External Influences Flashcards
What is demand
Amount of good/services that a customers are willing and able to buy at any given price
What is supply
Amount of good/services that a sellers are willing and able to sell at any given price
What is equilibrium price
Demand is equal to supply
What happens if there’s access demand in the market
Price would increase
Quantity would increase to try and meet demand
What happens if there is excess supply
Price will decrease
Quantity demanded will increase then
What are the factors of demand and supply
Price Income Wealth Advertising, promotion offers and PR Taste and fashion Demographic change Government action The price of other products (substitutes and complements)
What happens to demand as price increases
Demand decreases
How would you should the increase in demand due to a drop in price on a supply and demand graph
Arrows on current demand line pointing downwards
How does income affect demand
High income higher demand
Which way does the demand curve shift due to an increase in demand
right
Explain what is mean by an increase in demand
Increase in quantity demanded at every given price
Define wealth
Abundance of valuable possession or money
How will wealth impact demand
High wealth positive impact
High consumer confidence
Demand shift to the right
How will an increase of advertising and promotion activities affect demand
Increase
More exposure for business
How will taste and fashion affect demand
Somethings ‘fashionable’ more people buy
Increase demand
Define advertising
Drawing attention to a product or service to promote sales
Define taste and fashion
Popular or latest style of clothing, hair or behaviour
Define demographic change
Describes the size, composition and structure of populations and how they change
How will an increase in population affect demand (demographic change)
More people to supply products to
Increase
Define government action
Intervention by a gov to influence financial markets
Give an example of how gov action can decrease demand
Illegal to smoke in car with under 18s
Decreased proportion of adults smoking
Decrease demand
Define a substitute
Act or serve in the place of another
Define a complement
Products that are joint in demand
Bought together
What are the supply factors
Price Costs Taxes Subsidies Price of other products
How does price affect supply
Increase supply
can sell at a higher price ,more profits to get more supply
How does costs affect supply
As costs go down, supply goes up can afford to buy more
How do taxes affect supply
Will increase costs (has to pay more money to gov in tax)
Supply decreases
How does subsidises affect supply
Increases a companies annual income
Increase supply
Define subsidy
Payment from gov for every unit supplied
How does the price of other products affect supply
Increase supply of the other product
E. Price of Mars increases but price of twice stays the same
What is elastic demand
QD is sensitive to price will go up/down
What makes a product elastic
They have many substitutes
Are a luxury
What is an in elastic product
QD isn’t sensitive to a change in price
Give an example of inelastic products
Train tickets
Cigarettes
Give an example of elastic products
Newspaper
Sofa
Define competition
Rivalry amongst sellers
Define market
Any situation where buyers and sellers meet
Why have none physical markets grown
Offer Convenience
Why do physical markets continue to exist
Try before buy
Personalisation
Define market price
Price range in market at which consumers prepared to pay
Define markup
Difference between cost of producing an item+the price it’s sold
Define competitive market
Lots of sellers
Competition bases on price
Define monopoly
Dominated by one seller
25%+ market share
Define oligopoly
Few firms
Similar prices
Define monopolistic competition
Many firms
Different prices
Non price differences
Example of oligopoly
Mobile networks
Define collusion
Rival companies cooperate for mutual benefit
Market size
Collective value of goods/services that buyers purchase
Market growth
% growth in size of the market, measured over specific period
How could a business increase market share
Be aware of customer needs+meet them Sell more Have clear marketing plan Advertise Merge
Barriers to entry
Factors that prevent firm from entering the market
What are the barriers to entry
Large start up costs Breaking customer loyalties Inability to gain EoS Existing business starts price war Legal- patents
Barrier to exit
Factors which prevent a firm leaving a market
What are the barriers to exit
Difficulty selling off capital
Redundancy costs
Contract with suppliers
Define market dominance
Measure of market share compared to competitor
Define market power
Ability of firm to influence/control terms+conditions on which goods are bought and sold
Define acquisition/takeover
Control of another company is achieved by buying majority shares
Benefits to the business of a merger
Reduce competition Market share Economies of scale New management with different skills Combined resources
Disadvantages of mergers
Diseconomies of scale
Redundancies
Higher prices
Who are the CMA
Competition and market authority
What can the CMA do
Stop mergers and acquisitions going ahead
What can the European Regulatory commission do
Block UK mergers
What action can the CMA take in regards to legislation
Enforce consumer legislation
What sanctions can the CMA apply
Fine 10% global turnover for anti competitive behaviour
Individual disqualified from position
Name some separate regulation bodies apart from the CMA
Ofgem
OfCom
Organise growth
