Unit 1 - Business and its environment

Question 1

What is privatization?

Answer 1

The act of selling state owned and controlled business organisations to investors in private sector

Question 2

What is nationalisation?

Answer 2

The transfer of privately owned business to state ownership and control

Question 3

Name some advantages and disadvantages of privatization

Answer 3

Advantages :
Improved efficiency
Lack of political interference

Disadvantages:
Increased competition
Shareholder pressure
Fragmentation of industries

Question 4

What is a trade union?

Answer 4

Independent of employees, with close relationships with employers. Union representatives will support and advocate for union members

Question 5

What will a trade union do?

Answer 5

Negotiate with employers to discuss,
- Major changes
- Members concerns
They will also accompany members to disciplinary meetings, helping with legal and financial trouble

Question 6

Aims of minimum wage

Answer 6

• Prevention of workers being exploited by employers
• Reduction of inequality between the high paid and low paid
• Increase of the living standard and purchasing power of the lower paid
• Serves as an incentive as to work as more desirable than being unemployed

Question 7

Critics of minimum wage

Answer 7

• Can be avoided if employers only employ casual staff with no contracts, job security (it is illegal but hard to prevent)
• Rising labour costs make business uncompetitive, they could need to make workers redundant
• Workers paid above minimum may ask for a pay raise, inflation increasing can cost the business further

Question 8

What is the minimum age of employment?

Answer 8

The minimum age for full time employment is 16 years of age
Minimum age for part time is 13/14 years old (bar the entertainment industry) working under 25 hours a week

Question 9

What are some impacts and benefits if the laws on minimum wage where to change? (where the assumption is they have increased)

Answer 9

Increase cost to the business which could lead to the business employing less people as wages have increased. Other employees who make more than minimum wage may also want a pay rise in keeping with minimum wage.
Increase in wages could also improve job retention (labor turnover)

Question 10

What are some impacts and benefits if the laws on health and safety where to change?

Answer 10

It can be expensive to implement leading to increased costs. However, keeping up to date with health & safety can improve staff retention (labor turnover) and improve the business reputation overall. It can also help the business avoid expensive fines.

Question 11

Why do governments implement protection laws?

Answer 11

1. Consumers are weak (powerless) against businesses who have large budgets for marketing and advertising, advertisements they make can be misleading
2. Improvements in technological and scientific improvements mean some consumers find it difficult to operate and assess theses products
3. Marketing and selling techniques can pressure some consumers into buying products (unable to resist)
4. Imported goods sometimes do not meet the same standard and quality as domestic goods have
5. In competitive markets business may attempt to take advantage of consumers by reducing the quality, service and guarantee periods in turn offering a lower price then competitors

Question 12

Name some protection laws (UK)

Answer 12

Sales Of Goods Act
Trade Description Act
Consumer Protection Act

Question 13

What is the Sale Of Goods Act?

Answer 13

If an item is faulty or not fit for purpose consumers have the right to get a refund, reject the good/s or return it for a repair or a new product. The product/good is to be made as described, the goods delivered or sold must be of satisfactory quality (also fit for purpose).
Protection against unfair selling practices for goods, services & digital content

Question 14

What is the Trade Description Act?

Answer 14

Prevention of misleading information which leads to consumers spending money this includes :
Suppliers
Retailers
Manufactures
Service Industry

Question 15

What is the Consumer Protection Act?

Answer 15

(Protection against unfair selling practices for goods, services & digital content)
Consumers are entitled to compensation if they have suffered damaged caused by a defective product, this is in private not professional use

Question 16

What is a Monopoly?

Answer 16

A market in which there is only one supplier with no close competitors

Question 17

What is collusion?

Answer 17

Business agreeing to work together and restrict competition by fixing prices and sharing contracts between themselves

Question 18

Why is business competition good for consumers?

Answer 18

It pushes business to make better products and can help strengthen domestic economy by having overseas competition. It also provides a wider choice and better customer service to consumers. Products also can be cheaper.

Question 19

What is a social audit?

Answer 19

A report on the impact that a business has on society

Question 20

What are the impacts (positive) of a social audit?

Answer 20

Positive +
They identify what social responsibility a business is meeting and what still needs to be met. Also helps a business set targets for improvements in their social performance, its done by comparing with the best performing firms in the industry. It can improve a companies public image and be used as a marketing tool.

Question 21

What are pressure groups ?

Answer 21

A group of people who seek to influence and change government policy or legislation

Question 22

What are the impacts (negative) of a social audit?

Answer 22

Negative -
Some consumers are not interested in a social audit and they just want cheap goods not a socially responsible business. They require time and money in return for detail. If they are not checked by an independent third party, it runs the risk of not being taken seriously by stakeholders

Question 23

What are pressure groups wanting to change? (General)

Answer 23

Governments to change policies and pass laws in support of group opinion.
For consumers to change purchasing habits i.e. business with a good policy have an increase in sales while others have a fall
Change of polices in order for less environmental damage

Question 24

Name some examples of pressure groups

Answer 24

Greenpeace
Fair trade foundation
Amnesty international UK

Question 25

Why is international trade important?

Answer 25

Leads to:
- Improved business, political and social links
- Expansion in economic growth (GDP)
- Access to new products
- Importers may dump stock bellow cost price (cheap)
- Impact on domestic market is more than the lack of innovation without

Question 26

What is perfectionism?

Answer 26

The polices a government implements that restrict trade internationally to help domestic industries

Question 27

What is a tariff?

Answer 27

Custom duty or tax in imports of merchandise

Question 28

What is a quota?

Answer 28

A limit on the amount of a good that can be brought into the country, restricting international trade

Question 29

What is a voluntary export limit?

Answer 29

A self-imposed limit on the quantity of a good that an exporting country is allowed to export

Question 30

What is free international trade?

Answer 30

A pact in place between two or more nations to reduce barriers to imports and exports among them

Question 31

What is a MNC - a multinational company?

Answer 31

A company which has its HQ in one country and their operations in another country/ies

Question 32

What are the benefits to being a MNC?

Answer 32

Lower taxes, wages and salaries and lower costs of production. Closer to resources and markets the product is being sold to. Depending ob the country, laws are different on employment, environment etc and import limitations are usually lower

Question 33

What are the disadvantages of being a MNC?

Answer 33

There are new additional costs to the company as there are more thing to maintain, there are also legal risks associated to being a MNC and different taxes in place. Communication issues, both with langue and culture, some countries follow different holidays due to religion etc. Alongside with the possibility of needing to train their workforce due to being unskilled.

Question 34

What is a trade bloc and give an example

Answer 34

A trade bloc is a group of countries which come together to form agreements promoting trade and economic growth by reducing barriers to trade such as tariffs and quotas.
Examples - North America free trade agreement and EU

Question 35

Evaluate the impact of MNCs on their host countries (in bullet points)

Answer 35

Good
- Local managers can learn and become more skilled
- Host GDP grows, tax is paid to government usually
- Local firms piggyback big investments, will supply goods and services meaning more opportunities
Bad
- A potential for exploitation of workers, this depending on labor laws however
- Local business could be forced out due to lack of finances in competing with large business
- Profits may be taken back to HQ and not kept in host country meaning they lose out on tax revenue and investments into infrastructure are limited or ignored