External Influences Flashcards
Explain what is meant by a market
Any situation where buyers and sellers are in contact in order to establish price
Explain what is meant by competition
A rivalry amongst sellers
Explain what is meant by market size
The collective value of the goods/services that buyers purchase
Explain what’s meant by market growth
The percentage change in the size of the market, measured over a specific period
Explain the importance of market size to a business
If a business has more market size, they are more dominant meaning they’d have more sales and greater revenue
Evaluate how a business could increase its market share
Mergers or takeovers/acquisitions
Describe the key features of a monopoly
Dominated by one seller
In theory its described as any firm with more than 25% of the sales
High barriers to entry
Describe the key features of an oligopoly
The markets dominated by a few firms
High barriers to entry
Products and prices in the market are similar
Describe the key features of monopolistic competition
Many firms competing
They supply a slightly differentiated product
Low barriers to entry
Explain what is meany by demand
The willingness to buy a product if you’re able to buy it at any given price
Explain what’s meant by supply
The amount of a good/service that sellers are willing and able to sell at any given price
Explain what’s meant by equilibrium
The situation in a market where demand is equal to supply and both parties are happy
Explain the determinants of demand ( what factors can affect the level of demand )
Income - as it increases, demand increases
Wealth - as it increases, demand increases
Taste and fashion - as it changes, demand increases
Government action - as they campaign it more, demand increases
Price of substitutes - the less, demand increases
Price of compliments - the less, demand increases
Demographic changes
Advertising, promotional offers and public relations
Explain the determinants of supply
Price - the amount that a customer is willing and able to pay
Costs - the higher the costs the more supply
Taxes - government may put tax on a product in order to raise revenue, or discourage the use of certain products
Subsidies - government might offer subsidies to businesses supplying a certain product, because it believes them to be beneficial
Price of other products, the cheaper the others, the less demand for theirs
Explain how changes in the determinants of demand and supply affect price and out put decisions
The more alternatives, the less demand for their product, the cheaper the price, the less supply because firms receive less mark up
Evaluate factors which affect demand and supply in a market
Taxes - the higher the tax on products, the less demand and supply
Government regulation - the less of it, the more demand and supply
Market power - the more market power, the greater the demand and supply
Availability of substitute goods - the more of them, the less and demand and supply
Evaluate the effect of excesses and shortages in markets
Excesses - if theirs excess, it could lead to perishable goods being binned
Shortages - it could lead to a loss of customers as they’d go elsewhere for the same product leading to less revenue
Evaluate the impact of market forces on businesses and stakeholders
can affect the profitability of the businesses within the industry and the level of outpu
Recommend and justify how a business should respond to market forces
Make appropriate changes to products,targeting different markets or adjusting prices appropriately
Distinguish between physical and non-physical markets
Physical - buyers can physically meet the sellers
Non-physical - buyers don’t physically meet the sellers, its all done online
Distinguish between online and digital markets
Online - an e-commerce site that connects sellers with buyers
Digital - a market that’s digital
Explain why firms choose to operate in physical markets
They can provide good customer service, creating potential repeat customers which mean more revenue for the business
Explain why firms choose to operate in non-physical markets
They’re more convenient, meaning you don’t have to spend money on stores which can be spent elsewhere
Explain what’s meant by competition
A rivalry amongst sellers
Explain how the strength of competition affects a business
The more competition means greater choice and more services for customers, because they can access a wider range of products and services
Explain why firms may choose to enter or exit a market
Enter - the market is doing well and developing more
Exit - the market is failing, making it not profitable to be in it
Analyse the barriers to enter in a market
Large start up costs
Having the marketing budget to break customer loyalty
The inability to gain economies of scale
Possibility of existing business starting a price war
Legal restrictions such as patents
Analyse the barriers to exit a market
Difficulty of selling off capital
High redundancy costs
Contracts with suppliers
Leases with landlords
Explain what’s meant by market dominance
The company that possesses the greatest market share to competitors
Explain what’s meant by mergers
Where two company join together to make one company
Explain what’s meant by takeovers
