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BUSINESS > Analysing the Strategic Position of a Business (3.7) > Flashcards

Analysing the Strategic Position of a Business (3.7) Flashcards

1
Q

Porter’s Five Forces :
- …
- …
- …
- …
- …

A

The model is a framework for analysing the nature of competition within an industry.
- Power of customers.
- Power of suppliers.
- Intensity of rivalry.
- Threat from substitutes.
- Threat of market entry.

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2
Q

(Porter’s Five Forces)
- The threat of new entrants - …
- The threat of substitutes - …
- The bargaining power of customers - …
- The bargaining power of suppliers - …
- The intensity of rivalry - …

A
  • If barriers to entry exist then this is less likely.
  • The easier your product is to copy the more likely you are to face competition from rivals.
  • Think about ; the ability of customers to switch products, the importance of individual buyers.
  • Number of capable suppliers, the cost of switching suppliers, the brand power of suppliers.
  • Which is determined by the balance of the other four forces. Plus the number of sellers in the market, the degree of differentiation between products and the market size and growth potential.
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3
Q

(Porter’s 5 Forces) Threat of new entrants :

A
  • If new entrants move into an industry they will gain market share and rivalry will intensify.
  • The position of existing firms is stronger if there are barriers to entering the market.
  • If barriers to entry are low then the threat of new entrants will be high, and vice versa.
    Barriers can be : high investment costs, economies of scale available to existing firms, legal restrictions e.g. patents, lack of access to suppliers.
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4
Q

(Porter’s 5 Forces) Bargaining power of suppliers :

A
  • If a firm’s suppliers have bargaining power they will : exercise that power, sell their products at a higher price.
  • If the supplier forces up the price paid for inputs, profits will be reduced.
  • The more powerful the customer (buyer) the lower the price.
  • Things that determine the suppliers power : uniqueness of the input supplied, number and size of firms supplying the resources, cost if switching to alternative sources.
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5
Q

(Porter’s 5 Forces) The Power of Customers :

A
  • Powerful customers are able to exert pressure to drive down prices.
  • E.g. Supermarket business is increasingly dominated by a small number of large retail chains able to exert great power over supply firms.
  • Determinants : Number of customers (the smaller the number, the greater their power), number of firms supplying the product, the cost of switching.
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6
Q

(Porter’s 5 Forces) Threat of substitute products :

A
  • A substitute product can be regarded as something that meets the same need.
  • If there are substitutes to a firm’s product, they will limit the price that can be charged and will reduce profits.
  • The extent of the threat depends upon : the extent to which the price and performance of the substitute can match the industry’s product, customer loyalty and switching costs.
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7
Q

(Porter’s 5 Forces) Intensity of rivalry :

A
  • If there is intense rivalry in an industry, it will encourage businesses to engage in : price wars (competitive price reductions), investment in innovation and new products and intensive promotion.
  • Determinants of intensity of rivalry : Number of competitors in market, market size and growth prospects, product differentiation and brand loyalty, power of buyers and the availability of substitutes.
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8
Q

Ansoff Matrix :

A

A marketing planning model that helps a business determine its product and market strategy.

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9
Q

Look up picture of, what is riskiest?

A

Diversification is the riskiest as its a new product in a new market.

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10
Q

(Ansoff Matrix) Market Penetration :

A

A growth strategy where a business aims to sell existing products into existing markets.
- Aim : to increase market share.
- Get existing customers to buy more.
- Business focuses on markets/products it knows well.
- Unlikely to need significant new market research.
- But will the strategy allow the business to achieve its growth objective?

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11
Q

(Ansoff Matrix) Product Development :

A

A growth strategy where a business aims to introduce new products into existing markets.
- A strategy that often plays to the strengths of an established business.
- Strong emphasis on effective market research and successful innovation.
- A great way of exploiting the existing customer base.

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12
Q

(Ansoff Matrix) Market Development :

A

A growth strategy where the business seeks to sell its existing products into new markets.
- Approaches : New geographical markets, new distribution channels, different pricing policies to attract new customers.
- Often more risky than product development, particularly expansion into international markets.
- Existing products may not suit new markets, depends on customer needs.

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13
Q

(Ansoff Matrix) Diversification :

A

The growth strategy where a business markets new products in new markets.
e.g. the business Alphabet owns Google, Verify and Fiber.
- Example of failed diversification is HMV : diversified into live entertainment market, purchased several live music venues and exited the market soon after.
- Inherently risky : no direct experience of product/market, few economies of scale (initially).
- Approaches : Innovation & R&D, acquire an existing business in the market or extent an existing brand into the new market.

