External Influences (Miss Blackwell) Flashcards
What does STEEPLE stand for?
Social, technology, environmental, ethical, political, legal, economic.
GDP (Gross Domestic Product)
Total value of output produced in an economy.
Name an impact of GDP decreasing.
Job cuts and falling house prices.
Name an impact of rising GDP.
New jobs and more wealth.
Economic Growth
Annual percentage change in GDP.
Name a form of government action to facilitate growth.
- Encourage investment in physical capital by offering subsidies or lowering taxation.
- Improve infrastructure through better transport links.
- Improve quality of human capital by investing in education.
Standard of Living
The amount of goods/services a person can buy with their income in a year.
Inflation
Persistent general tendency for prices in the economy to rise.
Consumer Price Index (CPI)
A measure that examines the weighed average of prices of a basket of consumer goods/services.
Name something that causes inflation.
- Increased demand and decreased supply.
- Cycle of rising costs and prices.
Demand Pull
Buyers activity pulling up prices.
Cost Push
Increase in cost pushes prices up.
Name an impact of high inflation.
- UK exports uncompetitive as identical products can be made elsewhere cheaper.
- Reduce multinational investment as prices of labour raw materials etc are cheaper elsewhere.
- High inflation creates uncertainty around profits as businesses cannot plan ahead on future purchases.
Exchange Rate
The value of one currency in terms of another.
If the pound increases in value it is..?
Strengthening.
If the pound decreases in value it is..?
Weakening.
What does SPICED stand for?
Strong pound, imports cheap, exports dear.
Import
A sale that leads to money leaving the economy.
Export
A sale that leads to money coming into the economy.
How is the value of pound determined?
Forces of supply and demand.
Name four methods of dealing with high exchange rates.
- Increase prices.
- Bulk buy when the pound is strong, non-perishable goods.
- Reduce costs etc. Marketing.
- Employ zero hour workers.
- Do nothing.
- Search elsewhere for cheaper raw materials.
- Focus on exports by selling more there.
Name a factor that determines demand for £.
- Foreign investment in the UK.
- Desire of foreign customers to buy UK exports.
- ‘Hot money’ flows into the UK (money that flows in search of highest possible interest rate).
Interest Rates
The reward for saving and cost of borrowing expressed as a percentage of the money saved or borrowed.
Who sets interest rates?
Back Of England, Monetary Policy Commitee.
How are interest rates and exchange rates linked?
If interest rates are high, the pound will be strong because sterling is in demand due to hot money and vice versa.
Unemployment
A situation in which people who are able and willing to find work are not able to find employment.
Unemployment figures between 2019-2021.
2019 - 3.8%
2020 - 4.9%
2021 - 4.2%
Economically Inactive
Unable / unwilling to work.
Name 2 reasons why the government wants low unemployment.
- Unemployment is a waste of human resources, not producing goods/services.
- Bad for society social problems.
- Benefits have to be paid which could be spent in other areas.
- A low level of employement leads to more tax revenue and less welfare payments paid out.
Balance of Payment/Trade
Difference between the value of exports and imports.
Indirect Taxes
Taxes on expenditure / spending. These are paid to tax authorities indirectly by suppliers of goods/services.
Direct Taxes
Taxes on income and profits, paid directly by the bearer to tax authorities.
Income Tax
A tax taken out of a person’s income.
National Insurance
Taken as a contribution towards the state pension and treatment under the NHS.
Standard rate of VAT.
20%
What does VAT stand for?
Value added tax.
Tax on products are also known as?
Duties and excise.
Why add tax to certain products? (2 reasons)
To gain more tax revenue, deter people from buying it, pay for the negative effects it may cause e.g NHS costs.
Corporation Tax
A tax on the profits made by companies.
Name two purposes of taxation.
- Raises large amounts of revenue for the government to spend on public services.
- To control economic activity e.g through stamp duty.
- To influence expenditure on certain items.
Name 4 areas of government spending.
Welfare, health, education, pension, defence, debt interest, housing, business, environment, transport.
Monetary Policy
Manipulation of the level of demand in the economy using interest rates.
Fiscal Policy
Economic policy used to influence the level of spending in an economy. Through taxation and public spending.
Supply Side Policies
Aim to improve the economy’s overall productive capacity.
Name 2 supply side policies.
- Investment in education and training.
- Reducing welfare benefits.
- Income tax cuts.
- Cuts in corporation tax.
- Removing expensive and unnecessary business regulation.
- Encouraging business start ups through subsidies.
Subsidies
Payment from government to a supplier of a good or service.
Business/Economic Cycle
The observed pattern of increases and decreases in economic growth over time.
Stages of Business Cycle
Boom, recession, slump, recovery.
Name 3 benefits of subsidies.
- Decreases prices.
- Encourages consumption of goods with positive externalities.
- Helps business survival, especially during start up.
- Helps declining industries.
- Boosts demand during recessions.
Name two ways a business could benefit in a recession/slump.
- Business location/premises (cheaper to buy)
- Asset purchases (cheaper)
- Share purchases (cheaper to sell on for a profit later)
- Staff (taking advantage of labour while its cheap and available)
Ethics
Concerned with the judgement about whether something is morally right or wrong.
Name two benefits of ethical behaviour for a business.
- Attract new customers to the business.
- Attract new and better quality employees.
- Encourage employees to stay within the business.
- Encourage investment.
- Create positive publicity.
- Result in increased sales and profits.
Name a disadvantage of behaving ethically.
- Increased costs.
- Danger of building up expectations.
- Less competitive on prices.
- Could lead to less output.
