BUSINESS ACTIVITY AND INFLUCNECES ON BUSINESS

Question 1

what is the primary sector?

Answer 1

Production involving the extraction of raw materials from the earth, e.g. mining, quarrying, forestry, farming.

Question 2

what is the secondary sector?

Answer 2

Production involving the conversion of raw materials into finished and semi-finished goods e.g, engineering, construction, energy utilities.

Question 3

what is the tertiary sector?

Answer 3

Production of services in the economy e.g. accountancy, tourišm, plumbing.

Question 4

what does interdependent mean?

Answer 4

Businesses in these sectors are reliant on businesses in other sectors. This means businesses are INTERDEPENDENT. For example, a travel agent is dependent on forestry in the primary sector to grow trees which can be felled and turned into paper by a paper mill in the secondary sector which can be used to produce holiday brochures. A travel agent is dependent on computer manufacturers in the secondary sector for the IT equipment required to make customer holiday bookings and reservations.

Question 5

what is de-industrialastion?

Answer 5

DE-INDUSTRIALISATION is the decline in manufacturing meaning fewer people are employed in the secondary sector. This has happened for a number of reasons: • Manufacturing has moved to countries where labour is cheaper. • Automation and robots have replaced people in factories. • In developed countries people have more disposable income and more leisure tìme which means they can demand more services

Question 6

what is business location?

Answer 6

Business Location Location is where a business sites its offices, factories or shops. The location of a business is extremely important because it can impact how profitable a business is. Location can affect costs such rent, transportation and wages and the higher the costs the lower the profits. Location can also affect the level of customer demand and the level of sales. The higher the sales, the greater the profit. However, locating where there are likely to be more customers and sales is also likely to be more expensive, so a business will need to balance the costs of location with the revenue the business can expect to earn.

Question 7

why is business location important?

Answer 7

The location of a business is extremely important because it can impact how profitable a business is. Location can affect costs such rent, transportation and wages and the higher the costs the lower the profits. Location can also affect the level of customer demand and the level of sales. The higher the sales, the greater the profit. However, locating where there are likely to be more customers and sales is also likely to be more expensive, so a business will need to balance the costs of location with the revenue the business can expect to earn.

Question 8

factors influencing business location, transport links?

Answer 8

If a business sells products overseas then it might need to be close to an airport or port so it can ship its products easily. If a business needs to distribute its products to shops around the country it needs to be near to motorways. The quicker it can distribute its products, the more satisfied the business’s customer will be which could increase profits. Nearness to customers: Some customers will not travel a great distance to use a business, so it is important to be close to the market to increase sales and profits.

Question 9

factors influencing business location, availability of raw materials?

Answer 9

Businesses may need to be close to raw materials needed to manufacture its products e.g. a furniture business near a timber merchant. This can make sure raw materials can be delivered quickly with lower transport costs.

Question 10

factors influencing business location, labour?

Answer 10

Some businesses locate manufacturing abroad in countries such as China where wages are cheaper because this helps to lower costs and increase profits. Areas of high unemployment can also reduce labour costs because if there are more people than jobs available, people may be willing to work for less pay. A business will also find it easier to recruit people in areas of high unemployment, however if a business sells an expensive product in such an area there may be less customers as people cannot afford to buy it. Some firms such as computing businesses need to be close to highly skilled workers and locate near universities.

Question 11

factors influencing business location, competitors?

Answer 11

Some businesses need to be located away from competitors so that they do not fight for the same customers and reduce profits, e.g. petrol stations. However, some competing businesses need to locate close together where there is a greater concentration of customers, e.g. shopping centres.

Question 12

factors influencing business location, technology?

Answer 12

If a business needs good internet, telephone and postal services it will need to locate in a more urban area where these are faster or more frequent.

Question 13

factors influencing business location, nearness to customers?

Answer 13

Some customers will not travel a great distance to use a business, so it is important to be close to the market to increase sales and profits

Question 14

factors influencing business location, goverment constraints and opportunities?

