Unit 6 Flashcards
What are the three sectors of industry?
Primary, Secondary, Tertiary.
What does the primary sector refer to?
The extraction of materials from the earth, including industries such as farming, fishing, forestry, and mining.
Example: Fish caught for Donegal Catch frozen products.
What are some trends in the primary sector?
- EU introduced fish quotas to conserve fish due to overfishing.
- Development of wind and solar power to reduce environmental effects.
- Increased awareness of sustainable forestry methods.
- Growth of new businesses in the fishing industry, such as nutritional supplements.
What does the secondary sector involve?
The transformation of raw materials into finished products, including industries such as manufacturing, construction, and agribusiness.
Example: Kerry Group - food products.
What are some trends in the secondary sector?
- Increased competition from foreign retailers in the food market.
- Growth of pharmaceutical firms collaborating with educational institutions.
- Increased demand for manufactured products like electronics and pharmaceuticals.
- Growth of indigenous firms, such as Glenigan Farm.
What is the tertiary sector?
Referred to as the ‘services sector’, it is the largest sector in Ireland, aiming to provide services to consumers.
Example: Medical and transport services.
What are some trends in the tertiary sector?
- Shortage of staff despite increasing employee numbers.
- Wage increases due to successful pay claims.
- Growth of e-commerce changing retail dynamics.
- Increased presence of TNCs attracted by low corporate tax.
What are some jobs in the primary sector?
Farmer and fish monger.
What are some jobs in the secondary sector?
Builder and factory production worker.
What are some jobs in the tertiary sector?
Nurse and occupational therapist.
What is an indigenous firm?
An Irish-based business established and owned/managed by Irish residents, producing goods and services in Ireland.
Example: Easons.
What are the benefits of an indigenous firm?
- Loyalty to Ireland protects employment levels.
- Inspires business growth among local entrepreneurs.
- Provides employment to many living in Ireland.
- Profits are retained and spent in the Irish economy.
Example: Easons.
What are the challenges faced by indigenous firms?
- Increased competition from MNCs.
- High costs of rent and wages.
- Difficulty accessing skilled labor due to migration.
Example: People migrating to Dublin or emigrating to Australia.
What is the economy?
How businesses, consumers & governments trade & interact with one another in the production & distribution of goods & services in a country.
What are the 3 economic systems?
- Free enterprise - Little government involvement. 2. Centrally planned - Full government involvement. 3. Mixed - Business & government.
What is free enterprise?
Little to no government involvement. Businesses provide goods & services to satisfy consumers’ needs & wants.
Example: USA.
What is centrally planned economy?
The government makes all decisions relating to the production of goods & services. It decides what, who & how things are made.
Example: North Korea.
What is a mixed economy?
Combines elements of free enterprise & centrally planned systems. Decisions about production & distribution are made by businesses & government.
Example: Ireland.
What is economic growth?
An increase in the demand for goods & services in an economy, measured by GNP & GDP.
What is Gross Domestic Product (GDP)?
Measures the value of goods & services produced by a country.
Example: Ireland, includes goods produced by foreign-owned companies located in Ireland, e.g., Apple in Cork.
What is Gross National Product (GNP)?
Measures the value of goods & services produced by citizens & businesses in the country.
Example: Ireland, does not include goods from foreign-owned businesses based in Ireland.
What is an economic boom?
Occurs when economic activity is increasing rapidly, with GDP growth greater than 4%.
What happens during an economic boom?
- Increase in demand for goods & services. 2. Property prices rise. 3. Unemployment levels decline.
What is an economic recession?
When GDP growth is negative & falls for two consecutive quarters (6 months).
What happens during an economic recession?
- Demand for goods & services falls. 2. Unemployment levels rise.
What was the Celtic Tiger?
The economic boom in Ireland from the mid-1990s to 2007, with an average economic growth of 9.4% from 1995-2000 and almost 6% until 2007.
What is an economic depression?
A prolonged period of recession resulting in a significant decline in economic activity (more than 10% from its peak) and increased unemployment levels.
What is economic recovery?
When an economy recovers from the lows of a recessionary period, often stimulated by government fiscal policy.
What are the benefits of economic growth?
