External environment Flashcards
1
Q
EU law and impacts on trade
A
SINGLE MARKET - fewer restrictions - fewer trade barriers - firms don't pay tax when importing goods from other EU countries - easy export opportunities for the UK - freedom of movement = raw materials, finished goods, workers. EU citizen can work in any country in the EU and businesses have opportunity to expand to EU countries - common policies on product regulation -
2
Q
Competition law
A
- Competition act 19998
Businesses can’t conspire fixed prices
can’t conspire to limit production to drive up the prices
business cant divide the market to allow companies to avoid competitors (one company operating in china and one only in the uk)
3
Q
Dominant position businesses and monopolies
A
- can’t demand purchase of second product as well as initial product (tying)
- can’t sell goods at a loss to force smaller competitors out of the market (predatory pricing )]
Monopolies cannot takeover other competitors
4
Q
Laws that protect customers
A
- Trade descriptions act - ensures businesses do not mislead customers
- consumer protection act 1987 - ensuring consumer goods are fit for purpose and safe
- Data protection act - prevents the misuse of data
5
Q
Employment law
A
- Equality act 2010 = prevents demographic discrimination
- Race and relations act
- sex discrimination act
6
Q
Employment law and impacts on businesses
A
- recruitment = aren’t allow to include discriminatory language in job adverts, generally cannot advertise for a specific gender or age unless necessary to the job, justifiable reasons as to why they didn’t hire someone, diverse employment necessary
- Pay= equal pay, same benefit entitlements , not doing so can leas to poor quality of work, poor staff retention as well as having to pay legal fees if a case is taken to tribunal
- Promotion and redundancies = cannot promote ONLY older people because they think younger people don’t care, cannot deliberately make disabled and old people redundant
7
Q
Employment contracts
A
- protects employees for safe working conditions (held and safety work act 1974)
- employees entitled to paid holiday
- employees have the right to partial paid maternity and paternity leave
- employees have to attend work when theyre supposed to and be on time
- employees must be willing to carry out reasonable tasks that theyre asked to do
8
Q
How politics encourages businesses
A
- Business enterprise policy = encourage people to start business by allowing funding to be borrowed at a low interest rate, employment allowance preventing a need for paying business rates when starting up, Great business website there to advise businesses, ‘Tenner challenge’ there to encourage young entrepreneurs
9
Q
Changes in infrastructure effects on businesses
A
Political movements to develop infrastructure can lead to the business becoming more productive and efficient as moving goos around quickly as well as making data transfer quicker through better broadbands
- infrastructure improvements provide jobs too
-
10
Q
Government policies that protect the environment
A
- Emissions trading system - give greenhouse gas allowance to businesses, companies can trade their allowances acting as n incentive to using greener processes as well as being able to sell their allowances to other businesses
- ‘green subsidy scheme’ = renewable heat incentives paying businesses that use renewable energy to heat their buildings
- Funding of organisations that encourage more efficient use of raw materials, WRAP
- environment agency funded by the government to protect the environment
11
Q
Political changes and impacts on trade
A
- Tariffs= discourage trade, removing or reducing tariffs provides opportunities for businesses to make international trade easier and cheaper
- QUOTAS= trade restrictions putting limits on imports and exports. Protectionist policy where countries use quota to protect their economies and jobs
12
Q
GDP
A
Gross domestic product = total market value of goods and services.
measures economic performance of a country
13
Q
Economic growth
A
dependant upon:
- quantity of labour / population size and age
- quality of labour / education and training
- investment
- productivity of the nation
- governments can also encourage economic growth through cutting taxes and interest rates (short term)
14
Q
Economic growth and impact on businesses
A
- high revenue and profitability for businesses
- potential for economies of scale
- sustained growth increase confidence and helps businesses plan for the future
- impacts strategic decision making (sustained growth = expansion, new products etc)
- however fast growth is usually followed by a recession
15
Q
Rapid economic growth impact
A
Rapid economic growth usually followed by a recession however gov tries to minimise this through fiscal and monetary policy
16
Q
Demand - pull inflation
A
Caused by too much demand. Happens where there’s an increase in disposable income and people but more than companies can supply. Excess demand when the economy is near full capacity is called overheating.
Can lead to profits going up as businesses can charge more to respond to high demand
17
Q
Cost-push inflation
A
- rise in inflation due to rise in costs
- wage rises can make prices go up - especially if productivity doesn’t too rise
- profit margins go down due to rise in costs
18
Q
Exchange rates
A
When exchange rates are high UK exports are expensive and imports are cheap. A strong pound is BAD for Uk exporters because their goods aren’t competitively price abroad
- when exchange rate is low, exports are cheap and imports are more expensive to buy
-
19
Q
Fiscal policy
A
- setting tax rates
- setting the amount of government spending
expansionary fiscal policy
contractionary fiscal policy
20
Q
Expansionary fiscal policy
A
helps lower unemployment by cutting taxes giving people more money to spend and incrae consumption boosts production and creates jobs
DONE IN ECONOMIC SLOWDOWN/ HIGH UNEMPLOYEMNT
21
Q
Contractionary fiscal policy
A
‘rein in’ economic growth to a sustainable Level
- raising taxes and or cutting spending
DONE WHEN PRODUCTION IS 100%, RISK OF HIGH INFLATION
22
Q
Monetary policy
A
Tweaking interest rates
high interest rates= low consumer spending, high levels of investment in the UK from overseas
- exchange rates go up because higher demand for the pound
- low interest rates= selling of the pounds exchange rates falls
Set by the BANK OF ENGLAND
23
Q
Aims of monetary policy
A
- control inflaition
- control overall rate of economic growth
- manage unemployment (low interest rates= more money to spend and increased demand leading to rise in production so more workers needed)
- influence foreign exchange
24
Q
Open trade
A
when exports and imports ARE NOT restricted.
