7.2 Analysing the strategic position of a business

Question 1

what is GDP

Answer 1

attempts to measure business activity and the state of the economy in one number

Question 2

key stages of the business cycle

Answer 2

• boom
• recession
• slump
• recovery

Question 3

what is a recession

Answer 3

a period of two consecutive quarters (6 months in a row) of negative growth - negative GDP figure e.g. -2%

Question 4

what is an exchange rate

Answer 4

the price of one currency expressed in terms of another

Question 5

three business highly affected by exchange

Answer 5

• businesses importing and exporting
• businesses affected by foreign competition at home & abroad
• businesses in the tourism industry

Question 6

three businesses slightly affected by exchange

Answer 6

• domestic businesses e.g. hairdresser
• businesses selling products with an inelastic PED e.g. petrol or luxury products
• businesses in a monopoly market

Question 7

what is inflation

Answer 7

the measure of the average change in the price of goods and services as a %

Question 8

what is the CPI

Answer 8

• Consumer price index
• name given to inflation figure
• it measures the change in price of a basket of goods and services purchased by households

Question 9

2 problems from high inflation

Answer 9

• 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.

Question 10

what is the monetary policy

Answer 10

commitee of the Bank of England that regulates interest rates in an attempt to maintain economic stability

Question 11

what is the fiscal policy

Answer 11

when the government adjusts its spending levels and tax rates to moniter and influence the country’s economy

Question 12

impacts of the fiscal policy tax cuts

Answer 12

• reduces businesses’ costs
• increases customers’ disposable income
• increases demand and revenue

Question 13

impacts of the fiscal policy tax increase

Answer 13

• increase businesses’ costs
• decreases customers’ disposable income
• decreases demand and revenue

Question 14

what is quantitative easing

Answer 14

the introduction of new money into the money supply by a central bank through the purchase of predetermined amounts of government bonds

Question 15

what is protectionism

Answer 15

goverment policies set to restrict free movement of goods between countries (import tariffs, quotas or subsides)

Question 16

why restrict free trade

Answer 16

to protect domestic businesses from overseas competition

Question 17

what is free trade

Answer 17

the unrestricted purchase and sale of goods and services between countries

Question 18

what are tariffs

Answer 18

taxes on imported goods that increase the price, thereby making the import less competitive

Question 19

what are quotas

Answer 19

physical restrictions on the number of goods imported into a county

Question 20

what are non-tarrif barriers

Answer 20

might include excessive rules and regulations that make importing difficult

Question 21

what businesses are benefiting from protectionism 4

Answer 21

• domestic businesses
• businesses unable to compete on price with foreign competitors
• businesses respecting legislation (min wage etc)
• ethical businesses

Question 22

businesses hindered by protectionism

Answer 22

• exporting businesses
• importing businesses
• businesses experiencing retaliation

Question 23

what is globalisation

Answer 23

the integration of international markets leading to cross-border trade of goods across the world

Question 24

3 opportunities of globalisation

Answer 24

• new market leading to more sales and economies of scale
• access to cheaper resources and leading lower unit cost
• way of avoiding trade barriers

Question 25

threats of globalisation 5

Answer 25

• 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

Question 26

what are emerging markets or economies

Answer 26

countries experiencing rapid population and economic growth

Question 27

4 reasons for greater globalisation

Answer 27

• 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

Question 28

3 reasons why emerging economies are important

Answer 28

• large and growing markets
• growth of middle classes
• low-cost locations

Question 29

3 strategies for businesses entering emerging markets

Answer 29

• knowledge: understanding of market, consumers, suppliers and competitors
• local partners: having local partners eases entry
• well-made and locally tailored products