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14
Q

Savings :

A

Setting aside some money for future use (mainly by individuals or retained profit in businesses).

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15
Q

Investment :

A

The purchase of a fixe asset (valuable, stay with businesses for a long time).
- Using your money to make money.

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16
Q

Difference between Savings & Investment :

A

Savings carry almost no risk, investments always carry significant risk.

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17
Q

ROI :

A

Operating Profit
———————– x 100
Capital Invested

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18
Q

Why investment is undertaken :

A

1) To replace or renew assets that have worn out (depreciated) or become obsolete.
2) To introduce additional, new assets in order to meet increased demand for the firm’s products.

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19
Q

Risk of investment (5) :

A

1) The market might change e.g. new demand might not materialise as expected.
2) Economic conditions may change (e.g. high inflation).
3) The fixed assets purchased may be faulty or of low quality.
4) Opportunity cost may be higher than expected (e.g. other possibilities which might have been more profitable might have been missed).
5) Technology may develop more quickly than expected.

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20
Q

3 Methods of Investment Appraisal :

A

1) Payback period.
2) Average rate of return (ARR).
3) Not present value (NPV).

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21
Q

Investment Appraisal :

A

Making a judgement as to whether a new investment opportunity being considered by a business is going to be worthwhile.

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22
Q

Payback :

A

Assessing how long a particular project will take to break-even and move into profit.
- Useful for comparing 2 projects, which pays back the most quickly is the lower risk but not necessarily the best.
(answer is in years/months)

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23
Q

Payback Period :

A

Time it takes for a business to payback its initial investment.
- The shorter, the better.
- Results will be generated in time.

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24
Q

How to calculate Payback Period :

A

1) Calculate NCF if not already (inflows-outflow).
2) Add up each years NCF until you get to the cost of the initial investment (which was Year 0).
3) If the cost of initial investment is in between a year, do this formula.

revenue generated in the next year

x 365

Then add the days and how many years to get payback.

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25
Q

Benefits of Payback Period (4) :

A

1) Simple, easy to calculate + understand.
2) Focuses on cash flow which is key to business finances.
3) As it deals with speed of return its particularly relevant for hi-tech, rapidly changing industries.
4) Easy to compare one project with one another.

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26
Q

Drawbacks of Payback Period (4) :

A

1) Ignores cash flows after payback is reached e.g. machine may continue to payback for 20 years.
2) Money value in 3.5 years may be worth less than money today (e.g. inflation).

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27
Q

ARR (Average Rate of Return) :

A

Calculates the annual % profit from an investment.
- Useful for comparing the potential return with other ways in which the business could use it’s money. It’s better than PB as it includes profits made after break-even when PB doesn’t.
- The higher the better.

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28
Q

How to calculate ARR :

A

1) Add up positive cash flows of each year, (not Year 0).
2) Subtract this value from the cost of initial investment e.g. 8M.
3) Divide by lifespan of investment.
4) E.g. if that was £600,000 per year, then find % by 600,000/8000000 x 100 = 7.5%

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29
Q

NPV (Net Present Value) :

A

Calculates what any potential return is worth in “real terms”.
- This is better than ARR as the future profits are more realistic. They take into account inflation whereas ARR doesn’t.

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30
Q

How to calculate NPV :

A

1) Multiply the NCF by the discount factor for that year.
2) Pick the correct discount factor based on the % change, e.g. 10%.
3) Get NPV by adding them up together.
4) Minus this NPV from initial investment to calculate return.

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31
Q

Difficulties with conducting appraisals for investment :

A
  • Difficult to predict cost and revenues.
  • Risks and uncertainties.
  • Unforeseen technical difficulties.
  • New technology superseding the investment.
  • Higher than expected inflation, or a recession.
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32
Q

To overcome these difficulties when conducting investment appraisals businesses should :

A
  • Make ‘contingencies’.
  • Calculate alternative results.
  • Set more demanding targets to allow for risks (e.g. higher ARR).
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33
Q

Advantages of Net Present Value (NPV) (4) :

A

+ Takes account of time value of money, placing emphasis on earlier cash flows.
+ Looks at all cash flows involved through life of the project.
+ Use of discounting reduces the impact of long-term, less likely cash flow.
+ Has a decisions-making mechanism - reject projects with negative NPV.

