UNIT 1. Chapter 6. External influences on business acitivity

Question 1

4 main categories of legal constraints on business activity?

Answer 1

• Employment practices
• Consumer rights
• Business competition
• Location of businesses

Question 2

What are the objectives of law of employment practices? (2)

Answer 2

• Prevent exploitation of employees

* Prevent loss of industrial output and national incomes due to excessive trade union actions

Question 3

What do legal constraints of employment practices cover? (4)

Answer 3

• Recruitment, employment contracts and termination of employment
• Health and safety at work
• Minimum wages
• Trade union rights and responsibilities

Question 4

Recruitment, employment contracts and termination of employment.
How?(2) Examples of unfair dismissal? (3)

Answer 4

• A written contracts must be signed so that employer is aware of pay, working conditions, disciplinary procedures, etc.
• There are legal constraints over termination of employment.
e.g. of unfair dismissal:
+ Pregnancy
+ Refusal to work on a holiday
+ being a member of a trade union

Question 5

What do health and safety laws require business to do? Why? (4) (1)

Answer 5

• Equip factories and offices with safety equipment
• Provide adequate washing and toilet facilities
• Provide protection from dangerous machinery and materials
• Give adequate breaks and maintain certain workplace temperatures

These aim to protect workers from discomfort and physical injury at work. Providing a healthy and safe environment in which to work is now a legal requirement in most countries.

Question 6

Positive impact of legal constraints on employment, health and safety

Answer 6

• Workers feeling more secure and highly valued
• Safe working environment - reduce risks of accidents
• Avoidance of court cases and heavy fines
• Business who go beyond legal standards attract better employees and good publicity

Question 7

Negative impact of legal constraints on employment, health and safety

Answer 7

Adds to business costs
• Supervisory costs
• Higher wages
• Costs of paid leave for sickness, or holidays
• Employment of staff to give reasonable working hours
• Protective clothing and equipment

Question 8

Why is there a growing demand for consumer rights? (5)

Answer 8

• An individual consumer has no power against a large firm
• Products are becoming more scientific and technological for consumers to understand - don’t know whether meets quality standards
• Selling techniques are more complicated for consumers - risk of having to pay large debt for years
• Increased globalisation - increase in imported goods. Consumers need protection from products that adopt different safety standards
• The need for lower costs reduces quality of products/services

Question 9

Benefits and drawbacks of consumer protection laws on businesses?

Answer 9

Benefits:
• Good publicity
• Aid in marketing and sales - possibly leading to higher profits
Drawbacks
• Higher costs to meet protection legislation
• Redesigning products
• Redesigning advertisement
• Improving quality control
• Treating consumers fairly
• Change in strategy and culture of the organisation

Question 10

The law and business competition.
Benefits for consumers when there is free and fair competition? (4)
Laws to encourage and promote competition between firms? (2)

Answer 10

Benefits for consumers:
• Wider choice 
• Keeps prices low
• Better quality
• Strengthens the domestic economy
The laws:
• Investigate and control monopolies and make it possible to prevent mergers
• Limit or outlaw uncompetitive practices between firms

Question 11

Def. Monopoly

Answer 11

The business is the only supplier of a product in the market. (Very rare)

Question 12

How do monopolies develop? (4)

Answer 12

• By merger or takeover of other firms in the industry
• Invention of new products or processes that are then legally patented (originator has monopoly in production)
• Legal protection - government choses to protect an industry by having only 1 business in it.
• Due to ‘barriers of entry’ such as advanced technology knowledge, huge costs for facilities, etc.

Question 13

Examples of uncompetitive/ restrictive practices done by businesses. (3)

Answer 13

• Refusal to supply a retailer if they do not agree to charge the prices determined by the manufacturer
• Full line forcing - making retailers restock the whole range of products and not just popular ones.
• Predatory pricing - charging very low prices to eliminate new competitors.

Question 14

Def. Information technology

Answer 14

The use of electronic technology to gather, store, process and communicate information.

Question 15

Def. Computer aided design (CAD)

Answer 15

Using computer and IT when designing products

Question 16

Def. Computer aided manufacturing (CAM)

Answer 16

The use of computer and computer controlled machinery to speed up the production process and make it more flexible.

Question 17

Potential limitations of applying technology to a business (5)

Answer 17

• Costs: Capital costs, labour training costs, redundancy costs.
• Labour relations: reduced job security and motivation levels
• Reliability: Teething problems with new systems, or breakdowns in the system can excessively affect efficiency
• Data protection: Business must keep up to date with legal constraints of rights of holding data on staff and consumers.
• Management: lack of management skill for technological processes.