Name a reason why some businesses are more affected than others by ethical issues?
- Larger businesses are more well known and so more media attention and customers.
- Business outsourcing production to countries with different laws more likely to be affected by employee issues.
- Businesses with lower price points as they seek to lower unit costs.
Name 3 advantages of computer hardware/software.
- Systems are usually faster and more efficient.
- Communication is easier.
- Costs may be reduced in long run.
- Remote working possible.
- Reduces the need for physical storage space.
- Offers convenience for customers.
- May offer employees the opportunity to learn new skills.
Name 3 disadvantages of computer hardware/software.
- High initial costs.
- Job losses.
- Not always reliable.
- Staff will need to be trained.
- The businesses will need to spend time and money keeping data safe.
- May cause demotivation as workers resist change in workplace.
National Minimum Wage
The minimum pay per hour workers of school leaving age are entitled to by law.
National Living Wage
A new minimum wage rate for those aged 23 and over.
Sanction of not following minimum wage.
Fines, reimbursement of underpayment to staff.
Name a consequence of not following minimum wage.
- Recruitment problems.
- High turnover (staff leaving)
- Loss of sales from bad reputation.
What 3 things does the consumer protection act state?
Products/services must be..
1) As described
2) Fit for purpose
3) Of satisfactory quality.
Sanction of breaking consumer rights act.
- Fines
- Costs of rectifying.
- Time of staff dealing with complaints.
- Loss of loyal customers.
Name two ways a business avoids breaking the consumer rights act.
- Training
- Good quality i.e better suppliers.
- Methods of ensuring quality.
- Checking any modifications to law.
Intellectual Property
Intangible property that is the result of creativity.
Trademark
Name, slogans, logos and other items that essentially brand the product/company can be trademarked.
Copyright
Legal protection against copying for authors, composers and artists.
Planning Permission
Formal permission from a local authority for the construction or altering of buildings.
Name a reason why environmental legislation exists.
- Address pollution.
- Protect human health.
- Support continued growth of economies.
Name a reason why financial legislation exists.
- Encourage professionals to report suspicious activity or known wrongdoing.
- To promote fairness and prevent businesses gaining unfair advantages.
Demographics
Characteristics of human population groups.
Name the two key changes within the UK demographic.
- Ageing population.
- More ethnically diverse.
Name 3 types of environmental problems businesses cause.
- Air pollution
- Habitat loss from expansion
- Water pollution
- High wastage for landfill
- Deforestation
- Plastic wastage
Inferior products
When income goes up, demand goes down.
Name two impacts of changes in environmental issues to a business.
- Costs to change business practices.
- Gaining access to new markets.
- Pressure from consumers.
- Pressure from stakeholders.
Sustainability
Refers to preventing negative impacts from economic systems and production on the earth and it’s environment.
Name three ways a business can behave in a sustainable manner.
- Recycling waste.
- Alternative energy sources.
- Responsible waste management.
- Minimising travel, working from home.
- Reducing consumption.
- Local suppliers.
European Union
The economic and political union of most European states aimed at reducing trade barriers and harmonising economic policy.
Free Trade
Involves agreement between countries to trade with each other without erecting barriers to trade (tariffs and quotas).
Tariff
Tax/duty on imports.
Quota
Maximum quantity that can be imported.
Name 2 ways the UK benefited from being in the EU.
- More availability of foreign labour.
- No extra costs importing supplies.
- Consistent regulations and rules, no time spent adapting to different countries.
- No other countries could gain competitive advantage.
- More export demand.
- No additional paperwork + border checks.
Name an impact of paperwork and checks on UK importers.
- Higher costs as exporter may charge more due to higher labour costs.
- Higher delivery times.
- Quality may be reduced from higher times.
Name an impact of paperwork and checks on UK exporters.
- Higher costs.
- Reduced product ranges.
What are the 3 main ways economic uncertainty affects businesses?
- Investment stalemate.
- Reduced customer confidence.
- Weak pound, less foreign investment.
Name two positive implications of political stability.
- Increased confidence to invest.
- Reduces need to leave domestic markets.
- Helps to prepare for future.
- Reduces risk associated with business decisions.
Why do companies trade internationally?
- for variety (to obtain products they cannot make themselves)
- to specialise (can sell what they produce best)
- to grow (billions of new customers)
- to reduce costs (economies of scale can be gained)
- to avoid conflict (less eager to cause conflict if trade links exist)
International Trade
Refers to selling across borders.
Trading Bloc
A group of countries within a particular geographical region that have reduced/removed trade barriers for its member countries.
Globalisation
The increased integration and interdependence of national economies.
Multinationals
A business that has activities and operations more than one country.
Global Strategy
A plan of action on a global scale.
Global Brand
A brand that is recognised throughout much of the world.
Threats of global brands.
- Local and national businesses may be driven out as customers buy from global brands instead.
- May result in downward pricing pressure as global brands offer products more cheaply.
Challenges of globalisation
- Increased competition
- Understanding moral/ethical standpoints.
- Costs of expansion.
- Adapting to different cultures.
- Communication (language and time differences)
- The physical distance.
Digital Revolution
Encompasses the shift from analogue and mechanical technology to digital.
Information age
A time when large amounts of information is widely available.
Threats of the digital revolution.
- Digital tech is changing/improving quick
- Increased access to info allows customers to make more informed decisions, therefore businesses need to be more competitive.
- Both employees and customers may be reluctant to grasp the virtues of the digital revolution.
Factors affecting the effect of digital revolution
- The market in which the business operates.
- How rivals respond.
- The type of product/service.
- The budget of the business to use digital tech.
- The type of customer.