Within the business
Examples of organic growth
New products
Open more stores
Invest in machinery
Why would a firm want to enter a market
Growth- more customers
Why would a firm want to exit a market
Current market is shrinking
Want to enter a new market
Lack of sales
Globalisation
World coming together to trade in each other’s markets
Factors that have facilitated globalisation
Reduction in trade restrictions
Cost of production abroad
Ease of transportation
Increase movement of people
Other technological factors that have facilitated globalisation
Internet
Rise of e commerce
Smart phones
Multinationals
Operates in one country and manufactures and sells in a variety of others
Why are companies keen to become multinational
Economies of scale
Lack of legal constraints
New markets with less competition
Low wages
what are the benefits of multinations
employment LEDCs
local people get skills
invest in infrastructure
use local resources
what are the negatives of multinationals
low skilled jobs unsafe local businesses suffer income goes to domestic market loss of jobs in domestic market
what is global strategy
companies that are keen to operate on global scale must consider how to build a competitive global advantage
i.e choose best locations to produce products in
what is a global brand
recognized throughout much of the world
what are some of the opportunities of globalization
cheaper lab more customers less legal restrict cheaper raw materials new markets with high disposable income
what are the threats of globalization
less reliance on uk for products
high unemployment in UK
Pollution
ethical issues
why are some businesses more affected by globalization than others
businesses who produce
small businesses find it challenging
businesses with global appeal benefit
business without USP struggle
what is the European single market
refers to EU as one territory without internal boarders
what four freedoms is the EU market based upon
goods,services,people,capital
define free trade
trade without tariffs, quotas or other restrictions
benefits of the single market
not subject to tariffs or quotas
more easily available labour
European union
economic and political union aimed at reducing trade barriers and harmonizing economic policy
tariff
duty paid on imports
quota
limit on quantity of goods imported over a given period
why should Britain leave the European Union
free from EU laws and regulations
encourage domestic trade
why should Britain stay in the European union
lose trade benefits
struggle to fill vacancies especially in low skilled work
what are the political factors which affect businesses
Brexit EU competition policy privatization minimum wage legislation
how does political uncertainty affect a business
less investment and low consumer confidence
demographics
characteristics of human population and population groups
how has age in the UK affected demand
aging population
increase demand for retirement homes
how has ethnic diversity in the UK affected demand
more ethnically diverse
higher demand for international foods
what are the social factors which affect a business
social habits
change in employment patterns
change role of women
attitudes to work
define ethics
morally right or morally wrong
give examples of moral issues businesses will face
child labour
untested medicine
selling arms
paying large amounts for cancer treatment
what are the advantage to a business of behaving ethically
attract new customers
new and better employees
positive publicity
sales+ profits
what are the disadvantages of trading ethically
costly
lower output
ethics is subjective
false expectation for customers if say ethical
what are the objectives of a business
profit,increase market share, growth,service,survial
give an example of an objective which conflicts with ethics
keeping production in uk (ethical) but wanting to increase profits
how could a business increase its ethical profile
manufacture where based-pollution
buy one donate one
train locals
give money to charities
what environmental issues influence a business
air pollution water land noise congestion
name 3 ways business are changing their operations to be more environmentally friendly
ban on plastic straws
5p bags
“latte levy”
why does a business need to consider environmental issues
causing widespread pollution
pressure from the public
what other objective will clash when trying to be more environmentally friendly
costs e.g having to use more expensive packaging instead of plastic
what are the benefits to a business of being more environmentally friendly
easier to adapt if legislation was introduced
better reputation
sustainability
preventing negative impacts from economic systems and production on the earth
how can a business behave in a sustainable manner
skype>transport recycling scheme dispose chemical right water+energy saving buying from sustainable farmers
how would climate change levy’s make a business behave in a more sustainable manner
control their energy to keep costs low
how would congestion charges make a business behave in a more sustainable manner
reduce amount of traffic entering london
less carbon emmissions in city
what are the positive effects of behaving in an environmentally friendly way
buying from sustainable farmers USP
accounting-turn lights of reduce costs
HRM- attract employees
define GDP
total value of output produced in an economy a year
define economic growth
annual percentage change in GDP
what is included in GDP
public transport
healthcare
glass+steel
what happens if GDP is going down
economy shrinking