Question 18

Management information system benefits and drawbacks and what it is. (1 3 2)

Answer 18

Computers providing data to managers.
Benefits:
• Managers can obtain data more quickly and frequently. Aids overall control.
• Computers can be used to process the data rapidly, making it it easier for manager to interpret.
• Managers can easily communicate with the other divisions.
Drawbacks:
• ‘Information overload’ slowing down the process of decision making.
• Harder to apply work in teams or middle managers -> less motivation.

Question 19

How to introduce technology into the business effectively? (5)

Answer 19

• Analyse its potential use
• Involve managers and other staff for assessment of new ideas
• Evaluate the different systems and programs available
• Plan the introduction e.g. further training required
• Monitor the effectiveness of the system

Question 20

Word processing - applications and benefits (1 3)

Answer 20

Applications:
• All departments for secretarial tasks
Benefits:
• Speed
• Accuracy
• Easily amended

Question 21

Publishing programs - applications and benefits (1 3)

Answer 21

Applications:
• Marketing department for promotional material
Benefits:
• Reduce the need of professional publishing firms - lower costs
• Professional appearance given to the company
• Easily amended

Question 22

Databases - applications and benefits (1 2)

Answer 22

Applications:
• All department for storing and retrieving large quantities of data
Benefits:
• Saves costs from reducing paper work
• Saves time from easy retrieval of data

Question 23

Spreadsheet programs - application and benefits (1 2)

Answer 23

Applications:
• Finance department
Benefits:
• Flexibility and speed - easily amended and impact on the figures are demonstrated immediately.
• Can portray 'what if' scenarios.

Question 24

CAD - applications and benefits (1 3)

Answer 24

Applications:
• Design and architectural firms
Benefits:
• Saves on expensive designer salaries
• More flexibility of design for consumers
• Can be linked to other programs to show costs of the product

Question 25

CAM - application and benefits

Answer 25

Applications:
• Operations management in manufacturing businesses
Benefits:
• Labour costs are reduced
• Productivity is increased
• Lower variable/ unit costs

Question 26

Internet - application and benefits (2 3)

Answer 26

Applications:
• Internal and External Communication
• Research and development department
Benefits:
• Access to a much larger potential market
• B2B communication - obtain cheaper supplies
• Communication is quicker and cheaper

Question 27

Social and demographic influences on business activity (4)

Answer 27

• An ageing population with reduced birth rates and longer life expectancy -> changes patterns of demand of products and age structure of workforce would change.
• Changing role of women -> more women are seeking employment
• Better provision of education -> more skilled workforce
• Globalisation causes job insecurity -> more employees accepting temporary or part time employment.

Question 28

Main features of changing patterns in most business (5)

Answer 28

• Labour is being replaced by capital -> employment falls
• Change in demand of employees to more hi-tech industries
• Increase in women in employment
• Increase in part time employment
• More multicultural

Question 29

Def. Corporate social responsibility

Answer 29

Objective of the businesses that considers the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities, and the environment.

Question 30

Arguments for adopting environmentally friendly business strategies (4)

Answer 30

• Marketing and promotional advantage
• Less chance of breaking laws designed to protect the environment -> avoiding expensive court fines
• Attracts highly skilled employees
• Possible financial benefits e.g. solar panels may be a long term cheaper alternative oil and gas (that is becoming more expensive).

Question 31

Arguments against adopting environmentally friendly business strategies (4)

Answer 31

• Marketing and promotional advantage could also be gained by lower pricing. Being environmentally friendly may be overlooked if competitors have lower pricing.
• Reduced profits due to low polluting equipment
• In many countries, legal protection and inspection systems of the environment are weak -> easier not to care
• Economic development (from lower prices) may benefit more than environmental preservation.

Question 32

Def. Environmental audits

Answer 32

An account (checked by an external auditor) that assess the impact of a business’s activities on the environment

Question 33

Def. Social audit

Answer 33

A report on the impact a business has on society. This can cover pollution levels, health and safety records, sources of suppliers, customer satisfaction and contribution to the economy.

Question 34

Evaluation of environmental and social audits

Answer 34

• May not be taken seriously because they are not compulsory and there’s no primary way to check content
• Companies have been accused of using them as a ‘smokescreen’ to hide true intentions
• Can be time consuming and expensive to produce for limited value

Question 35

Def. Pressure groups

Answer 35

Organisations created by people with a common interest or aim who put pressure on businesses and governments to change policies so that an objective is reached.

Question 36

How do pressure groups achieve their goals?

Answer 36

• Publicity through media coverage e.g. frequent press releases of undesirable company activity
• Influencing consumer behaviour
• Lobbying of government - putting the arguments of the pressure groups to government members who have power to change the law. e.g. damaging the popularity of the government by a pressure group campaign, legal changes may be asked for.