- Increased employment. 2. Lowers government expenditure. 3. Higher business profits & sales.
What are economic variables?
Measures how an economy functions, including inflation, interest rates, exchange rates, unemployment, and taxation.
What is inflation?
The sustained increase in the price of goods & services in an economy from one period to the next, usually measured by CPI.
What is the Consumer Price Index (CPI)?
Records the overall change in the prices of goods and services that people typically buy over time by collecting approximately 53,000 prices every month.
What is deflation?
When the cost of goods & services in an economy decreases from one period to the next, occurring when the rate of inflation is less than 0.
What are the impacts of inflation on government?
Government may need to increase tax credits to maintain the level of disposable income of individuals, reducing income tax received.
What are the impacts of inflation on businesses?
Reduced sales as consumers may purchase goods elsewhere where prices are lower.
What are the impacts of inflation on consumers?
An increase in prices leads to less disposable income for leisure spending.
What are interest rates?
The cost in percentage of borrowing money from financial institutions and the reward for saving money.
What are the impacts of low interest rates on government?
Increased taxes earned as businesses expand and create more employment.
What are the impacts of low interest rates on businesses?
Consumers may borrow more money and purchase more goods & services, increasing sales & profits.
What are the impacts of high interest rates on government?
A reduction in consumer spending leads to less VAT.
What are the impacts of high interest rates on businesses?
Businesses may not expand/start up due to increased borrowing costs.
What are exchange rates?
The relative price of one currency expressed in terms of another currency.
What is the impact of a decrease in the value of the euro?
- Increased costs of imports for government organizations. 2. Increased export sales for businesses. 3. Consumers may stop buying imports.
What is the impact of an increase in the value of the euro?
- Sales may decline in export businesses. 2. Firms’ products may be more expensive in foreign markets. 3. Consumers will have more money to spend abroad.
What is the unemployment rate?
The percentage of the labor force that is out of work but actively searching for employment.
What is the labor force?
The total population of a country, excluding under 18s, over 65s, full-time students, and those out of work due to long-term illness/disability.
What is the minimum wage?
The legal minimum hourly payment to an employee, set by the government.
Example: Under 18s = 8.89.
What are the positives of increased employment?
- Increased revenue via taxes for government. 2. More money for consumers to spend on goods.
What are the negatives of increased employment?
- Difficulty finding high-quality staff. 2. High inflation due to increased consumer demand.
What are the impacts of unemployment?
- Reduced government revenue. 2. Increased government expenditure on social welfare. 3. Reduced business profits.
What is taxation?
Used by government to run the country, discourage consumption, and redistribute wealth.
What are the impacts of high tax rates?
- More money for government to run the country. 2. Reduced consumer spending. 3. Low disposable income for consumers.
What are the impacts of low tax rates?
- Less money for government to run the country. 2. Increased sales for businesses. 3. More disposable income for consumers.
How do businesses impact the economy?
- Increased employment reduces social problems. 2. Tax revenue increases government expenditure. 3. Improved standard of living.
How can the government stimulate business activity?
- Lower corporation tax. 2. Provide grants. 3. Increase education for skilled employees.
What does CLG stand for?
Company Limited by guarantee. It does not share capital & its members have limited liability.
What are indicators of a declining community?
Abundance of ‘For Sale’ signs, high unemployment rate, high school dropouts, closure of businesses, limited transport links, high crime rates.
What are indicators of a thriving community?
High levels of employment, access to education & training, new businesses opening, good transport links.
What is a community?
Consists of people who interact with one another in a common area, e.g., village, town or city.
What are the benefits of local businesses on the community?
Provide employment, increased disposable income, increased business culture - encourages people to start businesses.
What is community development?
Refers to the improvement of local areas and communities for both social & economic benefit through the efforts of local citizens/residents.
What is the first step in forming a community development committee?
Form committee: Group of people come together. Should be of all ages, genders, interests.
What is the structure of a community development committee?
Form CLG - gives members limited liability.
What is involved in the planning phase of community development?
SWOT analysis to identify local issues, e.g., unemployment. Then creates plan to achieve goals set.
How can finance be obtained for community development?
Obtain finance from fundraising, loans or grants, e.g., via LEADER.