what is the impact of GDP decreasing
job cuts
fall house prices
what happens if GDP rises
the economy is expanding
what is the impact of rising GDP
more wealth
new jobs
how does the government increase GDP
offer subsidies/lower taxation
improve infrastructure
invest in education
how does the gov facilitate economic growth
resource
increase productivity
increase output
growth
define standard of living
amount of goods and services a person can buy with their income in a year
inflation
persistent general tendency of prices to rise in the economy
consumer price index
measure that examines weighted average of prices of a basket of consumer goods/services
what is the target level of inflation
2%
why does high inflation make uk exports uncompetitive
identical products made round world
uk high inflation increqses prices
makes them less attractive from abroad
how does inflation reduce multinational investment
look to produce in cheapest location
use country lowest rate of inflation
why does inflation create uncertainty
estimated profits from an investment can change over time due to inflation
define exchange rate
value of one currency in terms of another
what is a strengthening exchange
pound increase in value
what is a weakening exchange rate
pound decreases in value
define import
sale leads to money going out of the UK
define export
sale leads to money going into UK
how do you get the UK amount from a different currency
divide the amount by exchange rate
how does foreign investment influence the demand of the pound
business wanting to locate uk demand pounds
more wanting to higher demand
how does hot money influence the demand of the pound
uk interest rates are high
foreign banks surplus foreign currency to demand pounds
how does the desire for foreign customers to buy uk exports effect the demand for the pound
uk exports would be cheaper so buy more
higher demand for pound
define interest rate
reward for saving and cost of borrowing expressed as a percentage
how would low interest rates effect a business
increase sales people spend more
loans cheaper
(opposite for high)
how would lower interest rates effect borrowers
pay back less on loans
they can spend more
(opposite for high)
how would lower interest rates effect borrowers
spend more less reward for saving
what is the link between interest rates and exchange rate
high interest rate=strong pound as sterling high in demand as more foreign investment (better return on uk savings account)
what is the relationship between interest rates and inflation
MPC raise IR
demand pound decrease (more reward saving)
inflation decreases
define unemployment
people who are willing and able to find work are unable
why does the government want low levels of unemployment
waste of human resources
why is unemployment bad for society
social problems and benefits have to be paid for
could be spent in other areas
health+education
how does unemployment effect tax
more employed more tax
why is unemployment bad for the individual
damage self esteem
alcohol+drug addiction
how does high levels of employment create a more productive economy
increase GDP
greater output
cause growth
balance of payments
difference between valuenof exports and imports
what happens if exports exceeds imports
trade surplus
what happens if imports exceeds exports
trade deficit
why would a weak pound be good for creating a trade surplus
exports cheaper
more attractive
what is tax used for
influence purchasing behaviour
spend on gov service
indirect taxes
tax on expenditure
indirectly paid by suppliers not consumers
direct tax
on income and profits
paid directly by the bearer
income tax
taken out of income
progressive
national insurance
state pensions+ treatment under NHS
VAT
automatically included in price
20%
stamp duty
tax paid to gov when buy a house
how would the gov control house price inflation
increase stamp duty
co-orpation tax
levy on profit of firm
corporation tax rate in UK
19%
corporation tax rate in NI
12.5%
how does low corporation tax attract business to the UK
can keep more profits
purpose of tax
revenue generated public services
control economic activity
influence expenditure to encourage behaviours
benefits of subsidies to a business
lower cost
lower prices
survival during start up
supply side policies
intend to increase output of economy
give examples of supply side policies
improve skills
cut corporation tax
reduce welfare benefits
define business cycle
pattern of increases and decreases in economic growth over the long term
monetary policy
manipulation of demand in economy using interest rates
fiscal policy
government control through taxation and public spending (focuses on demand)
what are the four stages of the business cycle
boom
recession
slump
recovery
what are the characteristics of a boom
high confidence,spending,income,inflation+investment
low unemployment
what are the characteristics of a recession
falling confidence,spending
inflation slows
invest in essentials
unemployment rising
what are the characteristics of a slump
low confidence,spending,income
high unemployment
low inflation
what are the characteristics of a recovery
rising confidence,spending,income
unemployment rising
inflation stable
which kind of business would thrive during a recession/slump
aldi and lidl
why dont firm invest during a recession/slump
less finance
higher risk
how would businesses respond during a recession/slump
redundancies
less stock holding
less production
how would a business get out of recession/slump
higher grant spending or MPC can decrease interest rates
why will production increase during a boom