Answer 14

Governments may use regional policy to support more deprived areas where there is high unemployment by encouraging business to locate their. Governments may offer incentives such as rent free premises and tax breaks. On the other hand governments may dissuade businesses from locating in certain areas for environmental reasons.

Question 15

nature of the business activity, services?

Answer 15

For example shopping centres may need to be located at out of town locations where there is space for customer car parking and where the roads will not get too congested.

Question 16

nature of the business activity, officies?

Answer 16

Are often located in city centres. Here there are facilities required by employees such as cafes and hotels, Offices in prestigious cities can enhance a business’ image

Question 17

nature of the business activity, manufactuirng?

Answer 17

May require a lot of spcae and so choose to locate in chersper areas, labour intensive

Question 18

nature of the business activity, agriculture?

Answer 18

farms will be located where the land is good for growing crops

Question 19

legal controls and trade blocs?

Answer 19

Goverments use planning controls to influence business location decisions. Governments may want businesses to locate in areas of high unemployment to create JObs or attract foreign businesses, Alternatively governments may not want businesses to locate in certain areas to protect the environmen

Question 20

what are trade blocs?

Answer 20

Trade blocs are when the governments of different countries agree to remove frade barriers, Businesses may choose to locate withín a trade bloc in order to avoid farifts. This will make their products more competitively prices therefore increasing sales

Question 21

the impact of the internet on location decisions?

Answer 21

As consumers shop more and more on line rather than in shopping centres or on the nigh street, retail businesses no longer need to locate close to customers. Of greater mportance might be space for a warehouse and access to good roads for fast deliveries, Some businesses do not need a fixed location and can be run from anywhere providing there is an internet connection, for example online tutoring or translation services

Question 22

Why may a business want to locate and expand abroad?

Answer 22

1) It gives the business access to more customers thereby increasing sales and profits
2) The market abroad might be growing. This can enable a business to increase sales if a business cannot increase sales in the UK because the market is saturated,
3) A business may not be allowed to expand and grow any more in the UK because the government believes it is already too big and that if it grows any more it will have too much power and charge high prices which is bad for customers.
4) It may reduce risks because if there is a downturn in the UK economy this could reduce demand and profits, but if the business is located in more than one country and demand in these other countries remains the same or rises, this can help to maintain profits

Question 23

Factors a business will need to consider before moving abroad?

Answer 23

• Will the costs of employing people and tax be higher or lower?
• Is the business confident there is a demand for its product abroad and will such a move increase sales and revenue?
• Will the potential employees in the new location have the right skills the business needs to make the product it sells?

Question 24

Advantages of locating abroad?

Answer 24

• Wages are lower in low cost labour countries eg. China which can reduce costs thereby increasing profits.
• Some resources are not available in the UK, for example certain crops or fruit cannot be grown here due to the climate. Being closer to raw materials can reduce transport costs.
• Governments may offer a firm lower taxes to locate in a foreign country, which can reduce business costs and increase profits.
• Rising demand in foreign markets could mean a rise in sales for a business which could increase market share and profits.
• Protectionist measures are policies that governments use to protect domestic businesses from competition from foreign firms. For example, quotas place limits on the number of goods that can be imported into a country and a tariff is a tax on foreign goods imported into a country, A business can avoid these protectionist measures by operating inside a country.

Question 25

Disadvantages of locating abroad?

Answer 25

• There may be different rules and legislation regarding packaging, how the product should be labelled or product safety. This could increase costs.
• Products may need to be changed to meet the different needs and wants of customers abroad and this can increase costs.
• Language Barriers: It may take longer to communicate business decisions as they may need to be translated.

Question 26

What is globalisation?

Answer 26

The growing integration of the world economies

Question 27

Features of globalisation?

Answer 27

• interdependence between countries
• money can flow between countries, e.g, people can invest in foreign firms
• businesses sell their products all over the world

Question 28

Opportunities of globilastion for business, number of customers?