- countries specialise in what they are good at
- more choice and lower prices for consumers
- Developing countries can export goods and increase their living standards
- fewer local jobs
- some countries may have unethical practices to allow their costs to stay low so they can compete internationally
25
Protectionism
When a government protects domestic business and jobs from foreign competition by giving them subsidies as well as imposing tariffs and quotas on imported goods
- allows small businesses to grow= don't have to compete with multinationals
- prices of goods rise due to decreased supply
- restrict your country's trade prevents your trading with theirs
26
Globalisation
- businesses operating all over the world
- allows strategic decisions about where to get raw materials
- access to worldwide market benefitting from economies of scale making them more competitive
- more opportunities
27
Reasons for increased globalisation
- internet = allows easy communication between countries, outsourcing of jobs all over the world
- giant cargo ships make it cheaper to transport goods
- cheap fast air travel to transport goods and workers
- EU citizens can work in other EU countries without restrictions
- increased free trade due to reduction in tariffs
28
Multinationals and globalisation
- international broadcasting has lead to an increase in multinationals
- the interest allows companies to market and sell internationally, avoid expenses of setting up in foreign counties
29
Benefits of investing in emerging countries
- cheaper labour
- people eager to spend money as the economy increases= high economic activity
- however this is risky as they are less stable= political issues, currency fluctuations, infrastructure problems
30
Opportunities due to urbanisation
- new markets with concentrated demand
- lots of opportunities for new and existing businesses to expand in tech, infrastructure and housing due to increased demand
- access to higher levels of education and therefore more skilled staff
31
Businesses and the impacts of migration
- migrants can help with areas with a restricted access to labour = migrants can help them overcome these shortages and allow them to expand
- migrants can create demand for certain products = new markets for businesses to move into,
- however skilled workers may emigrate leading to a lack of skilled workers which may be detrimental to a businesses (innovation, quality, efficiency, productivity etc)
32
CSR
corporate social responsibility -
the idea that a company should go above and beyond to help society
- greater public awareness
- however these companies are under great pressure = one slip up and cancelled
- becomes a part of the business culture
33
CSR business examples
Barclays= two year partnership withTeach first = recruit and train high quality teachers
McDonald's planet champion program - trains employees to find ways pf reducing environmental impact (daily litter picking petrols, 'litter champions)
34
evaluation of CSR
- improves brand loyalty
- attracts new customers
- positive publicity
-poeple would rather work with firms supporting CSR than those that don't (access to talented workforce)
- employee morale will improve more motivation
HOWEVER
- high costs may not please shareholders
- higher pricing due to the costs - customers are likely to expect this and be willing to pay
- unfair expectations on small businesses as they are unlikely able to fund large CSR investments
35
Carrolls pyramid of CSR
1. philanthropic responsibilities= gapped corporate citizen and contribute to resources to improve life
2. ethical responsibilities = do the right thing and avoid harm
3. legal responsibilities = obey law and regulations
4. economic responsibilities = profitable and to survive
36
new technology opportunities
- development of new products= smartphone manufacturers decision to put new battery in phones
- improving processes - help business efficiency and productivity giving them an advantage over comp
- mass customisation - can decrease costs and increase revenue
- reduced barrier to entry= new tech makes it easier to move into new markets
- E-commerce = businesses are Abel to reach a wider market to sell products
37
New technology threats
- newer tech may be brought out whilst business was installing new tech
- threat from competitors= new tech reduces barriers to entry for EVERYONE businesses need to be wary of new businesses
- growth in e-commerce means less shops = people loosing jobs
- too heavy reliance on tech can lead to decrease in technology when something breaks down
38
New technology impacts on different business areas
- ERP allows managers to keep track of data from all departments. Increases efficiency however if decisions are made without consulting people this can be a problem
- stock control systems can allow costs to reduce and increase in sales as stock is moved to where it is most needed
- computer aided design and 3D printing can reduce costs and improve efficiency however is expensive and needs extensive staff training
39
Porters five forces model
1. barriers to entry = how easy is it for new firms to enter the market
2. buyer power = buyers want goods as cheap as possible (more buyers = more power)
3. supplier power = suppliers want to get highest price as possible (fewer supplier = higher power)
4. threats of substitutes = how likely consumers are to buy an alternative
5. rivalry = how much competition is there
40
Barriers to entry strategies
- Patents and trademarks
- forward vertical integration = taking control of distribution Channels. Making the channel unavailable to new entrants
- price war = large businesses can benefit from economies of scale and therefore charge low prices = however forcing businesses out of the market this was is illegal under EU competition law
41
Strategies that influence buyer power
- buying the supplier out - 'backwards vertical integration'
- smaller businesses coming together to form buyer group
42
Strategies to influence supplier power
- try to tie buyers into long term contracts
- suppliers can use forward integration - setting up retail outlets, buying the retailers they supply to
- develop new products and protect them with patents agains supplier power. - they'll be the only ones selling it so they can charge premiums
43
Strategies to reduce threat of substitutes
- making it expensive to switch to other suppliers = buying a kindle you'll have to buy Amazon products to read on them - difficult to change format
- building brand loyalty
- designing products to the exact needs of consumers - no other products would compare until others notice
44
Strategies to reduce rivalry
- making it easier for customers to switch to your businesses (if you switch from an old bank to a new bank the new one often handles to hassle )
- businesses with larger promotional budgets likely to do better in larger markets
