External Environment of Business Flashcards
How is land an economic problem?
Businesses need a supply of raw materials for manufacturing but there is a limited supply resulting in scarcity.
What are the four factors of production?
- Land
- Labour
- Capital
- Enterprise
How is labour an economic problem?
Businesses will need skilled workers to carry out specific tasks but there aren’t enough for every business.
How is capital an economic problem?
Businesses need capital to startup but often don’t have the amount of money it needs.
How is enterprise an economic problem?
A business needs an entrepreneur in order to make the business successful but such people are scarce.
What is an opportunity cost?
The next alternative that would have been chosen.
What is the primary sector?
Businesses producing raw materials for other businesses.
Give three examples of businesses in the primary sector.
- Fishing
- Mining
- Farming
What is the secondary sector?
Businesses that use raw materials to manufacture products.
What is the tertiary sector?
Businesses that provide a service to customers.
Give three examples of tertiary sector businesses.
- Retail
- Banking
- Insurance
Define interdependence.
The way in which businesses from different sectors depend on each other.
Define specialisation.
When a business focuses one particular activity.
What is the chain of production?
The process of a product from raw materials, manufactured and then sold.
Give one advantage of specialisation.
The business can reduce costs, producing cheaper goods.
Define added value.
When a business increases the value of a product.
Give three factors that have lead to the decline of the primary sector in Britain.
- Raw materials have been fully depleted.
- Machinery has replaced workers.
- Foreign competition.
What is the decline of the secondary sector?
De-industrialisation
Give two factors that have lead to the decline of the secondary sector in Britain.
- Cheaper foreign competition.
- The use of machinery in the place of workers.
How has the importance of the tertiary sector changed in Britain?
The importance has increased.
Give four factors that have lead to the change of importance for the tertiary sector.
- Jobs are connected to a growing population.
- The increase in wealth of Britain.
- The increase in leisure time spent.
- The increase of customer service.
What are the four main business objectives?
- Profit
- Growth
- Survival
- Providing a service.
How might a business achieve sales growth?
Opening more outlets.
Give three different forms of growth.
- Sales growth
- Increased market share
- Elimination of competition
What is a business’ market share?
The amount of the market that a business controls generally in sales pc.
What is elimination of competition?
A business takes over / buys its competitor resulting in instant growth.
When might a business see survival as a vital objective?
During a time of recession when people don’t have much income.
What is the private sector?
A business owned by private individuals.
Give two main objectives based on a private sector business.
Growth and profit
What is the public sector?
Businesses controlled by the government such as education.
What is the most important objective of a public sector business?
Providing a good service.
How might the objectives of growth and profit conflict?
Growth may lead to lower profits for a short period of time.
How might the objectives of growth and service conflict?
With growth, a business may lose intimacy with its customers meaning the level of service may fall.
How might the objectives of survival and profit conflict?
Survival may mean focusing on providing a good service resulting in a reduction of profit.
What is a stakeholder?
A person or group with an interest in a business.
Explain how a worker is a stakeholder.
They rely on work for income and security as well as a social benefit.
Explain how a manager can be a stakeholder.
They need the work for income and have to organise the business to ensure its future. This may result in redundancy of workers.
Explain how owners are stakeholders.
Owners are paid by the company in dividends meaning they want the business to succeed. This may result in the redundancy of worker and managers.
Explain how a customer is a shareholder.
The customer wants low prices and good service from the business as well as a choice of products.
Explain how a supplier is a stakeholder.
The supplier relies on the business to buy their products. Therefore, the supplier may see the growth of a business as beneficial to them.
Explain how the local community is a stakeholder.
A business can provide jobs for local residents and may bring prosperity to the community contributing to local projects.
Explain how the government is a stakeholder.
The government wants people in work and paying taxes giving them more money to spend on education and what not.
They also want lower unemployment rates.
Give three potential social costs of business.
- Pollution
- Business closure
- Business opening
What is a social cost?
If the effect of the business harm the local environment and community.
How is pollution a social cost?
If the business is shown to be polluting the environment, measures can be taken to fine or shut down the business.
Give two social costs of business.
- Workers lose their jobs reducing spending in their local economy.
- Visual pollution caused by an abandoned facility making it harder to attract new businesses.
How is a business opening a social cost?
- A new business may be built on a greenfield site taking away farmland.
- Demolition of existing buildings may be required.
- Large businesses can force the closure of smaller businesses.
Give three social benefits of a business.
- Creation of jobs
- Regeneration of an area
- Community projects
How is the creation of new jobs socially beneficial?
- Workers’ pay will be spent in the local community supporting other businesses.
- One business can attract other businesses.
How is the regeneration of an area socially beneficial?
- Building on a brownfield site makes the area look more attractive.
- Regeneration often attracts other business.
How can community projects be socially beneficial?
A new business may offer to improve local facilities.
Give four reasons why a business takes notice of green issues.
- Consumers will stop buying their goods.
- Sales will fall.
- Profits will be reduced.
- If the business is seen as environmentally friendly, sales and profits may increase.
Give four ways businesses can react to community concerns.
- Use an ethical approach to business.
- Only buying from other businesses that operate ethically.
- Making donations to charities.
- Community involvement.
How might a business operate ethically?
- Paying workers fairly.
- Not polluting the environment.
Why might a business donate to charity and participate in community projects?
In order to gain good publicity to balance bad publicity it gets for damaging the environment.
Give three organisations that affect business behaviour.
- Local government
- National government
- Pressure groups
How can local government affect business operation?
- Granting planning permission that benefits the community.
- helping businesses find a suitable place to build.
- Placing regulations on businesses operations.
How can national government affect business operations?
- Support for the location of business to assist regeneration.
- Laws on pollution and chemicals.
- Measures that reduce the amount of pollution.
What is a pressure group?
An organised group who try to persuade others to share their views.
Give three possible actions that a pressure group might undertake.
- Writing letters.
- Organising protests.
- Gaining public support.
Give three reasons for the change in importance of the primary sector in Britain.
- Raw materials used up
- Use of machinery do replace jobs e.g. farming
- Foreign competition e.g. coal
What is a mission statement?
Brief summary of main objectives
What is satisficing?
Making profits to meet needs – not maximizing them
What is a dividend?
Payment made to shareholders from profits
Explain how competitors are stakeholders.
They may want to see how others run their businesses so they can improve their own products.
Explain how pressure groups are stakeholders.
They try to influence business policy in order to support of specific cause.
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