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34
Q

Disadvantages of NPV (3) :

A
  • More complicated method.
  • Difficult to select the most appropriate discount rate - may lead to good projects being rejected.
  • The NPV calculation is very sensitive to the initial investment cost.
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35
Q

Factors to consider, Investment Appraisals, Influence Risk (4) :

A
  • Length of project.
  • Source of data.
  • Size of investment.
  • Economic and market environment.
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36
Q

Qualitative influences on Investment Appraisals (4) :

A
  • Product quality + customer service.
  • Consistency of investment decision with corporate objectives.
  • Business’s brand and image, including reputation.
  • A business’ responsibilities to society & other external stakeholders.
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37
Q

Sensitivity Analysis (Investment Appraisals) :

A

Created to understand the impact a range of variables has on a given outcome, e.g. changing discount factor,
- Allows for more informed decision, do multiple calculations,

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38
Q

Ratio Analysis :

A

When a business assess the strengths and weaknesses of their finances.

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39
Q

The Balance Sheet :

A

Describes the financial position of a company at a particular point in time.
- Summary of assets (things a company owns).
- Liabilities (things a company owes).
- Tells where capital invested has come from e.g. retained profit and share capital.

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40
Q

(Balance Sheet) Non-Current Assets/Fixed Assets :

A

What the business owns with a lifespan of more than a year. They are used repeatedly as part of the firm’s operations and will not regularly be sold.
- e.g. Land, machinery, vehicles.
Add these up together to get total.

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41
Q

(Balance Sheet) Current Assets :

A

Assets owned by the business that are likely to be turned into cash within one year. These assets continually change form.
e.g. Receivables (debtors, people who owe you money = customers), Inventories (stock), Cash.
Add together to get total.

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42
Q

(Balance Sheet) Current Liabilities :

A

Short-term debts of the business, will have to be repaid within one year.
e.g. Payables (creditors = people you owe, e.g. suppliers).

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43
Q

(Balance Sheet) Net Current Assets (Working Capital) Formula :

A

Current Assets - Current Liabilities

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44
Q

(Balance Sheet) Non-current/Long-term Liabilities :

A

Debts that need to be repaid, but not within one year. Also known as : creditors falling due after a year.
e.g. Long-term loans & mortgages.

45
Q

(Balance Sheet) Net Assets (Companies value) Formula :

A

Total assets - non current liabilities.
SHOULD BALANCE WITH TOTAL EQUITY

46
Q

(Balance Sheet) Capital & Reserves :

A

Shows how the asset and business have been financed.
e.g. Share capital, Reserves (retained profit)

47
Q

(Balance Sheet) Total Equity (Shareholder’s funds) Formula :

A

Share Capital + Reserves.
NET ASSETS = TOTAL EQUITY.

48
Q

(Balance Sheet) Working Capital :
- What’s the ideal ratio?
- Formula :

A

Tells us about the liquidity of a business.
- A firms ability to pay its short-term liabilities (debts).
- Ideally, a business will have £2 of current assets to be able to pay every £1 of current liabilities it owes (2:1)
Current Assets - Current Liabilities

49
Q

Tangible vs Intangible Assets :

A

Tangible Assets : Non-current assets that exist physically.

Intangible Assets : Non-current assets that don’t have a physical presence but still have value.
- Most common is goodwill, which includes value of firm’s name, copyright, patents etc.

50
Q

(Income Statement) :
- Things on it :
- Gross Profit Formula :
- Operating Profit Formula :
- Profit for Year :

A

Describes the income and expenditure of a business over a period of time, usually a year.
- Revenue, Cost of Sales, Gross Profit, Expenses, Operating Profit, Profit for the Year.
GP : revenue - cost of sales
OP : GP - expenses
PFTY : operating profit - interest and taxation

51
Q

(Ratio Analysis) Liquidity Ratio’s :

A

Measure whether a business can pay its short-term liabilities (debts).
- Includes Current Ratio & Gearing.