Where one company makes a successful bid to take control of or buy another company
Explain what’s meany by organic growth
Growth from inside the business
Explain what is meant by monopoly
A market dominated by one seller, described as them having over 25% market share
Explain how mergers, organic growth and takeovers can lead to dominant firms
By acquiring another firm or merging with another, it will lead to you possessing greater market share
Evaluate the impact on a busines of a dominant firm operating in its market
It could led to less sales for the smaller companies and them potentially failing
Explain how market dominance is restricted and regulated in the UK
CMA - competition and marketing authority
Evaluate the impact and importance of the regulation of the market on businesses
If markets become to dominant in a firm it could lead to less sales foe th other business in the market
Explain what the European Union is
The economic and political union of most European countries aimed at reducing trade barriers and harmonising economic policy
Evaluate the UK not being part of the EU
Domestic trade - more expensive and takes longer to arrive
Regulations - no longer have to follow EU regulations
New trade deals - the UK can make their own deals with countries
Evaluate the UK rejoining the EU
Recruitment - will be easier because people from other countries can come work in the UK
Paperwork - less paperwork making it easier to move goods and services
Checks - less checks meaning goods will move quicker
Explain what’s meant by emerging market
An economy that experiences considerable economic growth and possesses some but not all characteristics of a developed economy
Explain how political uncertainty may affect a business
It means that they can’t plan ahead for the future
Evaluate the benefits to the business of political stability
It means they can plan for the future for things like expansion and what they aim to acheive
Explain how and why political instability may affect international trade
It may mean that the pound becomes stronger through the political instability, meaning there is less trade with foreign countries
Explain what a tariff is
A duty paid on imports
Explain what quotas are
A limit on the total quantity of a product can be supplied to a market
Explain what free trade is
Involves an agreement between countries to trade with each other without erecting barriers to trade
Explain the key economic indicators which influence a business
Interest rates
Exchange rates
Tax rates
Inflation
Labour supply and demand
Wages
Government activities
Identify the nature and purpose of different types of taxation in the UK
Income tax - taken out your income
National insurance- taken as a contribution towards the state pension and NHS treatment
VAT - added onto the price of a product
Corporations tax - a tax limited company’s pay on their profits
Stamp duty - tax on when you buy a house
Distinguish between direct and indirect taxes
Direct - a tax that goes straight to the authority
Indirect - a tax that goes to the customer and then the authority
Identify the main types and purposes of government expenditure
The expenses of national or local governments and is often used to fund national services like health, infrastructure, benefits or security
Explain what’s meant by a subsidy
A payment made by the government to a business to encourage them to keep on producing their product and at a lower price
Analyse the benefits to a business of a subsidy
A greater supply of goods
Lowering prices, controlling inflation
Prevents long term decline of industries
Distinguish between monetary, fiscal and supply side policies
Monetary - manipulation of the level of demand in the economy using the rate of interest
Fiscal - economic policy conducted by the government through taxation and public spending
Supply side - aim to improve the economy’s overall productivity capacity
Explain the relationship between interest rates and exchange rates
The higher the interest rates, the more foreign investment a country is likely to attract so it strengthens the exchange rate
Explain what’s meant by GDP
A measure of size and health of a country’s economy over a period of time
Explain what’s meant by the business cycle
The cycle of a business during economic upturn and downturn
Describe the main phases of the business cycle
Boom, recession, slump, recovery
Explain how a business can use the business cycle to its advantage
Business premises - expand the business during a recession as its cheaper
Products on sale - start selling products that are discount and budget
Asset purchases - buying land and buildings fall so it’s cheaper and can be bought in the anticipation of recovery
Share purchases - buy them when they’re cheaper and sell the, when they rise in price
Staff - be willing to work at a lower wage because the need the money
Explain why some businesses are more affected by the business cycle than others
Some are greater affected because they could be a small company that loses most of its customers
Identify technological factors which influence a business
Computer hardware
Computer software
Internet connectivity
Wireless charging
Automation
Explain how technology can be used in a business
In production
In communication
Printers
Marketing
