7.2 Analysing the strategic position of a business Flashcards
what is GDP
attempts to measure business activity and the state of the economy in one number
key stages of the business cycle
- boom
- recession
- slump
- recovery
what is a recession
a period of two consecutive quarters (6 months in a row) of negative growth - negative GDP figure e.g. -2%
what is an exchange rate
the price of one currency expressed in terms of another
three business highly affected by exchange
- businesses importing and exporting
- businesses affected by foreign competition at home & abroad
- businesses in the tourism industry
three businesses slightly affected by exchange
- domestic businesses e.g. hairdresser
- businesses selling products with an inelastic PED e.g. petrol or luxury products
- businesses in a monopoly market
what is inflation
the measure of the average change in the price of goods and services as a %
what is the CPI
- Consumer price index
- name given to inflation figure
- it measures the change in price of a basket of goods and services purchased by households
2 problems from high inflation
- cost pressures: higher borrowing costs (higher interest rates) higher material costs and pressure on wage rates
- reduced sales: lower demand due to lower disposable income or ppl save more during inflation.
what is the monetary policy
commitee of the Bank of England that regulates interest rates in an attempt to maintain economic stability
what is the fiscal policy
when the government adjusts its spending levels and tax rates to moniter and influence the country’s economy
impacts of the fiscal policy tax cuts
- reduces businesses’ costs
- increases customers’ disposable income
- increases demand and revenue
impacts of the fiscal policy tax increase
- increase businesses’ costs
- decreases customers’ disposable income
- decreases demand and revenue
what is quantitative easing
the introduction of new money into the money supply by a central bank through the purchase of predetermined amounts of government bonds
what is protectionism
goverment policies set to restrict free movement of goods between countries (import tariffs, quotas or subsides)
why restrict free trade
to protect domestic businesses from overseas competition
what is free trade
the unrestricted purchase and sale of goods and services between countries
what are tariffs
taxes on imported goods that increase the price, thereby making the import less competitive
what are quotas
physical restrictions on the number of goods imported into a county
what are non-tarrif barriers
might include excessive rules and regulations that make importing difficult
what businesses are benefiting from protectionism 4
- domestic businesses
- businesses unable to compete on price with foreign competitors
- businesses respecting legislation (min wage etc)
- ethical businesses
businesses hindered by protectionism
- exporting businesses
- importing businesses
- businesses experiencing retaliation
what is globalisation
the integration of international markets leading to cross-border trade of goods across the world
3 opportunities of globalisation
- new market leading to more sales and economies of scale
- access to cheaper resources and leading lower unit cost
- way of avoiding trade barriers
threats of globalisation 5
- competition in the UK or abroad
- lower prices pressure
- economic risks: exchange rate fluctuation, inflation etc
- political risks: foreign governments policies
- takeovers: large multinationals taking over domestic businesses
what are emerging markets or economies
countries experiencing rapid population and economic growth
4 reasons for greater globalisation
- improved transport: big containers and air transport has made movement of people and goods easier
- technology: easier and quicker to communicate, share info and trade across the world
- more open trade: WTO encourages reduced tariff barriers and more open trade
- multinational companies: global presence, opps for economies of scale
3 reasons why emerging economies are important
- large and growing markets
- growth of middle classes
- low-cost locations
3 strategies for businesses entering emerging markets
- knowledge: understanding of market, consumers, suppliers and competitors
- local partners: having local partners eases entry
- well-made and locally tailored products