52
Q

(Ratio Analysis, Liquidity Ratio)
Current Ratio :
- Formula :
- Recommended ratio…

A

Current Assets : Current Liabilities
Current Assets / Current Liabilities
- Then answer is expressed x : 1
- Recommended is 2:1, but things like JIT mean firms are able to operate at a lower level.
- If too high, firm’s aren’t investing enough to further expand the business.
(BALANCE SHEET)

53
Q

(Ratio Analysis, Liquidity Ratio)
Gearing Ratio :
- Formula :

A

Shows what proportion of capital invested in the business comes from loans.
non-current liabilities
—————————— x 100
total equity + non-current liabilities
- If a business has a value higher than 50%, It is highly geared, not very good as it means a firm has borrowed a lot of money, high interest repayment.
- 25% is considered low, means a firm has raised capital through alternative finances e.g. retained profits.
(BALANCE SHEET)

54
Q

(Ratio Analysis, Profitability Ratios)
Return on Capital Employed/Investment (ROCE) :
- Formula :

A

Lets owners/potential investors understand how efficient the business is at producing profit based on capital invested.
- Helps shareholders to gain idea of potential return on investment, however, unlikely shareholders would get 100% of profit made.

operating profit or profit before tax
————————————————- x 100
(total equity + non-current liabilities)
(BALANCE SHEET+ INCOME STATEMENT)

55
Q

(Ratio Analysis, Efficiency Ratios/Financial) Definition :

A

Measures how efficiently the business manages its current assets and liabilities, which will also impact a firm’s liquidity.
- Includes inventory (stock) turnover, Receivables (debtors) days and Payables (creditors) days.

56
Q

(Ratio Analysis, Efficiency Ratios\Financial)
Inventory (stock) Turnover :
- Formula :

A

Inventory (stock) Turnover : Measures how quickly inventory (stock) is converted into sales.

average inventory held
(INCOME STATEMENT & WILL GET TOLD)

  • Measured as a number, not ratio. The number of times the average value of stock held is sold.
  • Higher the figure the better for the firm’s cash flow and liquidity as it implies they are selling goods & shifting stock more quickly.
57
Q

(Ratio Analysis, Efficiency Ratios\Financial)
Receivables (debtors) days :
- Formula :

A

Shows the number of days it takes to convert receivables into cash, i.e. how long it takes to collect debts from customers
- Most of the time, the shorter the better but it depends.

Receivables (debtors)
—————————— x 365
Revenue

  • Firms that offer long credit periods will have high figures.
  • Businesses that deal mainly in cash or do not offer credit sales will have lower figures.
    (BALANCE SHEET+INCOME STATEMENT)
58
Q

(Ratio Analysis, Efficiency Ratios\Financial)
Payables (creditors) days :
- Formula :

A

Ratio shows the number of days it takes to pay any payables owed, i.e. how long it takes to pay the suppliers.

Payables
—————— x 365
Cost of Sales

-A firm that receive long credit periods will have high figures; those that pay suppliers in cash will have low figures.
- A firm will want a high figure, preferably higher than their receivable days, so they are not paying their debts too quickly and before they receive their revenue, this should improve their liquidity and cashflow.

(BALANCE SHEET+INCOME STATEMENT)

59
Q

Corporate Aim :

A

Long-term goals, what a business wants to achieve.

60
Q

Mission Statement :

A

There to inspire, puts corporate aim into words.

61
Q

What factors influence the mission of a business? (6)

A
  • Change in leadership.
  • Business size.
  • Activities undertaken by the business.
  • Nature of owners/stakeholders.
  • Competitors.
  • Economy.
62
Q

Corporate Objectives :

A

Medium-long term targets for the whole enterprise.

63
Q

Internal/External influences on corporate objectives + decisions (7) :

A
  • Business ownership.
  • Power of stakeholders.
  • Ethics.
  • Business culture.
  • Resource constraints.
  • Pressure for short-termism (just focusing on short term goals).
  • External environment.
64
Q

Functional Objectives :

A

Objectives for each department.

65
Q

Types of objectives (6) :

A

Profit, growth, survival, cash flow, social and ethical objectives.

66
Q

Strategy :

A

Medium/long-term plan of action developed to achieve the business’ objectives.
- Can only be put in place once an organisation has outlined its missions/aims and objectives.
- Can be clearly defined plans (for large companies) or a sequence of business decisions made over time with the aim to reach a particular goal (for a small business).

67
Q

Tactics :

A

Short-term plans for implementing strategy.
- These are more day to day activities.

68
Q

Order of a Corporate or Strategic plan (5) :

A

1) Mission/Corporate Aim
2) Corporate Objectives
3) Functional objectives
4) Strategies
5) Tactics

69
Q

SWOT Analysis :

A

Allows a business to make decisions on their future.
- A technique that allows an organisation to assess their overall position, or the position of one of its divisions, products and activities.