Explain how changes in technology may impact a business
New technology may be too expensive for the business, meaning they no longer have the most up to date technology so they aren’t as efficient as others
Identify what is meant by computer hardware and software
Computer hardware - includes the physical parts of the computer
Computer software - known as programs and apps in the computer
Distinguish between law and ethics
Law - the difference between what is right and wrong in the law
Ethics - the difference between what’s morally right and what’s morally wrong
Explain ethical issues which affects business
Child labour
Excessive hours
Low pay
Working conditions
Degrading the environment
describe social factors which influence a business
Demographics - the characteristics of the human population groups
Social habits - eating out mor or less
Changes in employment patterns - increase in part-time working
Changing role of women - more in the workforce
Education - young people have to stay for longer
Grey pound - retired people have a greater wealth through property and pensions and savings
Increased flexible working - more working form home
Explain why some businesses are more affected by ethical issues
Larger businesses are more well know so theirs more attention from social media and customers
Businesses involved in outsourcing production to countries with different laws are more likely to be affected
Evaluate ethical trading methods and working practices
(Reasons to be an ethical company)
Attracts new customers - if you’re ethical, they’ll choose you over competitors
Increased sales and profits - customers will feel reassured to use you if you’re ethical
Encourages employees to stay - you’re more attractive to customers so more profit and could lead to a pay rise
Explain the importance of being seen as an ethical organisation
Customers are more likely to come to you as they know you’d don’t use any unethical practices
Explain the drawbacks of trading ethically
Increased costs
Danger of building up expectations
Less competitive on printing
Could lead to less output
Describe environmental issues which influence a business
Air pollution
Land pollution
Congestion pollution
Noise pollution
River or sea pollution
Explain why a business needs to consider environmental issues
They need to consider them because if they are seen as an unenvironmentally friendly business it could cause potential customers to go elsewhere which could lead to less revenue and profits
Recommend and justify ways in which a business can address environmental issues
Use renewable energy
Recycle materials
Use sustainable materials and equipment
Evaluate the importance of being seen as an environmentally friendly organisation
Customers will feel positive after purchasing product from a business which is doing on harm to the environment which could lead to them being repeat customers crating more revenue for the company
Evaluate the possible conflicts between environmentally friendly objective and business objectives
One objective could be keeping down costs, whereas being environmentally friendly could lead to higher production costs, resulting in less profits
Explain what’s meant by sustainability
A company’s strategy to reduce negative environmental impact resulting from their operations in a particular market
Explain globalisation
A process by which countries and economies have become more interconnected OR the world coming together to trade in each others markets
Explain factors facilitating globalisation
Reduction in tariffs and quotas
Lower cost of production abroad
Ease of transportation
The internet and particularly the rise in e-commerce
Communication technologies such as smart phones
Easy movement of capital
The rise of multinationals
Explain multinationals
A business that has activities and operations in two or more countries - McDonald’s, she’ll and Microsoft
Why are so many companies keen to be multinationals
Economies of scale can be obtained as production increases
Ability to take advantages of legal constraints
They can enter new markets where less competition exists
Ability to take advantages of lower wages
What is a LEDC
Less economically developed countries
Wahat is a MEDC
More economically developed countries
Explain positive effects of multinationals
Demand for raw materials
Creates jobs
Utilise the trade agreements
Explain negative effects of multinationals
Profits sent back to home countries
They pay low wages
Poor working conditions
Exploitation of workers
Explain positive effects of multinationals operating in LEDCs
Provides employment opportunities in LEDCs
Employment equips local people with skills
Leads to utilisation of local resources to supply factors
Explain negative effects of multinationals operating in LEDCs
Employment often in exchange for low wages
Jobs are low skill
Working practices can be unsafe
Child labour is often used which can mean that the child misses out on education
Local businesses can be driven out of the market
Profit often goes black to domestic country where the multinational is based
Explain the role of multinationals in globalisation
Multinational corporations are a function of inter connectedness, as they can form and use the connections between national economies, to operate within multiple countries.