Answer 28

• Globalisation means businesses can sell to more customers by selling their products in more countries
• This enables a business to achieve objectives of increasing sales and profits

Question 29

Threats of globalisation for businesses, increased competition?

Answer 29

• Businesses face more competition because in addition to rival businesses in their own country
• They may also have to compete with business from other countries, which can reduce sales and profits

Question 30

Opportunities of globilastion for business, reduces risk?

Answer 30

• if a business is reliant on sales in one country, profits may fall if consumer demand falls
• by selling in many different countries a business spreads the risk
• if consumer demand falls in one country, profits can be maintained from better sales in other countries

Question 31

Opportunities of globilastion for business, lower costs?

Answer 31

• when businesses grow, the cost of producing each unit of output can fall
• this is known as economies of scale, which can help businesses become more competitive and increase sales because hey can lower their selling prices

Question 32

Threats of globilastion for businesses, threat of takeover?

Answer 32

• Globalisation means money can more freely move between countries. This means businesses may be more vulnerable to takeovers by other international businesses
• A hostile takeover is where a business is taken over against its will

Question 33

Threats of globalisation for a business, bad press?

Answer 33

• Global businesses are well-known all over the world.
• If a global business does something bad or behaves in an unacceptable way the business may receive bad press all over the world, This can damage a business’ reputation and reduce sales and profits

Question 34

Imports?

Answer 34

Goods and services bought from overseas

Question 35

Exports?

Answer 35

Goods and services sold overseas

Question 36

Invisible trade?

Answer 36

Trade in services, e.g, tourism

Question 37

Visible trade?

Answer 37

Trade in physical goods, e.g, textiles

Question 38

Visible balance/balance of trade?

Answer 38

The difference between total visible exports and visible imports

Question 39

Why do countries trade with each other?

Answer 39

• Some countries produce so much of a resource they cannot use it all themselves so they sell the surplus to foreign countries, e.g. Saudi Arabia and oil.
• It provides consumers with more choice
• To obtain products that a country cannot produce itself, for example in the UK it is not possible to grow tropical fruits due to the climate
• To obtain products that would be too expensive for a country to produce itself. For example in the UK we import a lot of manufactured goods because labour is cheaper in some overseas countries such as China.

Question 40

Benefits of international trade, more choice for consumers?

Answer 40

International trade increases consumer choice because it enables consumers to buy products that the country cannot produce itself

Question 41

Benefits of international trade, business growth?

Answer 41

By selling overseas, businesses can reach more customers and increase their profits which can be used to develop brand new and more advanced products

Question 42

Benefits of international trade, reduces risk?

Answer 42

• The economic conditions of different countries may not all be good at the same time.
• If a business operates in a single country then when economic conditions are poor, customer demand and so profits could fall.
• However, if a business operates in different parts of the world then if economic conditions are poor in one country, overall profits could be supported by better economic conditions and higher customer demand and sales in a different country

Question 43

What are exchange rates?

Answer 43

• The value of one currency in terms of another.
• Different countries use different currencies so exchange rates are used to complete transactions (buying and selling) for international trade

Question 44

The impact of exchange rates on international competitiveness?

Answer 44

If the value of a currency continues to fall for a sustained period of time then this further benefits exporters as their goods are competitively priced overseas meaning customer demand rises. This means exporting businesses might expand and recruit more staff. Higher sales will mean the government collects more tax. Low exchange rates also make a country attractive to tourists as their money goes further. However, if a currency continues to be weak this can be damaging for importers as the price of their goods increases so customer demand falls.

Question 45

Government spending?

Answer 45

• The government spends money on a variety of public services such as healthcare, education, defence, policing, a judicial system and transport.
• Businesses can benefit from government spending on education because this can increase the skills of the workforce so businesses can find it easier to recruit employees.
• Businesses can benefit from government spending on transport links because it can make it quicker and easier for supplies to be delivered, for finished goods to be distributed and for customers and employees to access the business.

Question 46

Fiscal policy?