customers spending more
what does more spending create in a boom
spending creates need for jobs as production would increase
what would a business do in regards to its location to take advantage of the business cycle
move to larger location before a boom
prepare for the demand
what would a business do in regards to its products to take advantage of the business cycle
offer budget goods during recession
what stage of the business cycle would a business buy assets/shares
slump/recession its cheaper
sell shares for more in a boom
how will complying with the law benefit a business
avoid fines
prevent bad publicity
copyright
legal ownership of material e.g books+films
national living wage
new minimum wage rate 25+
5 pieces of legislation relating to the workplace
contract law weights and measures act data protection act health and safety act smoking in the workplace
contract law
agreement between two or more parties
breaking=breach of civil law
weights and measures act
correct amount that it states
can be fine
data protection act
controls how personal data is used
fined up to £500,000
health and safety act
business comply with certain health and safety regs
fined or imprisoned
smoking in the workplace
2001 work place=smoke free
prosecution and fine
intellectual property
intangible property result of creativity
trademark
slogans,logos and other products which brand companies
what are the three points of the sales of goods act
- goods fit description
- must be of satisfactory quality
- fit for purpose
planning legislation
need when building
prevents disputes over areas of land
need it- changes can be undone to building
control of substances act
control hazardous substances
FCA
Financial Conduct Authority
what does the FCA do
protect consumers
promote competition
enhance market integrity
what type of organisation is the financial conduct authroity
regulating
how can a business comply with data protection act
ask permission before sharing
how can a business comply with trademark law
change their logo
how does complying with trademark law conflict with other business objectives
growth
spent time building up brand around the logo
how would changing the minimum wage conflict with business objectives
could be hogher costs if increase
conflict with profit
how would new environmental laws e.g a ban on black plastics conflict with other business objectives
source new packaging
time consuming
expensive
give examples of procedures involved in a risk assessment
protective clothing
guards on machinery
staff training
what are the technological factors which influence a business (7)
computer hardware computer software computer calculation internet connectivity wireless charging automation devices e.g tablets
advantages of technology in a business
efficient communication long term costs remote working less physical storage needed
disadvantages of technology in a business
high initial cost
job losses
not always reliable
training
international trade
selling across borders
why do countries trade internationally (5)
variety economic efficiency growth international co-operation specialisation
how does international trade improve economic efficiency
develop export markets=EOS
competition forces firms to be more efficient
how do international improve international co-operation
nations become dependent on each other
what are the factors that need to be considered when trading internationally
language exchange rates cultural differences logistics buying habits
advantages of free trade
EOS
lower costs
lower price for customer
disadvantages of free trade
more raw materials being used
increase competition
threatens domestic jobs
what is the relationship globalisation and international trade
factors facilitating globalisation develop
makes international trade easier
increased competition-need cheaper materials
trading bloc
groups of countries
specific geographical region
protects themselves from imports from non members
name two trading blocs
TTP- trans-pacific partnership
european union
why would a business choose to make most imports, tariff free
stop monopolies in the uk
more competition
name an industry which tariffs protect
farming
exchange rate
the value of one currency in terms of another
disadvantages of trading blocs
agreements aren’t tailored to a specific economy/country
domestic business can’t cope
have to abide by laws/regs of that bloc
emerging market
a country achieving rapid growth as well as globalisation
examples of emerging markets
india
turkey
what are the opportunities presented from an emerging market
access to more customers lack of regulation customers wi higher disposable income produce closer to market they serve cheaper labour
why would emerging markets reduce exports for UK businesses
emerging markets produce own products- self sufficient
digital revolution
shift from analog and mechanical to digital technology
give an example of digital technology in a business
self checkout
e-commerce
define information age
time when large amounts of info is widely available
what is the impact of the information age
time sensitive promotions
staff planning
advantages of technology change
efficiency
motivated staff-jobs being made easier
three opportunities from digital revolution
cost saving
market researcn
wider market access
three threats of the digital revolution
changing quickly-hard to keep up
customers-more choice
lots of info free
which factors determine how much a business will be affected by the digital revolution
market
decisions of rivals
type of product+consumer
budget