70
Q

What does SWOT stand for & which are INTERNAL and which are EXTERNAL?

A

Strengths, Weaknesses, Objectives, Threats.
- S&W are internal.
- T&O are external.

71
Q

PESTLE :

A

Political, economical, technological, legal and environmental.

72
Q

ADVANTAGES of SWOT (6) :

A

+ Structured performance for assessing internal/external influences on an organisations performance.
+ Will support a business to help achieve it’s objectives through supporting decision making.
+ Leaders can analyse what a business needs to do to counter threats/target opportunities.
+ Competitive advantage through developing strengths/fixing weaknesses.
+ Highlights current + potential threats.
+ Comparing with a competitor’s SWOT can support businesses with competitive advantages.

73
Q

DISADVANTAGES of SWOT (2) :

A
  • Time-consuming.
  • External factors can change rapidly.
74
Q

Measures of HR Effectiveness (3) :
Measures of Operational Effectiveness (4) :
Measures of Marketing Effectiveness (4) :

A

HR : Staff Turnover, Labour Productivity, Absenteeism.
Organisational : Capacity Utilisation, Quality reports, Waste levels, Environmental targets.
Marketing : Market Share, Customer Satisfaction, Recognition levels, Customer Loyalty.

75
Q

Employee Retention Formula :

A

employees who have stayed with the organisation for a given period
————————————————- x 100
total number of employees at the beginning of that period.

76
Q

Labour Turnover Formula :

A

Number of employees leaving
during period
——————————————- x 100
Average employed during period

77
Q

Disadvantages of Labour Turnover (4) :

A
  • Higher costs.
  • Increased pressure on remaining staff.
  • Disruption to production + productivity.
  • Hard to maintain quality/ customer service.
78
Q

Factors that may cause high Labour Turnover (5) :

A
  • Nature of business e.g. seasonal.
  • Pay.
  • Working conditions.
  • Competition poaching staff.
  • Poor communication.
79
Q

How to improve Labour Turnover (4) :

A
  • Effective recruitment & training.
  • Competitive pay and benefits.
  • Job enrichment.
  • Reward staff loyalty.
80
Q

Labour Productivity Formula :

A

Output per period (units)
———————————– x 100
Number of employees at work

81
Q

Why does productivity matter (3) :

A
  • Labour costs are normally a high % of costs.
  • Efficiency/profitability is closely linked to productive use of labour.
  • Competitiveness depends on unit costs.
82
Q

Factors affecting productivity (4) :

A
  • Extent and quality of fixed assets e.g. equipment/IT.
  • Ability and motivation of workforce.
  • Method of production.
  • External factors e.g. reliability of suppliers.
83
Q

How to improve productivity (4) :

A
  • Measure performance + set targets.
  • Streamline production processes.
  • Invest in better capital equipment/employee training.
  • Improve layout/organisation of workplace.
84
Q

Absenteeism Formula :

A

Number of staff absent
———————————- x 100
Number employed during period
OR
Number of days taken off for unauthorised absence (during period)
———————————————— x 100
Total days worked by the workforce over the period

85
Q

How to tackle Absenteeism (5) :

A
  • Investigate and understand causes.
  • Have clear absence + sick policies.
  • Set targets + monitor trends.
  • Reward good attendance.
  • Consider wider staff motivation issues.
86
Q

(Using non-financial data to analyse performance)
- Marketing : (6)
- Operations : (5)
- Human Resources : (6)

A
  • Marketing : Sales growth, market share, brand loyalty, social media presence, sales volume, portfolio analysis (BM).
    Operations : capacity utilisation, VC per unit, time to make products, age + condition of machinery, process used).
    HR : Absenteeism, labour turnover, labour costs as % of revenue, staff morale, retention rates, HR training and recruitment.
87
Q

Core Competencies :

A

The unique strengths of a business that cannot easily be replicated by a competitor.
- These are strengths critical to the success of a business, e.g. specific piece of technology or understanding their customers.
- Should be adapted and changed to meet demands of the market.
- Allows business to gain a competitive advantage.
— Example of Apple : I.O.S, branding, loyal customers.

