Theme 1 - Business activity and Influences P.2

Question 1

What is the acronym used to remember the external factors that affects a business?

Answer 1

• Political - elections, war
• Economic
• Social
• Technological
• Legal
• Ethical/ Environmental

Question 2

how can politics affect a business?

Answer 2

Governments restrict the sale of some products to buyers in other countries, or can place quotas or tarrifs on imported goods, where imports and exports can be controlled by a government. This can reduce the amount of products that a business can sell or trade

Question 3

how can economics affect a business?

Answer 3

Economics means that recessions and inflation can affect businesses. This means that people might be unable to spend money into that business because they might not be able to afford it

Question 4

what are recessions?

Answer 4

The decline of economic and business activities

Question 5

what is inflation?

Answer 5

the increase and rise in prices of products + services over time

Question 6

how can social factors affect a business?

Answer 6

Social issues can be an increase in trends amongst a society. Trends within societies can change the popularity and sales of a business, since if that product or service has a high demand, then they would be able to make more money. Trends change very quickly, and that is what leads to a change in a business’ sales and income.

Question 7

how can technology affect a business?

Answer 7

Advances in technology can have a significant positive impact on business operations, where IT technology like email and databases can improve communication and efficiency.

Technology like devices and AI can sometimes take jobs, which can either threaten or be advantagous to businesses

Question 8

how can laws affect a business?

Answer 8

Legal are rules and procedures that must be followed by businesses. This might stop or affect certain operations

Question 9

how can ethics affect a business?

Answer 9

Ethics can affect businesses if they have child labor or animal testing. Can affect legal as well If it is illegal In the country. People as a result, might not want to spend money on that company.

Question 10

how can the environment affect a business?

Answer 10

Environmental can affect a business like limiting car use, planes and plastic usage. People are now more likely to spend money on an environmentally friendly business since people now care about the environment more.

Question 11

what is an MNC?

Answer 11

a company that operates in 2 or more countries e.g. factories, stores, call centers, warehouse

Question 12

what is a host country?

Answer 12

The countries that the MNCS are going into that is not their home country

Question 13

what are the benefits to being an MNC?

Answer 13

• Access to lower production prices
• Businesses can hire staff for cheap
• Access to new markets

Question 14

what are the disadvantages of being an MNC?

Answer 14

• Higher responsibilities
• Has to navigate currency, language in a foreign country
• Border laws can prevent operations in other countries

Question 15

what are the benefits to the host countries of MNC’s?

Answer 15

• Job opportunities for residents - reduces crime and homelessness
• Government wants people to have jobs so they don’t have to pay them benefits
• Contributes for the country’s GDP (gross domestic product). Higher GDP, higher economy and more money that goes to government

Question 16

what are disadvantages to the host countries?

Answer 16

• Domestic businesses get less popular because a popular, well-known brand can replace them
• Higher amounts of transport, causes higher pollution and environmental damage
• MNCs do unethical actions in foreign countries on purpose, like physical labour and underpaying and over-working their employees

Question 17

What are the two types of interest?

Answer 17

interest
compound interest

Question 18

what does interest mean?

Answer 18

the cost of borrowing money from the bank, so percentage increase. Banks don’t like when people borrow from the bank, so they add to the borrowed amount to get a profit

Question 19

what happens to businesses when interest rates rises (interest)?

Answer 19

the expenses increase for the business but the profit decreases for them since they have to pay more money back. Interest also applies to regular people, and if they don’t have enough money to pay the bank back, they would be less likely to buy from that business.

Question 20

what is compound interest?

Answer 20

Compound interest is the reward for saving money in a bank.
Banks will reward a person/business by adding additional money based on the interest rates to the money that you have kept in the bank. This is good for the person but not good for the bank as they are loosing money and are not making a profit.

Question 21

How does the interest rate rising affect businesses, regular people and banks (compound interest)?

Answer 21

the money saved for the business increases, since they get money back, meaning that this is bad for banks because they don’t gain a profit and instead have to pay the borrower money back.
This means that for regular people, they would likely spend more money on a business since they can afford to buy more things.

