Steeple Factors (external influences) Flashcards
What does STEEPLE stand for
Social Technological Environmental Economic Political Legal Ethical
Key economic indicators
GDP
Economic growth
What is GDP
Gross domestic product
Total value of output produced in an economy in a year
Economic growth
Annual percentage change in GDP
What is economic growth
Where GDP increases
What is a shrinking economy
Where GDP falls
Impacts of a shrinking economy
Job cuts
Fall in house prices
Impacts of growing economy
More wealth
More jobs
Ways that the government encourage increase in GDP
- Lower taxation or offer subsidies to encourage investment in physical capital
- Improve infrastructure > increase efficiency
- Improve quality of human capital (skills, education)
Ways businesses encourage economic growth
- Invest in training
- Invest in physical capital
Act as resources
Increase productivity
Increase output
Economic growth
Why is growth important to government
- creates a higher standard of living (GDP per capita)
Standard of living
Amount of goods/service a person can buy with income in a year
Inflation
Persistent general tendency of prices in an economy to rise
What is the EU
A political and economic union of most European states aimed at reducing trade barriers and harmonising economic policy
Characteristics of the EU
- Member countries must pay membership fees
- Legally binding regulations must be followed
- 4 freedoms for member countries
Positives to UK businesses leaving the EU
Laws and regulations
Encourage domestic trade (less comp)
Reasons for UK businesses to be in the EU
Single market/ 4 freedoms
Subsidies
Consequences to businesses of political uncertainty
Reduced business investment
Reduced customer spending
Political factors affecting business
- EU
- Brexit
- Competition policy (CMA)
- Privatisation ( gas and electric)
- Minimum wage
Example of social factors
- Demographics
- Social habits
- changes in employment patterns (part time)
- Women in work
- Increase holiday expectations
- Education til 18
- Grey pound, retired people have greater wealth through property, pensions, savings
Demographics
Characteristics of human populations and population groups
UK demographic changes
People living longer
Ethnic diversity
Ethics definition
Concerned with the judgement about whether something is normally right or wrong
Examples of ethical issues
- Child labour
- Testing animals
- Arms
- Carbon footprint
- Tax avoidance (corporation tax)
Benefits of ethical behaviour
Increased reputation leads to:
- Attract customers
- Attract/retain employees
- Encourage investment
Disadvantages of ethical behaviour
- Costly
- Less competitive
- Ethics can vary
- Can create false expectation
- Higher prices for consumers
What can ethical behaviour cause between other objectives
Conflict
Business objectives
P rofit I ncrease market share G rowth S urvival S ervice (social+ethical)
Example of conflict between objectives
Ethical and profit
Ethical increases costs, thus reduce profits
Ways to improve ethical behaviour
- Avoid child labour
- Pay full taxes
- Charitable contributions/donations
- Increase independence of LEDC’s eg training
Environmental issues caused by business operations
- Air pollution
- Water pollution
- Land pollution (deforestation)
- Noise pollution
- Congestion
Examples of environmental changes
- 5p bags
- ban cotton buds
- ban plastic beads
- deposit return for bottles
Sustainability definition
The endurance of resources. Refers to preventing negative impacts from economic systems and production on earth and its environment
How a business can be more sustainable
- use Skype
- recycling schemes
- dispose chemicals in correct manner
- Water/energy saving measures
- Use renewable energy
- Buy sustainable products
Government measures for sustainability
- Climate change levy
- Pressure groups
What is the climate change levy
It is a tax on the use of energy in industry and commerce
How is climate change levy effective
- Business attempts to minimise energy usage
- Save costs
- Operate more sustainably
What are pressure groups
Associations that highlight unsustainable behaviour eg green peace
How are pressure groups effective
- Cause negative publicity
- Poor reputation
- less sales
- Business acts sustainably to avoid this
2 key economic indicators
- GDP
- Economic growth
What is GDP
Gross domestic product
The total value of output produced in an economy (in a given time)
What is economic growth
Annual percentage change in GDP
What is it called if GDP is less than the year before
A shrinking economy
Impacts of a shrinking economy
Job cuts
Fall in house prices
What is it called if GDP is higher than the year before
An expanding economy
Impacts of an expanding economy
More wealth
More jobs
Government methods of encouraging an increase in GDP
- lower tax and increase subsidies
- Improve infrastructure, efficiency
- Improve quality of human capital (skills) eg education
How can businesses contribute to economic growth
- Invest in training
- Invest in physical capital
How does investment in training and physical capital by businesses lead to economic growth