88
Q

Difficulties with non-financial methods of performance (4) :

A
  • There’s not always widespread agreement on desirable levels.
  • Usually quantitative.
  • Non-financial methods usually interdependent.
  • Financial methods often reflect what has happened and what will happen.
89
Q

Short-Termism :
- (5)

A

Management who describe themselves as this tend to emphasise certain performance methods, such as :
- Share price.
- Revenue price.
- Gross and operating profit.
- Unit costs and productivity.
- Return on capital employed.
NEED TO HAVE BOTH ST + LT (PIE)

90
Q

Focussing on Short-Term problems could mean they neglect (5) :
- Reasons as to why too many firms have become increasingly ST could include :

A
  • Customer loyalty.
  • Reputation.
  • Labour turnover.
  • Sustainability and social responsibility.
  • Quality & innovation etc.
    — Could include : stock market investors focussing on mainly latest financial performance, reliance on bonuses based on ST performances & frequent changes in leadership & strategy.
91
Q

How can you indicate management of a business that has short-termism :

A
  • Management bonuses/financial incentives based on achievements of short-term objectives.
  • Low or falling investment in R & D.
  • High dividend paying rather than reinvesting profits.
  • Overuse of takeovers rather than internal growth.
92
Q

Long-Termism :

A

Tendency for management to focus on LT gains.
- These measures show the ability of a business to sustain or grow its current operations.
e.g. core competences, quality, market share, innovation and people.
- Disadvantages is that it takes longer to earn money from this approach which shareholders may not like.
NEED TO HAVE BOTH LT + ST (PIE).

93
Q

(Assessing overall performance) Kaplan and Norton :

A

An attempt to help firms measure business performance using both financial and non-financial data.
- Enables managers to understand clearly how their business is performing, believes looking at non-financial indicators helps predict future performance whereas financial focuses on just the previous accounting period.
— Example : Tesco Clubcard, combines customers with financial.

94
Q

(Assessing overall performance) Kaplan and Norton, 4 key perspectives :

A

Financial : generating revenue, profit and shareholder management.
Internal Processes : considers systems in place to ensure the business is successful, lead time/unit costs.
Learning & Growth : focus on the resources & infrastructure, e.g. effectiveness of teams + innovation, technology investment.
Customer : Extent to which the customer is satisfied, levels of returns.
e.g. Tesco

95
Q

Advantages (4) & Disadvantages (3) of Kaplan & Norton :

A

+ Measurable.
+ Links performance to long-term (mission & vision).
+ Involves all stakeholders in the business.
+ Highly flexible, KPI’s chosen by business.
- Doesn’t consider sustainability (out-dated).
- Have to monitor frequently, time-consuming/expensive.
- Difficult to have balance between the four perspectives.

96
Q

(Assessing overall performance) Elkington’s Triple Bottom Line :

A

Believes that firms should have three separate bottom lines.
- ‘Profit’, ensuring that the bottom line in the profit & loss account is as high as it can be.
- ‘People’, ensuring an organisation undertakes business in a way that ensures that staff and other stakeholders are considered, socially responsible, e.g. fair wage and conditions, customers have their feedback listened to.
- ‘Planet’, conducting business in an environmentally sustainable manner, business often forced between lower-cost option or environmentally-friendly alternative, very difficult to measure, e.g. carbon footprint & waste management.
e.g. Ikea : fair wages, invests in renewable energy.

97
Q

Advantages & Disadvantages of Elkington’s Triple Bottom Line :

A

+ Entices ethically conscious customers & investors.
+ May result in increased LT profitability.
+ Competitive advantage from being socially responsible.
+ May boost employee retention, improve brand reputation and customer loyalty.
- Might create potential conflict, benefits of social and environmental actions that a business engages in are LT, however could have negative impacts on profits in the ST.
- Most shareholders focus on ST (profit) results.
- Hard to reliably measure - no KPI’s.

98
Q

PESTLE :

A
  • POLITICAL : Competition policy, regulation, tax.
  • ECONOMICAL : Interest rates, ecnomic growth, consumer spending and income.
  • SOCIAL : Demographic change, pressure groups.
  • TECHNOLOGICAL : New productive processes, new technology.
  • LEGAL : Employment law, minimum wage, health and safety.
  • ENVIRONMENTAL : Sustainability, pollution and carbon emissions.
99
Q

(PESTLE)
- Political Environment is the…

A

The government actions that impact on the strategic and functional decisions made by the business.
- They will impact heavily on the competitive environment and the infrastructure that allows businesses to operate effectively.
- The gov want to grow the economy, people will have to pay taxes.

