Unit 1 - Business activity and Influences Flashcards
What is the acronym used to remember the external factors that affects a business?
- Political - elections, war
- Economic
- Social
- Technological
- Legal
- Ethical/ Environmental
how can politics/war affect a business?
War can impact because if a business sell or trade in a warzone, their business can get damaged, but war wouldn’t affect all businesses
how can economics affect a business?
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
what are recessions?
The decline of economic and business activities
what is inflation?
the increase and rise in prices of products + services over time
how can social factors affect a business?
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.
how can technology affect a business?
Technology like devices and AI can sometimes take jobs, or there is concern on the technological developments and if businesses have the ability to adapt to those changes
how can laws affect a business?
Legal are rules and procedures that must be followed by businesses. This might stop or affect certain operations
how can ethics affect a business?
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.
how can the environment affect a business?
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.
what is an MNC?
a company that operates in 2 or more countries e.g. factories, stores, call centers, warehouse
what is a host country?
The countries that the MNCS are going into that is not their home country
what are the benefits to being an MNC?
- Access to lower production prices
- Businesses can hire staff for cheap
- Access to new markets
what are the disadvantages of being an MNC?
- Higher responsibilities
- Has to navigate currency, language in a foreign country
- Border laws can prevent operations in other countries
what are the benefits to the host countries?
- 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
what are disadvantages to the host countries?
- 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
What are the two types of interest?
interest - the cost of borrowing money
compound interest - the reward for saving
what happens to businesses when the interest rises (interest)?
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.
what does interest mean?
the cost of borrowing money from the bank, so percentage increase. This applies to businesses and humans, like student loans or insurance. Banks don’t like when people borrow from the bank, so they add to the borrowed amount to get a profit
what happens to businesses when the interest rises (compound interest)?
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.
what is the effect of a stronger currency on UK businesses
- Stronger
- Pound
- Imports
- Cheaper
- Exports
- Dearer (expensive)
what do imports mean?
entering products into a home country
what do exports mean?
bringing products from a home country into a foreign one, selling products abroad
what does currency exchange mean?
one currency expressed in another currency
why do exchange rates change?
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
what will happen if imports become cheaper for businesses?
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 profits increases and cheaper prices can be offered to customers
what will happen if exports become more expensive for businesses?
If exports become more expensive, then businesses who sell products abroad would have a large fee to pay. The increase of the selling price of products, demand increases, sales decreases, profits decreases
what do you need to do when converting British pound to a foreign currency?
To convert from British pound to a foreign currency you must multiply by the exchange rate
what do you need to do when converting a foreign currency to the British pound?
To convert from a foreign currency into British pounds you must divide by the exchange rate
what is a tariff ?
the tax placed on imported goods, this is because domestic companies can make money off of this and this benefits the government
what is a quota?
It is a physical count of how many goods can be imported
what is quality control?
when a company checks the quality of the product at the end of production
what is quality insurance?
when a company checks the quality of the product during each stage of production
what is a tax?
charges that governments put so that they have expenses that they can use for the country e.g. roads, healthcare
what is Value Added Tax (VAT)?
a tax that is added from the consumption or use of goods and services e.g. food items, children clothing
what is a fiscal policy?
It is the use of government spending and tax in order to influence and change an economy
how would an increase in tax affect the government, individuals, and businesses?
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
what is a monetary policy?
The government changes in interest rates in order to adjust the money supply of the company
what would the government do if they wanted people to spend more money?
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.
what would the government do if they wanted people to spend less money?
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
what are some factors that businesses can use to measure their success?
- 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
why might a business fail?
- 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
make an AO4 point about politics (ext factors)
However, politics might not affect every business
