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business > A293 - External Environment > Flashcards

A293 - External Environment Flashcards

1
Q

What is perfect competition?

A

A market where a business has a lot of competitors

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2
Q

What are the features of competition? (5)

A

1) Many firm
2) Similar products
3) Low prices
4) Advertising + customer service important
5) Lower costs

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3
Q

How can a business increase competitiveness? (4)

A

1) New firms
2) Selling new products
3) Cutting prices
4) Increasing advertising

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4
Q

How can a business decrease competition in their market? (4)

A

1) Takeover/merger
2) Internal growth
3) Patent
4) Collusion - agreeing on prices

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5
Q

Why do businesses benefit from reduced competition?

A

Higher market share, more profit, less advertising, less need for quality

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6
Q

How can Holden respond to increasing competition?

A

Meet needs of customers better - superior product/price
Incentives
Market research - Kapok?

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7
Q

What is business ethics?

A

What is morally right or wrong for a business to do e.g. HR, sourcing of materials, production

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8
Q

What are advantages of good ethics? (3)

A

1) Customers willing to pay more
2) May increase sales
3) Good reputation

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9
Q

What are disadvantages of good ethics? (3)

A

1) Increase costs
2) May lose profits
3) Damaging if claim to be ethical but not

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10
Q

What is Fair Trade?

A

Trade between companies in developed countries and producers in developing countries in which fair prices are paid to producers

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11
Q

What are the benefits of using Fair Trade? (5)

A

1) Can charge more
2) Increased sales
3) Employees attracted to business
4) Looks good to investors
5) Reputation

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12
Q

What are negatives of using Fair Trade? (3)

A

1) More expensive
2) Reduced profit
3) If increase RRP - less customers

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13
Q

What is a social benefit?

A

Where something good comes to society from business activity e.g. employment, tax revenue - inward investment

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14
Q

What is a social cost?

A

Where a problem in society is caused by business activity e.g. pollution, redundancies

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15
Q

Why should Holden move to Bowton? (6)

A

1) Less tariffs
2) Less transportation (costs)
3) Better for environment
4) Lower fabric costs
5) Help UK recover
6) More ethical?

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16
Q

Why should Holden not move to Bowton? (4)

A

1) Chinese redundancies - expensive
2) Not helping Ch economy - ethics
3) Initial expense
4) May have to change supplier

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17
Q

What are sustainable materials?

A

Materials that can be obtained without diminishing ability to provide in the future

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18
Q

Why should Holden use Kapok? (4)

A

1) Better for environment - investors
2) Fair Trade - improve image
3) Can charge more
4) Catch up to competition - proven to work

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19
Q

Why should Holden not use Kapok? (5)

A

1) More expensive - recovering economy, luxury
2) Absorb or increase RRP?
3) More transport
4) Exchange rates
5) New supply chain

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20
Q

How does the government help with environmental problems? (6)

A

1) Taxation
2) Rules + regulations
3) Adverts + education
4) Carbon permits
5) Recycling
6) Grants + lower tax on biofuels

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21
Q

Why should green-belt areas be reduced? (3)

A

1) More businesses - unemployment
2) Economy improves
3) Inward investment

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22
Q

Why should green-belt areas not be reduced? (3)

A

1) Environment - bad long-term
2) Protest groups - businesses fail
3) Reduction in property values

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23
Q

Should Bowton reduce green-belt areas?

A

Yes - more likely to be positive

- More wealth - improve Bowton

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24
Q

How could Holden be sustainable if they build a new factory?

A

Recycled materials + build brand image, - expensive or low quality
Brown field + Support of Bowton, - not ideal

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25
Q

How could Holden be sustainable if they rent in Bowton?

A

Green energy + less electricity from fossil fuels, - expensive
Recycled packaging + less raw materials USP, - quality

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26
Q

How could Holden be sustainable if they stay in China?

A

Improve waste disposal + reduce pollution, - expensive

Reduce packaging + cheaper, - limit to effectiveness

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27
Q

What is GDP?

A

Gross Domestic Product - total value of country’s output in a year

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28
Q

What is economic growth?

A

Businesses produce and sell more, employment + consumer income rises

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29
Q

What is recession?

A

Fall in GDP - demand falls, less production, less jobs + income, luxury businesses fail

30
Q

What is the boom and bust cycle?

A

Boom, downturn, recession, recovery, boom…

31
Q

What does the recession mean for Holden?

A

Spend less on luxury, lower SR, can’t pay costs, failure?

32
Q

What are interest rates?

A

The cost of borrowing money or reward for saving money (£ rate = amount borrowed * rate% / 100)

33
Q

What does an increase in interest rates mean?

A

Costs more to borrow

Rewards for saving

34
Q

What is inflation?

A

General rise in price

35
Q

What happens when inflation is too high?

A

Increase interest rates - reduce demand so businesses sell less and have to lower prices

36
Q

What happens when inflation is too low?