Increases resources, productivity, output
Why is economic growth important to the government
- Causes a higher standard of living (GDP per capita)
Definition of standard of living
The amount of goods/services a person can buy with income in a year
What is inflation
The persistent general tendency of prices in economy to rise
What is deflation
General prices decreasing in an economy
What is a recession
Negative economic growth for 2 consecutive terms (quarters)
Impacts of a shrinking economy
Less produce Less GDP Less spending Less revenue Business cut costs More unemployment
What is the consumer price index (CPI)
A measure that examines the weighted average of prices of a basket of consumer goods and services
Formula for deflation
Change in price of (CPI)/original price X 100
3 impacts of high inflation
- UK exports become uncompetitive
- Reduction in investment (costs too high)
- Creates uncertainty
Exchange rates definition
The value of one currency in terms of another
Strengthening exchange rate
Pound buys more of a foreign currency
Weakening exchange rate
Pound buys less of a foreign currency
What is an export
A sale leading to money coming into the economy
What is an export
Sale leading to money leaving the economy
SPICED
Strong Pound Imports Cheap Exports Dear
Impacts of weakening pound on UK businesses
- Rise in costs of raw materials
- More demand for exports (cheaper)
Short term responses from UK businesses to a fluctuating exchange rate
- Nothing, accept lower mark up
- Cut overhead costs eg electricity
Long term responses from UK businesses to fluctuating exchange rates
- Use domestic suppliers
- Increases prices
- Focus on exports to EU customers
3 factors determine demand for pounds
Foreign investment - eg offices
Interest rates - hot money
Desire to buy UK exports
Interest rates definition
The reward for saving and the cost of borrowing expressed as a percentage
Who sets interest rates
The monetary policy committee
Bank of England
Impacts of interest rates
1st page second book
What are the links between interest rates and exchange rates
High interest rates cause a strong pound due to hot money, therefore an appreciation of the pound
Vice versa
Relationship between interest rates and inflation
- MPC raise interest rates
- less spending/more saving
- demand falls
- prices fall/stabilise inflation
Unemployment definition
Situation where a person willing and able to work is unable to find employment
On the claimant count
Claimant count
People claiming job seekers allowance (unemployed)
Reasons gov want low unemployment
- Waste of Human Resources
- Social problems eg self esteem, depression, crime, drugs etc
- cost of benefits
- Less tax revenue
Balance of payment
Balance of trade
Net trade
Difference between the VALUE of exports and imports ( x - m )
Trade surplus
Exports exceed imports
Trade deficit
Imports exceed exports
Cause of trade surplus
- Weak pound
More competitive exports and less imports due to expense
Purposes of taxation
- Gov generate revenue
- Influence consumer spending
Purposes of taxation
- Gov generate revenue
- Influence consumer spending
What are indirect taxes
Taxes on expenditure
Included in price of product
Examples of indirect taxes
VAT
Stamp duty
Alcohol, cigarette and fuel duties
Direct taxes
Taxes on income and profits
Paid directly by bearer to HMRC
Examples of direct taxes
Income
National insurance
Corporation tax
What is a progressive tax and example
Different rates depending on factor
Eg income tax, stamp duty
What is income tax
Tax taken out of a persons income
What is national insurance
Tax taken from employee and employer, that contributes towards state pension and NHS
What does VAT stand for
Value added tax
What is VAT
A tax on spending, it is inclusive of the price of a product
Current rate of VAT
20%
How do businesses benefit from being VAR registered
Can reclaim expenses
What is corporation tax
A tax levied on a business’s profits
What is stamp duty
A tax paid when a house is purchased
What can the government use stamp duty for
Controlling inflation
What is HMRC
The government department responsible for the collection of tan in the UK
What is a subsidy
A payment by the government to firms, to incentivise an increase in supply of particular goods or services
Benefits of subsidies to business
- Lower costs/increase profits
- Decrease prices (competitive)
- Ensure business survival during start up
What are demand-side policies
Policies used to manipulate/influence the level of demand in the economy
Monetary and fiscal
What is monetary policy
Manipulation/control of the level of demand in economy using the rate of interest
Who is in charge of monetary policy
Controlled by MPC/bank of England
High interest rates cause
- less spending (cost of borrowing)
- More saving (reward for saving)
High interest rates do what to the pound
Stronger pound (hot money)
High interest rates do what to inflation
- Slow rate (don’t say disinflation), due to less demand
Low interest rates cause
- More spending
- Less saving
Low interest rates effect on pound
- Weaker pound (less hot money)