What is the Local Enterprise Office (LEO)?
30 Local Enterprise offices in Ireland, offering a range of government supports to help entrepreneurs establish & grow their businesses.
What are the functions of the Local Enterprise Office?
Training, mentoring, financial support.
Training includes financial management & marketing. Financial support includes grants and small loan schemes.
What is the LEADER programme?
An EU funded programme that aims to provide local communities with the resources needed to reduce poverty, increase social inclusion, and promote economic development.
What are the functions of LEADER?
Funds projects, local action groups, provides finance.
Examples include promoting rural tourism and developing tourist walking trails.
What do Area Partnership Companies (APCs) support?
Support local communities to reduce unemployment & poverty, encourage educational engagement, and improve social inclusion.
What are the functions of APCs?
Encourage young people to engage with education, support entrepreneurship, and offer job search assistance.
Examples include CV preparation & interview techniques.
What is Pobal?
Works with organisations to improve the lives of people experiencing social exclusion & disadvantage.
What programmes does Pobal facilitate?
Gateway, dormant account fund, European refugee fund.
Gateway provides short term employment; dormant account fund redistributes money for local employment.
What is an economic benefit of community development?
Direct increase in employment as new businesses start up & hire staff.
What is a social benefit of community development?
Improves the sense of pride within the community, encouraging stores to open and enhancing the area’s appearance.
What are economic benefits of community development?
Increased employment, promotes enterprise culture, and growth of commercial rates.
Commercial rates can be reinvested back into the community.
What are social benefits of community development?
Reduced antisocial behaviour, reduces emigration, and increases community spirit.
What are business ethics?
Moral rules and standards that help people make decisions in a business. Everyone must identify what is morally ‘right’ and ‘wrong’ and choose the ‘right’ option, regardless of impacts on profits.
What are some reasons for unethical behaviour in a business?
- Lack of legislation: Little consequences for unethical actions.
- Business Greed: Prioritizing profits over ethics.
- Existing business culture: Unethical behaviour from senior management influences employees.
- Employee fear: Fear of dismissal may lead to unethical actions.
How can a firm encourage ethical behaviour?
- Ethical Audit: Independent review of ethical practices.
- Lead by example: Senior management must act ethically.
- Whistleblowing: Create a culture that supports reporting unethical behaviour.
- Training: Include code of ethics in induction and refresh training.
- Rewards: Incentives for ethical behaviour and punishments for unethical actions.
What is a code of ethics?
A set of moral rules and standards that provide guidelines on expected behaviour when dealing with stakeholders.
What are the advantages of a code of ethics?
- Increased ethical behaviour: Employees strive to be ethical.
- Marketing tool: Increases consumer awareness and boosts profits.
- Increased management time: Empowers employees, freeing up management time.
What are the disadvantages of a code of ethics?
- Poor industrial relations: Employees may feel mistrusted.
- Slow decision making: Fear of judgment may hinder decisions.
- Decreased productivity: Time spent on the code may reduce daily productivity.
What is environmental responsibility in a business?
The responsibility to conduct business activities without damaging the environment.
How can a business protect the environment?
- Energy: Use renewable sources.
- Waste: Reduce, reuse, and recycle.
- Pollution: Reduce harmful emissions.
- Deforestation: Source wood products sustainably.
- Water scarcity: Conserve water and collect rainwater.
What are characteristics of an environmentally responsible business?
- Honest communication: Rectify environmental damage.
- Environmental awareness: Provide training and workshops.
- Open to new approaches: Use recyclable products.
- Compliance with laws: Follow environmental regulations.
- Consultation: Engage stakeholders on new policies.
What is the Environmental Protection Agency (EPA)?
An independent state body responsible for environmental protection and monitoring in Ireland.
Head office in Johnstown Castle Co. Wexford.
Reasons why the government seeks involvement in businesses & the economy
• Improve infrastructure: EG: Roads, water supply & hospitals. = Allows efficient running of country.
• Redistribute wealth: Imposes higher taxes on higher incomes & uses this to distribute money to those on less income, via social welfare EG: WFP.
• To legislate & regulate: Gov introduces & enforces laws to encourage the development of businesses, protect employees & consumers, EG: The employment Equality Act.