A

Lower interest rates - people spend more, increasing demand so businesses can charge more. This stimulates the economy

37
Q

What would happen to Holden if interest rates rose?

A

Borrowing expensive - mortgage increased, customers save, luxury product demand falls

38
Q

What could Holden do if interest rates rose?

A

Increase SR

  • Adverts
  • Increase price
  • Decrease price/absorb costs
  • Lower costs
39
Q

Why are interest rates currently low?

A

To combat the recession - business payments minimised, people more likely to spend - more tax to Bowton

40
Q

Why are low interest rates good for Holden?

A

More SR and profit - expansion, relocate, ethical investment, charge less to beat competition

41
Q

What could Holden do about the rising price of latex?

A

Alternative supplier
Increase selling price
Absorb costs

42
Q

What are the advantages and disadvantages of using an alternative supplier?

A

+ Lower costs
+ Keep same selling price
- Quality - brand image
- Reliability

43
Q

What are the advantages and disadvantages of increasing selling price?

A

+ Maintain profit
+ Simple
- Luxury competitive environment - price elasticity
- Recovering economy - sell less

44
Q

What are the advantages and disadvantages of absorbing the costs?

A

+ Same selling price
+ Same sales, quality
- Lower profit - less dividends
- Consider how much difference

45
Q

What is the fiscal policy?

A

UK policy on spending and tax

  • Money spent of public services
  • More tax on social costs e.g. cigarettes
46
Q

What is the multiplier effect?

A

Funding one thing can help whole country e.g. roads, builders, tax and disposable income, more spent, help economy

47
Q

What could increased tax mean for businesses?

A

Income = less disposable
Corporation = less spending money
Air travel = higher costs
Tax = inward investement

48
Q

Why does Bowton want to encourage firms to locate there?

A

Reduce unemployment - employees or construction

Disposable income - demand for local products - tax

49
Q

Should businesses be given grants?

A

Spending cuts = can’t afford it

Reduce unemployment - less benefits paid + increased tax revenue etc - self-financing

50
Q

What is globalisation?

A

When a business is connected in several countries

51
Q

What are the benefits to the UK of globalisation? (5)

A

1) Larger export markets
2) More employment from foreign businesses
3) Lower business costs
4) More consumer choice
5) Economies of scale

52
Q

What are the disadvantages to the UK of globalisation? (3)

A

1) More competition
2) Lower profits/sales
3) Unemployment in UK

53
Q

What are the ethical advantages of globalisation? (2)

A

1) Raised standard of living

2) More job opportunities

54
Q

What are the ethical disadvantages of globalisation? (4)

A

1) Worker exploitation
2) Local culture affected
3) More transportation = CO2
4) Pollution - less legislation

55
Q

How could Sierra Leone benefit from Holden’s globalisation?

A

Jobs, income, improved standard of living, economy improves

56
Q

What will Holden be affected by in globalisation?

A

Exchange rates
Inflation in other countries
Tariffs

57
Q

What is the EU?

A

Family of democratic European countries that removes barriers to trade to member countries e.g. tariffs

58
Q

What are the advantages of the EU? (3)

A

1) Single market - more customers
2) Free movement of workers - more/cheap labour
3) No trade barriers - cheaper+easier

59
Q

Why is foreign competition increasing?

A

Developing countries = lower labour costs, do same as UK and are very skilled - better products
Internet = foreign business take markets

60
Q

What would an increase in import taxes mean for Holden currently?

A

Increase prices of stock sold in EU = reduce demand = less profit

61
Q

What is unfair competition?

A

Using unethical means to achieve a competitive advantage e.g. child labour

62
Q

Why does the government believe competition is good?

A

Greater choice

Better value - efficiency = lower prices / more services

63
Q

What do increasing wage rates in China mean for Holden?

A

Increased costs = less profit

  • Increase selling price (only if no substitute, Holden superior or competition also increasing prices)
  • Reduce other costs - quality
  • Minimise labour - machinery
  • Relocate to emerging economy
64
Q

What is exchange rate?

A

The value of one currency in terms of another

£1 = Le6789

65
Q

What happens if exchange rates rise?

A

More SLL per £, so buy more or cheaper, could reduce RRP, stimulate demand, beat competition

66
Q

SPICED?

A

Strong Pound Imports Cheaper Exports Dearer

67
Q

What does a strong pound mean?

A

Charging same £ is higher in $ etc so less demand

68
Q

What is the Eurozone?

A

Euro using countries
Interest rates set by European Central Bank (ECB)
No exchange costs, easier price comparison

69
Q

What are the positives of using retailers? (3)

A

1) Cost effective to reach large market - don’t need additional staff/buildings to sell abroad
2) People trust retailers, can touch products
3) Retailers do promotion

70
Q

What are the negatives of using retailers? (3)

A

1) Less control of price end customer pays
2) Can be difficult to get contract
3) Retailers have power - can insist on quality or price

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