Schedule K Flashcards
Competition law
promote fair competition
price fixing
when competitors agree to all provide the same price meaning all can charge higher prices
What are businesses not allowed to do according to competition law (3)
- agree fixed prices with competitors
- limit production in order to reduce competition
- separate markets or customers between each other e.g. geographically divide countries with each firm taking a section.
competition policy
seeks to improve the competitive nature of markets
competition in markets can be improved by… (3 points)
- Curtailing monopoly power and protecting competitive markets
- restricting mergers and prohibiting cartels
- creating fairness in markets for both businesses and consumers so businesses dont abuse power but can make acceptable profits to drive innovation and productivity
advantages of competition policy (4 points)
- encourages enterprising and efficiency
- creates a wider choice for consumers
- beneficial to economy
- quality of products and services
labour market laws
collective labour law guarantees certain rights, and places certain restrictions, on groups of employees e.g. trade unions
key features of labour laws (4 points)
- pay: equality
- pay: national living wage
- discrimination is illegal
- legislation gives employees “rights”
environmental law
- legislation designed to influence the behaviour of individuals and businesses in order to decrease the negative environmental impacts
benefits of environmental law (3 points)
- laws prevent/discourage businesses from committing harmful acts against the environment
- gives businesses a CSR
- New business opportunities e.g. green tech and innovation
drawbacks of environmental law (2 points)
- may restrict businesses from working as quickly as possible as they are sticking to the rules and regulations
- could result in increased operating costs for businesses
enterprise explination/definition
- a term relating to the ideas and skills of entrepreneurs, government may want to invest in ways to keep enterprise to help the economy
international trade
the exchange of goods between different countries
effect of exchange rates on trade
if the $ is worth less than the pound, importing raw materials from the USA will be cheaper, encouraging trade
GDP definition/explanation (2 points)
- Gross domestic product
- the total value of a country’s output in a year, when the value of GDP increases its called economic growth.
recession
when the GDP shrinks twice in a row
how often is GDP measured
every 3 months
Expanding economy: consumer confidence
increases
Expanding economy: spending
increases
Expanding economy: income
increases
Expanding economy: unemployment
decreases
Expanding economy: prices
decrease
Expanding economy: investment
increase
Expanding economy: interest rates
decrease
Expanding economy: GDP
increase
Contracting economy: Consumer confidence
Decreases
Contracting economy: spending
decreases
Contracting economy: income
decreases
Contracting economy: unemployment
increases
Contracting economy: prices
increase
Contracting economy: investment
decrease
Contracting economy: interest rates
increase
Contracting economy: GDP
decrease
inflation
the sustained increase in the average price of goods and services
exchange rates
show the price of a currency in terms of another currency
Fiscal policy
the manipulation of government spending, taxation and government borrowing to influence the level of economic activity
income tax
tax on peoples incomes, expresses as a percentage
taxation
the process of imposing charges on business and individuals by the government
direct tax
tax imposed on an individual or property
indirect tax
tax on goods and services
corporation tax
a tax paid by companies on the profit they have made
monetary policy
the manipulation of the rate of interest, the money supply and exchange rates to influence the level of economic activity
High interest rates: consumer saving
increases
High interest rates: consumer borrowing
decreases
High interest rates: investment
decreases
High interest rates: house prices
decrease
Low interest rates: Consumer saving
decreases
Low interest rates: consumer borrowing
increases
Low interest rates: investment
increases
Low interest rates: House prices
increase
Open trade
the removal of any trade restrictions between countries
advantages of open trade (6 points)
- cheaper goods
- lower prices for consumers
- wider variety of products
- no tariffs on exporting goods
- increased competition
- can make community less self reliant
disadvantages of open trade (4 points)
- ethical questions
- human rights questions (sweatshops)
- can undermine local industries
- could undermine quality
protectionism
when an economy introduce barriers to trade, restricting the free movement of goods and services e.g. tariffs.
