 10

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

Question 11

What does the legal environment cover

Answer 11

Covers the laws that govern how our society operates.

Question 12

Factors influenced by the legal environment

Answer 12

Environment
Labour
Competition

Question 13

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

Answer 13

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

Question 14

Examples of uk legislations governing competition

Answer 14

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

Question 15

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

Answer 15

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

Question 16

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

Answer 16

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.

Question 17

What do specific environmental legislations include?

Answer 17

The environmental protection act 1990

The environmental act 1995

Question 18

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

Answer 18

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

Question 19

What is GDP

Answer 19

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

Question 20

What is a boom

Answer 20

High rates of economic growth and production

Question 21

Features of boom

Answer 21

High profits
Low unemployment
High inflation
Shortages in supply

Question 22

Impact on strategic and functional decisions when there is a boom

Answer 22

• 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.

Question 23

What is a recession

Answer 23

Output starts to fall and growth declines

Question 24

Features of a recession

Answer 24

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

Question 25

Impact on strategic and functional decisions when there is a recession

Answer 25

- 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

Question 26

What is a slump

Answer 26

Prolonged period of economic decline

Question 27

Features of a slump

Answer 27

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

Question 28

Impact on strategic and functional decisions when there is a slump

Answer 28

- 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

Question 29

What is meant recovery

Answer 29

Economy starts to pick up after a period of decline

Question 30

Features of a recovery

Answer 30

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

Question 31

Impact on strategic and functional decisions when there is a recovery

Answer 31

- 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

Question 32

How may exchange rates affect business decision making when importing

Answer 32

- May switch international suppliers when the exchange rate is less favourable - stockpile raw material and products when currency is strong

Question 33

How may exchange rate affect business decisions when they are exporting

Answer 33

- Lower prices to limit the impact of a strong currency | - increase promotion to foreign markets when currency is weak

Question 34

Consequences of high inflation for a business

Answer 34

- 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

Question 35

How may low inflation benefit a business

Answer 35

- Businesses feel confident in a stable economic environment - Businesses May look to invest and grow

Question 36

Consequences of deflation for a business

Answer 36

- 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

Question 37

Why may businesses want a steady rate of inflation

Answer 37

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