Answer 46

Using changes in taxation and gov spending to manage the economy

Question 47

Direct tax?

Answer 47

A tax charged on income. Income tax is paid on an individuals personal income. Businesses pay corporation tax on company profits

Question 48

How would businesses benifit if income tax was lowered?

Answer 48

• Because people would have more money to spend which could increase customer demand and therefore business sales.
• If corporation tax was lowered this could increase company profits so businesses might decide to increase the amount paid to shareholders as dividends or increase the amount spent on investment such as new equipment or developing new products

Question 49

Indirect tax?

Answer 49

Taxes on spending. Value Added Tax (VAT) is paid when goods and services are purchased

Question 50

If VAT was increased what would this result in?

Answer 50

• This would result in prices rising and goods and services becoming more expensive.
• Therefore consumer demand would fall and so would business sales.

Question 51

Constraints on public spending?

Answer 51

-The 2008 financial erisis meant governments significantly reduced government spending and this had a knock-on effect on businesses

• Reducing the money spent on schools and hospitals meant staff had to be made redundant. When larger numbers of people lose their jobs then customer demond sales and profits fall.
• Reducing the money spend on social security payments reduces people’s benefits meaning they can no longer afford as much so customer demand falls

Question 52

How governments can affect business activity, infrastructure provision?

Answer 52

-Infrastructure includes roads, bridges, railways, energy provision.

• Building infrastructure is expensive and governments often pay private businesses to undertake the work, meaning these businesses can make good profits.
• Furthermore, the employees working for these businesses earn good wages which they can spend with other businesses thereby benefiting the wider economy.

Question 53

How governments can affect business activity, trade policy: protectionism ?

Answer 53

• Is where a government uses trade barriers such as quotas and tariffs to restrict international trade,
• Governments may use protectionism to protect jobs if they think foreign businesses will gain market share and damage domestic businesses or to help raise money for the government.

Question 54

How governments can affect business activity, trade blocs?

Answer 54

• Groups of countries situated in the same region that join together and enjoy trade free of barriers.
• The European Union is an example of trading block and businesses within the EU can import and export goods and services between countries without them being subject to quotas and tariffs.
• This means businesses can increase sales by selling to different national markets

Question 55

How governments can affect business activity, Legislation?

Answer 55

• Governments pass legislation to protect consumers and the environment.
• Legislation can cover consumer protection, competition policy and environmental legislation.

Question 56

Types of trade barriers?

Answer 56

• Tariffs: A tax on imports to make them more expensive and increase demand for domestic goods.
• Quota: A physical limit on the quantity of imports allowed into a country. -Subsidies: Financial support given to a domestic producer to help compete with overseas firms.

Question 57

Monetary policy?

Answer 57

• Using changes in interest rates and the money supply to manage the economy
• Interest is the price of borrowed money. Higher interest rates means it costs more for consumers and businesses to borrow money.
• This means less money is borrowed so customer demand and business sales fall for expensive purchases which require borrowed money such as houses.

Question 58

Why are high interest rates bad for businesses?

Answer 58

• More money is paid in interest charges on loans which increases costs and decreses profits
• Businesses put off buying expensive equipment because it is too expensive so businesses may not grow as quickly, restricting a business ability to increase sales and profits.
• Sales can fall because consumers have less money to spend because higher interest rates increase mortgage repayments
• Sales of goods purchased with borrowed money such as cars or houses fall because they become more expensive

Question 59

Why does high interest rates effect consumer spending?

Answer 59

• Higher interest rates increase people’s mortgage repayments meaning they have less disposable income so sales of business fall. This is particularly so for luxury goods such as holidays.
• Higher interest rates means borrowing money is more expensive so sales of highly priced goods for which people need to borrow money fall, for example cars.
• Higher interest rates can be good for savers as their money will earn more interest in the bank

Question 60

External influences?

Answer 60

• Businesses can be impacted by changes in their external environment which are outside their control.
• External Influencès can be classified as Political, Economic, Social. Technological and Environmental.
• External influences can impact businesses in positive and negative ways

Question 61

The economic environment?