• Discourage consumption: EG: Impose sugar tax to deter people from buying sodas.
• To provide essential services: Gov provide services that private enterprises can’t provide, EG: Electricity & transport in rural areas.
How can the government create a positive business climate?
• State agencies - Grants.
• Invest in 3rd level - better skilled employees.
• Reduce taxes.
• Spend money in economy - EG: Buy medical equipment.
• Increase capital expenditure - schools & hospitals = creates jobs.
Fiscal policy (Budget)
The government’s policy of raising revenue (Mainly Taxation) and prioritising expenditure in order to influence the economy of the country.
Current expenditure
Money spent on the day-to-day running of the country, EG: Wages of nurses & teachers + social welfare payments.
Capital expenditure
Money required for long term projects, EG: New schools & hospital equipment.
National budget has three possible balances
• Surplus: Income is greater than expenditure.
• Deficit: Income is less than expenditure.
• Balanced: Income & expenditure are equal.
How does the government deal with a budget deficit?
• Increase taxes - Increase tax rates
• Reduce expenditure - EG, wages.
• Borrow money - EG: via government bonds.
Government bonds
A government will issue bonds in order to raise money to run the country. A bond is similar to an interest paid loan - Gov promise to repay the holder of the bond (Bondholder) at some point in the future. Until the bond is repaid, the government only make interest payments on the bond.
• Gov bonds are bought by: Insurance firms.
How does the government use its expenditure policies to support Irish businesses?
• Spends money: The government uses its policies by spending money in Irish firms…EG: Hospital equipment. This increases sales for firm.
• Provide grants: State agencies (LEO) provide grants to firms. Allows for expansion.
• Invests in infrastructure: EG: Roads + ports which reduces business costs as transporting goods is faster & more efficient.
• Invests in education + training: Skilled employees.
How does a business use its expenditure policies to discourage businesses?
• Reduce social welfare: Reduces income, less money spent on goods…Decreasing sales.
• Reduced education spending: Business will have to pay more for highly skilled employees, eg abroad + increase business costs.
Examples of state agencies
• CCPC
• LEO
• WRC
• Enterprise Ireland
• IDA
Enterprise Ireland
Helps indigenous Irish businesses export their goods & services. It focuses on Irish-owned enterprises with 10/more employees that want to grow export sales.
Functions of Enterprise Ireland
• Provide finance: Provides funding to businesses that want to start/increase international sales. - usually equity capital.
• Encourages R&D: Encourages businesses to invest in research & development + to develop new products -> increasing firms success.
• Provide market research centres: Provide business with up to date information, including: Market size & competitors.
• Provide events: Organises trade missions & fairs in coordination with country visits by gov ministers. These allow links to be built between other countries.
IDA Ireland
= Industrial Development Agency. Aims to attract foreign direct investment (FDI) into Ireland by providing advice & financial support.
Functions of IDA Ireland
• Provides info & stats: Compiles info on key business sectors & locations around Ireland.
• Provides assistance: Provides support to businesses that want to set up in Ireland by helping to find ideal locations. EG: IDA business parks.
• Creates links: Creates links between international businesses, third level institutions & research centres. This ensures correct skills & R&D facilities are in place.
• Provides finance: Provides financial assistance through capital & training grants.
Foreign Direct Investment
When a business invests money in a foreign country & establishes operations there, EG: Google is a USA company but has set up operations in Ireland.
Impact of state agencies on businesses
• Increase sales: Grants can help businesses fund product development & market research for new products. This helps to increase sales.
• Reduce costs: State agencies provide businesses with grants, EG: Startups which reduces costs.
• Attracts FDI: access to grants will attract FDI into Ireland & increase employment for Irish economy. -IDA.
The impact of increasing taxes for a business
• High corporation tax = Difficulty expanding.
• VAT = Makes products more expensive, thus decreasing sales.
• Businesses act as tax collectors, EG: PAYE. May have higher costs of admin staff to deal with tax.
Ways to create a positive business climate by reducing taxes
• Reduce VAT: This will make products cheaper & so consumers will buy more, increasing sales.
• Reduce corporation tax: Allow a firm to invest in expanding = larger firm.
• Increase tax credits: Consumers = more disposable income.
