Government Influence on Businesses Flashcards
Monetary policy
ways in which to control the money supply in the economy, this affects spending which may be achieved by varying interest rates
To reduce inflation, governments increase interest rates to reduce consumer spending
MPC
Monetary Policy Committee is responsible for the Monetary policy
Increasing interest rates means… x3
increases cost of borrowing for businesses which has an adverse effect on cash flow and profits
unable to invest in future technology which result in losing competitive edge, customers and market share
reduced customer spending means less demand for products
Decreasing interest rates means… x2
borrowing is cheaper which encourages businesses to expand
increase customer borrowing means that they will spend more which increases demand
Quantitative easing means…
MPC introduce measures to increase bank’s ability to lend to customers and businesses
Quantitative easing encourages… x2
encourages customer spending by producing new money to boost economy
businesses can invest in new equipment/machinery/technology
Fiscal policy
involves the use of government spending, government borrowing and taxation to achieve economic objectives
IMPACT of National Minimum wage x3
increase costs for UK firm
reduces profit
reduces opportunity for growth
Increased income tax means…
customer disposable income will reduce which reduces demand for good/services so firms will need to work hard to attract sales. Businesses may have to drop prices to attract customers which reduces profits back to business.
Increased VAT means…
customers will be charged higher prices
Increased corporation tax means… x2
firms’ net profit is reduced which could put expansion plans on hold
lower dividends to shareholders who could sell their shares
Consumer Protection legislation
sets standards of hygiene and safety
IMPACT of Consumer Protection x2
compliance can increase costs
pressure could enhance quality and increase sales in the long run
Employment legislation x4
Working Time Directive reduces firms flexibility e.g. no working over 48hours a week
cannot fire employees (need verbal or written warning)
redundancy only if job doesn’t exist anymore and compensation must be given
Maternity leave is extended to 1 year which impacts the quality of the customer service that customers receive.
General Data Protection
companies need o keep record of how and when an individual gives consent to store their personal data therefore companies have to show a clear audit trial of consent
Financial support and advice for UK businesses x6
Start up loans of £25,000 for new businesses as well as 12 months of business mentoring
Grants for starting up in high unemployment areas or employing homeless people
Inland Revenue give advice on taxation rates, allowances and tax breaks
Local Enterprise Companies are set up in Scotland to support economic growth by offering advice, training and grants to business
gov schemes to encourage spending on things- helps sell more good to help them survive
too much bureaucracy makes it difficult for industry to access
Disadvantage to General data protection is…
Staff need to be trained on how to manage data which is costly and time consuming
Health and Safety at Work Act 1974 HASAWA means that employers have to…x4
Appoint specialist staff to ensure that safety equipment and procedures are regularly reviewed which may result in new equipment needing bought to meet standards
Org is viable for work-related injuries suffered by employees which could result in compensation claims which reduces cash flow
Ensuring safe working methods and conditions through regular inspections
Safe and competent workers by ensuring all have taken part in training
Impacts of HASAWA are…x4
Cost of equipment providing training
Compensation claims if accident occurs at work
Temporary of permanent closure
Legal action due to not following legislation
Low tax rates means…x2
Decrease in government spending will negatively impact the ability to provide a quality services in public sector e.g. NHS
Customers have more disposable income which fuels demand which means prices can be increased/causes inflation
Social policy aims to…
Identify and find out ways of reducing inequalities to services and support between social groups defined by socio-economic status, race, migration status, gender, etc.
Social policy provides services such as…x5
Child benefit and family support
State education
Unemployment support and training
Pensions
Health and social care
Fluctuations in exchange rates…
Alter the value of the UK sterling against other currencies
Govs try to manipulate exchange rates in effort to maintain business competitiveness
High sterling value 2P 1N
Reduces costs of imports for UK businesses as buyers in the UK use less sterling to pay for goods bought abroad
Harder to sell exports abroad as customers use more of their currency to buy goods therefore
export prices rise for them
Imports are cheaper which will attract UK consumers to purchase improved goods, increasing sales
Low sterling value means that… 3N 1P
Foreign companies more likely to buy UK goods boosting sales
Customers have less disposable income to spend
Costs of imported goods from overseas goes up making things more expensive
UK businesses may not be able to sell what’s in demand which means customer needs aren’t met
Benefits of technological developments to UK businesses are…x8
Investing in drones for making deliveries reduces the need for labour therefore reducing wage costs and increasing profit
CAM improves efficiency as production can occur 24/7 which increase output
Online surveys and market research can be carried out to ensure current products meet customer expectations and research what competitors are doing.
Can advertise job vacancies on the internet which attracts a wide range of candidate, giving the org better change at finding the best person for the job
Finance department can use spreadsheets to create graphs that are used in presentations to communicate financial data easily and clearer so everyone can understand
Can use video conferencing to facilitate meetings e.g. pandemic for those who aren’t at the same location.p which reduces travel costs
Computerised inventory management can be programmed to repeat an order when stock is low which reduces chance of human error.
E-commerce means that customers can order directly from the business and get it delivered to their homes. This means that larger organisations have little advantage over small businesses in this area.
Disadvantages of technological developments to UK businesses are…x3
Computerised stock management can be expensive to implement which can create cash flow problems
Capital intensive production heavily relies on machinery. Workers are doing repetitive jobs which can lead to higher staff turnover
Production will also stop if machinery breaks down which causes delays and missed deadlines
Fiscal policy involves…
High tax rates and low tax rates
Monetary policy involves…
High interest rates
Low interest rates
Regional policy uses…
And examples x2
Grants, tax relief and subsidies to attract new company investment in areas of high unemployment and deprivation.
E.g. areas of the Clyde which traditionally relied on the shipbuilding industry or in the Borders who relied on textiles had capital invested into them by the gov to attract businesses to open in the areas to provide jobs and reduce unemployment.
Exchange rates are…
The price of one currency expressed in terms of another
Why do the government become involved with business? x6
To control the level of economy activity- more people working means increased income tax which improves economy and gov services
To decrease unemployment as unemployed aren’t contributing to economy which reduces income tax and put pressure on benefits
To prevent exploitation of ‘weaker’ groups in society e.g. equality act 2010 protects staff from workplace discrimination
To regulate private monopolies- CMA get invoked when a company dominates the market to prevent org from charging high prices to customers
To provide services which would not be provided in the private sector e.g. police, ambulance
To provide education and healthcare as healthy, educated people can work for employers which helps economy grow
Consumer protection examples are…x3
Trade descriptions act means advertisement cannot be false or misleading to customers about product
Sale of goods act means products must meet quality standards
Prices displayed must be price charged