Answer 61

• The state of the economy can impact businesses, If the economy of a country is growing then customer demand rises meaning that businesses are willing to expand and grow by opening new shops and factories or launching new products.
• This can help increase profits. If the economy of a country is in a recession then customer demand falls, unemployment rises so sales and profits can fall.

Question 62

Social, greater customer awareness?

Answer 62

The internet means consumers can find out more information about products and service and compare prices. Therefore businesses need to identify and meet customer needs to be competitive.

Question 63

Social, changing consumer demand?

Answer 63

Changing lifestyles means consumer needs change and so consumers may need different products and services to meet these needs. Busier lives may explain the increased demand for delivery of take-away food and home cleaning services.

Question 64

Social, more women in work?

Answer 64

This increases the number of people in work and therefore gives businesses a greater choice when recruiting staff.

Question 65

Social, more part-time workers?

Answer 65

Allows businesses to be more flexible

Question 66

Social, urbanisation?

Answer 66

This is where people move from rural areas into towns and cities. This creates new markets and therefore opportunities for businesses to sell products and services.

Question 67

Social, business ethics?

Answer 67

This concerns what is morally right or wrong in business. Examples of ethical business decisions include using more recycled materials and not testing products on animals. Although making ethical business decisions may increase business costs, it may also give a business a good reputation and attract more customers.

Question 68

Enviromental, global warming?

Answer 68

Emissions from factories and transporting goods

Question 69

Enviromental, habitat destruction?

Answer 69

To acquire land for business development

Question 70

Environmental, resource depletion?

Answer 70

• E.g, through mining and fishing. Meaning natural resources such as coal are at risk of running out.
• As a result businesses may focus on sustainability so that resources are preserved for future generations. Examples of business sustainability include recyclable packaging. energy efficient equipment, using renewable energy. This can help a business to reduce costs, improve their reputation and increase profits.

Question 71

Technological?

Answer 71

New Technology can impact businesses, Developments in technology can help businesses To develop new products and increase profits. New technology can also automate more of The production process in the secondary sector, making it more capital intensive and more efficient.

Question 72

Political?

Answer 72

Businesses need to be careful if they operate in or are thinking of operating in political unstable countries and circumstances can change quickly making it hard for a business to run. Other political factors include:

• Pressure groups: They can campaign on issues to influence businesses directly or influence governments to change the law which can influence how businesses operate.
• BREXIT: Businesses within the UK that import from or export to the EU are currently very uncertain as to how future trade will be impacted.
• Government policy: A government may introduce new policies which may be particularly favourable to business.

Question 73

What makes a business successful, profit?

Answer 73

• This is the money left over after all costs have been subtracted from revenue.
• Businesses who make high profits can be judged as successful, but you should be cautious when using profit to judge business success because it can depend on:
• The size of a business: it would be unfair to compare the profits of a small, local business with a large global business!
• The level of competition faced by a business: If a business faces lots of competition, customers have a lot of choice about where to take their custom which can reduce business profits.
• Industry: Some industries may be more profitable than others so it is not fair to compare different businesses e.g. a supermarket with a car manufacturer.
• Objectives: If a business has prioritised achieving an objective of improving its image and reputation then it would not be fair to judge its success on profits.

Question 74

What makes a business successful, revenue?

Answer 74

• This is money from the sale of goods and services. If revenue increases over time then a business may be deemed to be successful.
• However, revenue may have increased, but not as much as the business set as an objective or market conditions such as an economic recession may reduce revenues.
• Therefore market conditions and business revenue objectives are important considerations when using revenue to judge how successful a business is

Question 75

What makes a business successful, market share?

Answer 75

-This is the proportion of sales in a total market a business enjoys. Businesses who are successful will have a large and / or increasing share of the market. This is because they are earning more sales than their competitors. However, to calculate market share a business needs to know that total value or volume of sales in the whole market which means knowing the sales of all their competitors and this information may be hard to obtain which can impact the accuracy of the calculation.

