External Influences Flashcards
Define competition
rivalry between sellers
define market
only situation where buyers and sellers are in contact to establish price
define the difference between physical and non-physical markets
p: offers personalisation, physically meet
n-p: convenient, don’t meet physically
define mark up
difference between cost of production and selling price
what is ‘market price’?
price range customers are prepared to pay
What are the types of market?
monopoly, competitive, oligopoly,
what is economies of scale?
arise when unit costs fall as output rises
what is dis-economies of scale?
arise when unit cost rises as output falls
define competitive market.
large number of sellers, mainly based on price (6 t shirts)
define monopoly market
dominated by one seller, needs 25% share of market
define oligopoly market
market is dominated by a few firms, prices kept similar to keep customers, all follow suit of each other
what is monopolistic competition?
- large number of businesses
- products are branded
- customers have loyalty
- offer non-price diff
define market size
no. of individuals in a market who are potential buyers of a products/service
define market growth
increase in the demand for a product, measured in % over set time
why is it good for a business to know its size?
don’t overprice/overproduce
selling strategy
what is market share?
share of total market owned by a particular business, product or brand
What are 3 ways to increase market share?
- be aware of customer needs
- sell more to existing customers
- clear marketing plan
Define market dominance
measure of strength of a business and its product relative to competition
define barriers to entry
factors that could prevent a business from entering a market
define barriers to exit
factors preventing a firm from leaving market, even if they wanted to
Give 2 barriers to entry
- large start up costs
- need to break customer loyalty
- legal restrictions (patents)
give 2 barrier to exit
- difficulty selling off capital
- contracts with suppliers
define price
amount customers are willing to pay
define cost
amount spent of producing a product
define merger
where 2 companies join together to form a new larger firm
define aquisition
where control of another business is achieved by buying a majority of its shares
what does CMA stand for?
competition and markets authority
What are the aims of CMA?
to make markets work well for customers, businesses and economy
If the supply increases, price …
… increases
if price increases, demand …
… decreases
Define demand
the amount that customers are willing and able to pay for a good/service at a given price
Define supply
the amount that sellers are willing and able to sell of a good/service at a given price
Define equilibrium
situation where demand is equal to supply
If a supply factors has a - impact, what happens to curve?
shift left
Give 5 demand factors
price, income, wealth, taste&fashion, ads/campaign
Explain the effect of income on demand
more disposable income = more avaliable to spend = increased demand
Give 3 supply factors
price, min. wage, cost,
Explain the effect of minimum wage on supply
if min, wage increases = the employees will need to be paid more = some may be made redundant = decrease in production rates = less supply
Define a substitute.
an alternative product that serves the same function
Define a complement.
a product that is used and therefore bought, in conjunction with another
Give an example of a substitute and a complement
s: raspberries and strawberries
c: printer and printing ink
Define elasticity of demand
how sensitive quantity is to a change in price
Define inelastic demand
quantity is insensitive to change in price (petrol)
What is elastic demand
quantity is sensitive to change in price (substitutes)
Define globalisation
process of growth in world markets through integration, where it is possible to trade in global markets as one would in domestic markets
Why is it beneficial for a business to import?
cheaper production costs, cheaper labour, growth of technology
What is a multinational?
a company based in one country but manufactures and sells in multiple other countries
Why is it beneficial to be a multinational?
gain economies of scale, lack advan of lack of legal constraints in LEDC’s
Give 1 + and 1 - of multinationals.
- develop local skills, utilise resources
- child labour, income to domestic market
Define emerging market.
developing countries that are achieving rapid growth and industrialization, and quickly gaining status of developed market
What are examples of opportunities?
- new markets, op for more production,
What are examples of threats?
- reduced exports as LEDC produce for themselves
What are examples of threats?
- reduced exports as LEDC produce for themselves
What is the business cycle?
the process that the market goes through in terms of growth and time
What is a boom on the business cycle?
high levels of employment, high demand, encouraged investment
What is a recession?
confidence is low, employees redundant
What are supply side policies?
increasing capacity in the economy
What are macro economic objectives?
- reduce unemployment
- increase economic growth
- control inflamation
What is the multiplier effect?
change one variable, and there is a visible knock on effect
What is meant by market dominance?
when a business has majority share of the market (25%)
What is meant by merger?
When two businesses join and become one larger one
What is meant by acquisition?
One business takes over the running of another
what is meant by organic growth?
when a business naturally grows internally
what is the influence of the EU?
legislation, single currency
Give 2 political factors that might influence a business.
campaigns, uncertainty, legislation
Give 2 economic factors that might influence a business.
exchange rates, strength of currency
Give 2 social factors that might influence a business.
cost of living, disposable income
Give 2 technological factors that might influence a business.
access to computers, wifi,
What is meant by the digital revolution?
increase in access to places through the use of technology
What is the purpose of legislation?
creating equality, good environment to work in, safe, protect data, etc.
Give 3 different legislations.
data protection, equality, health and safety, working hours
explain one legislation
eg. working hours - only up to 48 hrs a week
eg. equality - everyone treated equally no matter race, religion etc.