100
Q

(PESTLE, Political)
Legislation involves….

A

Involves creating and enacting laws in order to protect individuals, businesses and society as a whole.

101
Q

(PESTLE, Political)
Competition Laws :
- This means anticompetitive prices such as…
- Mergers and takeovers are…

A

Look to promote fair competition in markets and stop the abuse of customers by businesses due to monopoly power.
- This means anticompetitive prices such as price fixing between businesses are illegal.
- Mergers and takeovers are monitored and won’t be allowed if deemed that they significantly reduce competition.

102
Q

(PESTLE, Political)
A monopoly exists where there is…
- Government refer to any business that has at least ___% market share as having monopoly powers.
- Monopolies can exploit… therefore, they’re…
- Market Power :

A

A monopoly exists where there is only one business in the market.
- At least 25% market share.
- Monopolies can exploit consumers by charging high prices, therefore, they’re regulated in order to protect the customer.
- Market Power is the ability of a business to set price above those that would be charged if there were competition.

103
Q

(PESTLE, Political)
Benefits of of Competition Policy being successful :
- Lower _______, increased competition leads to…
- Improved __________, in order to maintain a…
- Increased __________ for customers.
- Innovation, businesses invest in ___&___ to draw in new customers.

A
  • Lower price, increased competition leads to a fall in market share.
  • Improved quality, in order to maintain a customer base within a competitive market, businesses will strive to better the quality of their products.
  • Increased choice for customers.
  • Innovation, businesses invest in R&D to draw in new customers, will benefit society as a whole, e.g. technological developments.
104
Q

(PESTLE, Legal)
- Equality Act protects…
- Employment Relations Act allows…
- Labour market law is designed to protect…
- Wage Discrimination occurs when…

A
  • Equality Act protects things like age, disability, gender, race, pregnancy etc.
  • Employment Relations Act allows Trade Union membership.
  • Labour market law is designed to protect workers from discrimination within the workplace and make it easier for businesses to recruit workers.
  • Wage Discrimination occurs when businesses pay workers a different wage rate for providing the same job.
105
Q

(PESTLE, Legal)
- Environmental Law :
- e.g. …
- Governments can ____________ businesses and impose…
- Environmental _______________ Act and ____________ Act aim to control pollution and clean up any contaminated sites a business owns.

A
  • Environmental Law : Help to ensure that businesses do not have a negative impact on the environment.
  • e.g. Limits to emission levels, guidelines on waste disposal and quotas on finite resources.
  • Government can inspect businesses and impose fines on those failing to comply.
  • Environmental Protection Act and Environment Act aim.
106
Q

(PESTLE)
- Government looks to promote ______________ in the economy as it creates…
- Enterprise is the term that can be applied to…
- Gov supports business start-ups for a number of reasons :
- Government can provide ___________ and ______________ to businesses.

A
  • Government looks to promote enterprise in the economy as it creates jobs and leads to economic growth.
  • Enterprise is the term that can be applied to any business.
  • Support start-ups : Provide employments, businesses will pay taxes, can help start-ups becoming environmentally friendly.
  • Can provide grants and training (e.g. financial, marketing, etc) to businesses.
107
Q

(PESTLE, Political)
- Regulation is undertaken by the government to…
- Government creates rules and sanctions in order to…
- Privatisation leads to…
- Deregulation :

A
  • Regulation undertaken by the government to create competitive markets.
  • Government creates rules and sanctions in order to modify the economic behaviour of firms.
  • Privatisation leads to monopoly power as most firms privatised operate in markers with barriers to entry such as economies of scale, this can be countered through regulation and regulation.
  • Deregulation : Opening up of markets to new competition through the removal of rules and regulations that created barriers to entry.
108
Q

(PESTLE, Political)
- Government will look to improve ______________ to help, e.g. improve…
- Pollution Permits :
- UK Trade and _________________ helps businesses to export to…

A
  • Government will look to improve the infrastructure to help businesses operation more effectively, e.g. improve transport network and increase the provision of utilities.
  • Pollution Permits : Allow businesses to produce a legal level of pollution every year, permits are tradable on the market and if a business doesn’t use all of theirs, they can sell them to other businesses, provides financial incentive to reduce pollution.
  • UK Trade and Investment (UKTI) helps businesses export to foreign markets and helps foreign companies in setting up production in the UK.
109
Q
A

BUSINESS (9 decks)

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