Question 76

What makes a business successful, customer satisfaction?

Answer 76

-Keeping customers happy. If customers are happy this will increase customer loyalty which means customers will come back and use the business again, increasing sales and profits. Word of mouth may attract new customers which will help to increase sales. To increase customer satisfaction, businesses may use customer surveys to obtain feedback on how they could improve and have a good system for responding to customer complaints. Using the results from customer surveys can help a business ensure it continues to meet customer needs and therefore attract more customers. Furthermore, if the results of customer surveys show an improving trend of customer satisfaction then the business may be deemed successful.

Question 77

What makes a business successful, growth?

Answer 77

-Growth is a common business objective and can therefore be used as a measure of success. Growth can be measured in a number of different ways including revenue, market share and number of employees.

Question 78

What makes a business successful, Owner / Shareholder Satisfaction?

Answer 78

• Shareholders buy shares because they hope to receive a dividend (a share of the profits) or because they hope to make money by selling their shares for more than they bought them for.
• Therefore, for shareholders, a business is successful if annual dividends increase and / or share prices rise over time. Shareholders in private limited companies tend to be owned by friends and family who are often involved in running the business.
• Shares in private limited companies are NOT publicly for sales on the stock exchange, therefore, business success for these shareholders might mean survival, growth or an increase in pay.
• Owners of smallI businesses such as sole traders may judge their business to be successful if it survives and continues to trade and provide a satisfactory income.

Question 79

What makes a business successful, employee satisfaction?

Answer 79

• Employees want the business they work for to be successful as they depend on the job as a sources of income.
• Therefore they want the business to make a profit and to grow as their increases job security and reduces the likelihood that they will lose their job. -Employees also want good working conditions, a safe working environment and training so that they feel more confident when carrying out their job. -Training may enable then to learn new skills which can help them earn a promotion to a more highiy paid job.

Question 80

Reasons for business failiure, cash flow problems/lack of finance?

Answer 80

• Overtrading: Where a growing business does not have enough cash to finance increasing levels of production and output Investment in -Fixed Assets: Fixed assets include property and machinery. They are therefore expensive and use up a large amount of cash.
• Trade Credit: Trade credit is where a business sells goods but allowed its customer to pay for them at a later date. The business has spent money on producing the goods but If they do not receive payment for a long time they can run out of cash.
• Borrowing too much: The more a business borrows the more the business will have to pay in interest.
• Seasonal Demand: Some businesses experience very high and very low periods of demand. For example farmers will spend a lot of time growing crops and will receive cash when they are harvested. Businesses at summer holiday resorts will have high demand in the summer and very little in the winter. These businesses will have to be very careful not to run out of cash during periods of low demand.
• Unforeseen expenses: For example repairs can be expensive and use up a lot of cash.
• External Factors: If the economy is in recession then customer demand and sales will fall meaning a business has very little cash flowing into the business.

Question 81

Reasons for business failiure, not competitive?

Answer 81

• New businesses enter the market: New competitors may launch better quality or lower priced products which attract customers.
• Poor cost control: High costs mean a business needs to increase prices to make a profit. If the prices are too high they will lose customers to competitors. A business might have high costs if they fail to shop around for cheaper raw materials, a manufacturing business may produce a lot of scrap meaning a large amount of raw materials are wasted or a small businesses may not be able to bulk buy and get discounts from suppliers.
• Poor marketing: Prices could be set too high so sales are lost or customers or too low meaning customers assume the product is of a poor quality. The business could use a promotional method that is inappropriate for its target market.

Question 82

Failiure to adapt to changes in the market?

Answer 82

• Businesses may fail because they do not respond to technological advances or changes in consumer tastes
• Nokia failed to innovate and develop a smart phone. Although Nokia still exists, its market share has fallen significantly as Apple and Samsung have become market leaders
• Toys R us could not compete with the likes of Amazon as more shoppers purchased toys online rather than visiting a physical shop