Question 22

what is the effect of a stronger currency on UK businesses

Answer 22

• Stronger
• Pound
• Imports
• Cheaper
• Exports
• Dearer (expensive)

Question 23

what do imports mean?

Answer 23

entering products into a home country

Question 24

what do exports mean?

Answer 24

bringing products from a home country into a foreign one, selling products abroad

Question 25

what does currency exchange mean?

Answer 25

one currency expressed in another currency

Question 26

why do exchange rates change?

Answer 26

Supply and demand means that if the supply is less, there is a higher demand for the product, which means that if the demand is higher, then so is the exchange rate since people are more likely to spend more money on the thing that is wanted

Question 27

what will happen if imports become cheaper for businesses?

Answer 27

If imports become cheaper, products that are needed for a business to be brought into the country can be done at a **cheaper price**. This means that cheaper prices can be offered to customers, increasing profits

Question 28

what will happen if exports become more expensive for businesses?

Answer 28

If exports become more expensive, then businesses who sell products abroad would have a large fee to pay. This means that **less products will be sold**, meaning that **selling price of products will increase**, leading to the demand to increase. Sales then decrease so profits decreases

Question 29

what do you need to do when converting British pound to a foreign currency?

Answer 29

To convert from British pound to a foreign currency you must **multiply** by the exchange rate

Question 30

what do you need to do when converting a foreign currency to the British pound?

Answer 30

To convert from a foreign currency into British pounds you must **divide** by the exchange rate

Question 31

what is a tariff ?

Answer 31

the tax placed on imported goods by the country that is **receiving** the goods. Governments do this so that domestic companies can make money off of this, benefiting the government

Question 32

what is a quota?

Answer 32

It is a physical count of how many goods can be imported

Question 33

what is quality control?

Answer 33

when a company checks the quality of the product at the **end** of production

Question 34

what is quality insurance?

Answer 34

when a company checks the quality of the product during **each stage** of production

Question 35

what is a tax?

Answer 35

charges that governments put so that they have expenses that they can use for the country e.g. roads, healthcare

Question 36

what is Value Added Tax (VAT)?

Answer 36

A tax that is added from the **consumption or use of goods and services**. This tax is usually placed on luxury goods e.g. food items, designer products. This is set by the **government**

Question 37

what is a fiscal policy?

Answer 37

It is the use of **government spending and tax** in order to influence and change an economy

Question 38

how would an increase in tax affect the government, individuals, and businesses?

Answer 38

If the government increases the tax, it's good for them because they get more money, but it's bad for individuals since they wouldn’t spend that much on non-essential products that has tax. If the tax increases a lot, then people wouldn’t be able to afford luxury products that are taxed. This is bad for businesses since people wouldn't be able to afford their products or services

Question 39

what is a monetary policy?

Answer 39

The government changes in **interest rates** in order to adjust the money supply of that country

Question 40

what would the government do if they wanted people to spend more money?

Answer 40

If government want people to spend more money in country, they would decrease interest rates, so more people would borrow money and then spend it on the government.

Question 41

what would the government do if they wanted people to spend less money?

Answer 41

If the government people to spend less money in country, they would **increase interest rates**, because inflation would take place, and people would spend too much and this would cause the prices to increase a lot, so by increasing interest rates, people would borrow and spend less money

Question 42

what are some factors that businesses can use to measure their success?

Answer 42

- popularity (if people can recognise their brand) - employee satisfaction - positive customer reviews - no. of employees - % of market share in the market - ethics/environmental contributions - amount of franchises/locations (maybe abroad) - if they are a MNC - amount of profit - number of sales

Question 43

why might a business fail?

Answer 43

- a business might not be able to generate enough revenue or profit - they might not be able to pay back what they are owed - they might not want to adapt or innovate to competition or new advancements in technology - they could go in financial debt - lack of experience in business might cause new business owners to not run the operations properly