Low interest rates effect on inflation
- Higher rate of inflation due to increase in demand
What is fiscal policy
Manipulation of the level of demand in the economy through taxation and government spending
Who controls fiscal policy
- Government
- Chancellor of the exchequer
What is caused by an increase in tax
Less spending
What is caused by a fall in tax
More spending
What does an increase in government spending cause
An increase in demand, due to the multiplier effect
What is he multiplier effect
The effect of changes in economic activity in one sector on another sector
If a business experiences a rise or fall in demand for its product/service, there is a knock on effect to it suppliers
What are supply side policies
Policies that manipulate the productivity/output of an economy
Examples of supply side policies
- Improving skill set (education/training)
- Cut corporation tax
- Reduce welfare benefits
- Subsidies
- Increase in minimum wage
- Fall in income tax
What should supply side policies lead to
- An economy with skilled workers incentivised to work
- Business’s able to invest
Definition of the business/economic cycle
An observed pattern of decreases and increases in economic growth over the long term
What are the 4 stages of the business/economic cycle
Boom, Recession, Slump, Recovery
Factors to explain at different points in business cycle
- spending
- investment
- inflation
- confidence
- unemployment
- income
How to define boom/recession/slump/recovery
A stage in the economic cycle where…
Then state a characteristic of this stage
Examples of thriving businesses during a slump/recession
Aldi Lidl Cash for gold Pay day loans Repair garages (less new cars)
National min wage
The min pay per hour workers are entitled to by law
Rate for each age bracket is different
National living wage
Min wage for 25+
Consequences of breaches in civil law
Fine
Positives of compliance with civil law
- Avoid fines/compensation/rectifying costs
What is copyright
An automatic right protecting intellectual property from being copied
Don’t have to apply
What is Intellectual property
Intangible property that is the result of creativity (eg song, book, film)
Protected by copyright
What is a contract
A legally binding document between 2 parties
What is contract law
The law making it illegal for one party to change the terms and conditions of the contract
Example of a breach of contract law and it’s consequence
A supplier failing to supply what they are meant to
Firm paying fine/compensation
What is the weights and measures act
Concerns needing to indicate the correct amount of a product
Example of a breach in weights and measures act and consequence
1L milk having 990ml
Fine to supplier
What is the data protection act
Protects personal data of staff and customers, ensuring it can only be accessed by authorised members of staff
Consequence of a breach in data protection act
Up to £500,000 fine
What is the health and safety act
Means employers legally have a duty of care towards its employees, with an obligation to create a safe and healthy workplace
Consequence of a breach in health and safety act
Compensation, fine, forced to rectify issues
What is smoking in the workplace (law)
Illegal to smoke within a workplace
Consequence of breach of smoking in the workplace
£200 fine
What is trademark
Where a firms name, slogan, logo or other items that brand the product/firm is protected from being used by another firm
Have to apply for it
What is planning permission/legislation
Needed for new buildings, extensions, and change of use in a building
Who to apply to for planning permission
Government/council
Why is planning peromission needed
To ensure that buildings are safe, and to prevent disputes due to building on private land
What is environmental legislation
Law that addresses pollution and protects human health
Acts included in environmental legislation
- Clean air act
- Environmental health act
- Safe drinking water act
- Resource conservation act
- Control of Substances Hazardous to health act
What is the FCA
The financial conduct authority, regulating body of finance (loans, mortgages, credit cards)
What do the FCA do
Protect and enhance the integrity of financial markets
Promo for competition
Characteristics of the consumer rights act/sale of goods act
- Product/service must be of satisfactory quality
- Fit for purpose
- Match description
- Return in 30 days
- Return for up to 6 years (up to discretion of seller eg partial refund, exchange etc
Examples of technology that aids business
- Computer hardware/software
- Internet connection
- Automation
- Portable tablets/iPads
- Computer calculation
Advantages of hardware and software
- efficiency/speed
- communication
- long term costs fall
- Remote working (from home)
- reduces need for physical storage space
- convenience for customers and staff
- offer opportunities to learn new skills
Disadvantages of hardware and software
- high initial costs
- job losses
- not always reliable
- can be hacked
- training costs
- data protection costs
- demotivation if difficult to operate
- redundancies