Advantages of protectionism (2 points)
- restricts poor quality goods
- protects inefficient and unviable businesses
Disadvantages of protectionism (2 points)
- reduces variety and volume of goods
- makes goods more expensive
social changes
refers to the fluidity of human behaviour and actions that affect demographic and lifestyle
urbanisation
the movement of people towards cities and away from rural areas. usually increases as country becomes more developed.
migration
the movement of people between countries
advantages of migration (3 points)
- migrants can fill skill gaps
- UK have an aging population: migrants can be young workers
- more consumers for businesses = increased sales revenue
disadvantages of migration (2 points)
- polish plumber: offer a lower price for a British one to match
- Puts pressure on public services e.g. hospitals and housing
CSR - Corporate social responsibility
a business behaving ethically and contributing to economic developments
impact of bad CSR
People will scrutinise the business on social media which will lead to a bad brand image and loss of customers
Carroll’s CSR pyramid: Level 1 (2 points)
Economic:
- Responsibilities of businesses to be profitable
- only way to survive and benefit society later on
Carroll’s CSR pyramid: level 2 (2 points)
Legal:
- responsibility to obey laws and regulations
- e.g. employment, competition and health & safety laws
Carroll’s CSR pyramid: level 3 (3 points)
Ethical:
- Responsibility to act morally and ethically
- go beyond narrow requirements of the law
- e.g. treatment of suppliers and employees
Carroll’s CSR pyramid: level 4 (3 points)
philanthropic:
- Responsibility to give back to society
- Discretionary but still important
- e.g. charitable donations
drawbacks of Carroll’s pyramid
- Doesn’t take into account the changes in market or performance of a business
pros of CSR: finance (2 points)
- Able to attract investors
- avoid fines and environmental taxes
pros of CSR: HR
- increase recruitment, retention and motivation
pros of CSR: Marketing (3 points)
- increase brand loyalty
- CSR=USP= premium pricing
- positive media attention
pros of CSR: operational (2 points)
- Lower production costs through efficient procedures
- recycling and good supplier relations
cons of CSR: financial costs (3 points)
- looking after employees and suppliers
- green operations
- appointing a director of CSR
cons of CSR: Not meeting corporate objectives (2 points)
- short term = shareholder returns
- long term = growth - entering new markets
cons of CSR: Opportunity costs (2 points)
- time and money spent on CSR
- Day to day functions
Technological change: Marketing (2 points)
- May move to online websites such as instagram
- no more magazines and newspapers
Technological change: Operations
- AI may be able to do a more efficient job as they dont require breaks or get tired
Technological change: Finance (3 points)
- AI will decrease costs
- it can do jobs people are paid to do for free, therefore increased redundancies
- AI more efficient = lower average unit cost
Technological change: HR (3 points)
- AI no sick days
- AI cant resign, decreased labour turnover
- increase people to maintain the robots
the competitive environment
- relates to the number of firms in the market and how they influence the strategy and behaviour of the other firms
Porters 5 forces: Threat of new entrants (3 points)
- increase in new entrants gaining market share = increase in rivalry
- position of existing firms are stronger if barriers to entering are high
- low barriers = high threat of new entrants
Porters 5 forces: Bargaining power over suppliers (3 points)
If a firms suppliers have power they will:
- exercise that power
- sell their products at a higher price
- squeeze industry profits
Porters 5 forces: Bargaining power of customers
- powerful customers are able to exert pressure to decrease prices, or increase quality for the same price therefore reduce industry profits
Porters 5 forces: threat of substitute products (2 points)
- A sub product can be regarded as something that meets the same need
- if threat is high then demand will be lower
High competitive rivalry will lead to (3 points)
- price wars
- investment in innovation and new products
- increase in marketing
all likely to increase costs and decrease profits
High industry profits need… (5 points)
- weak suppliers
- weak customers
- high barriers to entry
- few opportunities for sub products
- little rivalry
Low industry profits need… (5 points)
- strong suppliers
- strong customers
- low barriers to entry
- many sub product opportunities
- intense rivalry
ways to adapt to increased competition (5 points)
- increase differentiation
- increase customer service
- increase brand loyalty
- decrease prices
- product development
