External Influences 2.5

Question 1

What is inflation? and briefly how will it impact a business?

Answer 1

A sustained increase in price levels over a given period of time. Higher inflation increases cost of production. This may force prices for consumers to increase which could lead to a fall in demand and decreased revenue

Question 2

What are exchange rates and briefly how will it impact a business?

Answer 2

The cost of one currency in terms of another. Higher exchange rates means costs are going to be higher to export goods for firms which could decrease supply.

Question 3

What are interest rate and briefly how will it impact a business?

Answer 3

The cost of borrowing and reward for saving. Decrease in interest rates increases borrowing so firms will invest more.

Question 4

What are taxes and how will it impact a business?

Answer 4

Higher taxes will increase the cost of production so higher prices to consumers which could decrease demand.

Question 5

What is government spending and how will it impact a business?

Answer 5

When a government decides to increase the supply of a good so increases government spending. This may increase supply as cost of production may decrease. This could be subsidies for example.

Question 6

What is consumer protection? What is an example of a consumer protection law?

Answer 6

When a business has to comply with a range of legislation that protects consumers. Protection act and the data protection act.

Question 7

How might consumer protection impact costs, operations and price?

Answer 7

costs = higher costs because need to make sure goods are high quality
Operations = Increased time to do quality checks
Price = higher price as cost will be put onto consumers

Question 8

What are some examples of employee protection?

Answer 8

• Minimum wage
• Redundancy
• Increased maternal, paternal and sick leave

Question 9

What are trade union rights?

Answer 9

This is when an organisation of workers come together to protect the rights of workers.

Question 10

What is environmental protection?

Answer 10

When a business must be able to comply with legislation that ensures the protection of the environment

Question 11

What is health and safety?

Answer 11

The cost to ensure that all employees are equipped with the right safety equipment in case any injuries was to arise

Question 12

What is competition policy?

Answer 12

A business must comply with legislation that means they cannot do illegal activity that forces competitors out of the market.

Question 13

What are 4 main impacts to a business of a competitive environment?

Answer 13

Increasing their product range, changing their marketing strategies, changing their nature of their business and changing their pricing policies