Explain why some businesses are more affected than others by globalisation
Businesses with mass market products who sell in multiple countries would be more affected
Businesses with products the middle class would buy because by 2030 it is expected that their will be more than 2 billion people in the middle class
Explain globalisation
A process by which countries and economies have become more interconnected OR the world coming together to trade in each others markets
Explain what factors facilitate globalisation
Reduction in trade restricted tariffs and quotas
Lower cost of production abroad
Ease of transportation
The internet and the rise in e-commerce
Communication technologies such as smart phones
Easy movement of capital
The rise of multinationals
Explain multinationals
A business that had activities and operations in two or more countries
Explain why companies are keen to be multinationals
Economies of scale can be obtained as production increases
Ability to take advantage of legal constraints
They can enter new markets where less competition exists
Ability to take advantage of lower wages
What’s an LEDC
Less economically developed country
What’s an MEDC
More economically developed country
State positive effects of multinationals
Demand for raw materials
Creates jobs
Utilise trade agreements
State negative effects of multinationals
Profits sent back to home countries
They pay low wag3s
Poor working condition
Exploitation of workers
State positive effects of multinationals operating in LEDC’s
Provides employment opportunities in LEDC’s
Employment equips local people with skills
Leads to investment in local infrastructure
Lead to utilisation of local resources to supply factories
State negative effects of multinationals operating in LEDC’s
Employment often in exchange for low wages
Jobs are low skill
Working practices can be unsafe
Child labour is often used which can mean that the child misses out on education
Local businesses can be driven out of the market
Profit often goes back to domestic country where the multinational is based
Explain the link between globalisation and multinationals
Globalisation refers to the interconnectedness of national economies. Multinational corporations are a function of this interconnectedness, as they can form and use the connectedness between national economies, to operate within multiple countries
Explain why some businesses are more affected than others by globalisation
Businesses with mass market products who sell in multiple countries would be more affected
Businesses with products the middle class would buy because by 2030, theirs expected to be an additional 2 billion people in that class
Explain global strategy
A plan of action on a world wide scale
Explain global branding
A brand that is recognised throughout much of the world
Explain a brand
A distinctive product offering created by the use of a logo, symbol, name, design, packaging or combination a of multiple
Explain threats of global brands to local businesses
Local and national businesses may be driven out as customers buy from the global brands instead
May result in downwards pricing pressure as global brands may offer products for cheaper
Global brands can afford market research to tailor products to that, but smaller businesses can’t afford it
Explain how the presence of global brands can help local markets/businesses
The global brand may decide to get supplies locally, so it creates more business for the smaller companies
The shops near the global brand would have more people walk past, so it could create more sales
The global brands could bring new ideas that local businesses decide to adapt
State challenges of globalisation
Increased competition
Understanding differences in customers ethical/moral standpoints
Cost of expansion
Adapting to different cultures and customer behaviour
Communication
The physical distance
Explain international trade
The refers to selling across borders i.e. the exchange of goods and services between countries
Explain why countries trade internationally
Variety - trade enables countries to obtain products they can’t make themselves
Economic efficiency - the development of export markets can enable a business to gain economies of scale
Growth - access to millions of new customers which creates the potential for business and for the economy to grow
Avoid conflict - trade leads to co-operation rather than conflict as nations become dependant on one another
Specialisation - a country can specialise in what it does best and then sell these products to others
State what insurance is
A legal agreement between an insurance company and an individual where they can receive financial protection for the losses they may suffer
State what export insurance is
When the Uk government offer assistance against the risk of non-payment by overseas
3xplain the passport programme
Offers help to smaller and medium sized businesses who want to to start exporting
Explain the assistance included in the passport programme
Help with market research and selection of target markets
Help to visit potential markets
A detailed assessment of the businesses readiness to export
An action plan for exporting
Explain free trade
Trade without tariffs or quotas being imposed on products
Explain advantages of free trade
Business - obtain economies of scale if export demand increases
Business - access to greater variety of raw materials at a lower costs
Customers - lower price through increased competition
Explain disadvantages of free trade
Workers - foreign competition can lead to job losses
Environment - LEDC’s may use up non-renewable resources for export
Business - more competition from businesses based in other countries
Explain a trading bloc
A group of countries within a particular region that have reduced or removed trade barriers for its member countries
Explain advantages of a trading bloc
Business can gain access to a potential market of hundreds of millions of people
Businesses can import raw materials at a lower cost since tariffs have been removed
If exports increase, there is the potential for economies of scale
Explain disadvantages of a trading bloc
Membership may hinder trade with countries outside the bloc
Competition from firms within member countries may be too great for domestic businesses and the may lose sales as customers import goods from member countries instead
Explain emerging markets
A country that is achieving rapid economic growth
Explain opportunities that emerging markets present
Can take advantages of legal constraints
Can move production into these markets and take advantage of cheap labour
Can move production into these markets and be located closer to other markets that they sell to
Can access new markets which possibly have higher disposable income
Explain threats that emerging markets present
Lower labour costs on emerging markets could lead to job losses in domestic markets
Fewer exports from developed economies as the emerging economy can produce for themselves
More competition as businesses based in emerging economies are now pursuing expansion into developed economies
Explain the digital revolution
Involves the shift from analogue and mechanical technology to digital technology
Explain the Information Age
A time when large amounts of information is widely available
Explain opportunities the digital revolution presents
Access to a wider market of potential customers
Range of information has increased as access to websites has grown
Greater scale of market research
Explain threats the digital revolution presents
Adverse publicity travels quicker
Keeping up to date with technology can be costly
Loss of jobs in certain sectors