• Reduce PRSI
• Reducing taxes: Encourages other businesses to start up.
Impact of increased laws on regulations on businesses
• Increased spending: Consumers will buy more when consumer protection act is in place as they feel protected.
• Reduces costs: More product quality & safety laws ensures products are fit for sale & lead to less returns…reducing costs.
Impact of the government on the labour force (Working)
• Provides employment: Government is Ireland’s largest employer. It employs people directly in the public sector, civil service & semi-state companies. - reduces social welfare.
• Sets taxation: EG, PAYE, PRSI & USC rates. Increasing rates discourages people from working as more pay will be deducted in the form of taxes.- increases supply of labour employers.
• Increases profits: Gov buys goods and services from Irish businesses, eg: Medical supplies & Garda cars. This ensures employers can pay employees & creates indirect employment.
• Highly skilled employees: Gov invests in 3rd level institutions to ensure employees are highly skilled. Students are exempt from tuition fees. Solas helps unemployed to upskill & enter the workforce.
The public sector
The public sector refers to businesses & organisations owned & run by the state. EG: The civil service & Dublin bus.
Civil service
Public officials who advise & support government ministers in the running of departments. EG: The Department Of Education & Skills. Roles can range from administrative - managerial positions.
The private sector
The private sector refers to businesses that are not owned or funded by the state. EG: Private hospitals.
Public-private partnership (PPP)
When the public & private sector work together on a common project. It involves providing infrastructure & services that in the past would have been provided by the public sector. EG: Dublin criminal court of justice.
Advantages of public-private partnership
• Obtain finance: It enables the government to raise finance from the private sector for a project that it would not be able to fund itself.
• Faster completion: Projects are completed faster & on time. There is often a penalty imposed if the contract is completed behind schedule.
• High expertise: Expertise & experience from the private sector is used in PPP projects = greater results.
Disadvantages of public-private partnerships
• High cost: Project may be more expensive in the long run as private enterprises will earn a profit from the PPP contract.
• Low quality: The firm may apply lower standards in constructing & maintaining infrastructure projects. = negative impact on these services, EG: Hospitals.
• Higher risk: Many PPP contracts are awarded to the same firm. If the firm files for bankruptcy it will be unable to complete existing projects & maintain completed ones.
Privatisation
The sale of state-owned companies. The ownership is transferred from the public sector -> private sector. EG: Aer Lingus & IAG.
Benefits of privatisation
• Increased government revenue: The sale of state-owned companies gives the government a lump sum.
What is a drawback of PPP contracts?
The firm may apply lower standards in constructing & maintaining infrastructure projects, leading to negative impacts on services like hospitals.
What is a risk associated with PPP contracts?
Many PPP contracts are awarded to the same firm. If the firm files for bankruptcy, it may be unable to complete existing projects or maintain completed ones.
What is privatisation?
The sale of state-owned companies, transferring ownership from the public sector to the private sector.
Example: Air Lingus & IAG.
What is a benefit of privatisation?
Increased government revenue from the sale of state-owned companies, providing funds for infrastructure and national debt repayment.
How does privatisation increase efficiency?
Private firms are profit-driven and typically run in a more efficient and cost-effective manner.
What financial advantage do privatised companies have?
Privatised companies have greater access to finance, allowing them to take out loans and sell shares, making expansion easier.
What is a drawback of privatisation?
Loss of state assets that may be important to a country, such as water supply and transport.
How can privatisation affect employment?
Privatised firms may run more efficiently and require fewer staff, leading to redundancies and increased social welfare payments for the government.
What impact can privatisation have on consumer prices?
Privatised companies aim to make a profit for their shareholders, which may result in increased prices for consumers.
What is nationalisation?
When a private sector industry is taken over by the government (public sector).
Example: AIB.
What is a benefit of nationalisation?
It provides essential services that may not be profitable for private enterprises to offer, such as An Post and transport links in rural areas.
How can nationalisation save businesses?
The government can turn a poorly performing business into a profitable firm.
Example: AIB has now returned profit.
What is a drawback of nationalisation?
High investment is often required.
What is another drawback of nationalisation?
It may not solve the problem, as the government may not be able to run the business better.
What is deregulation?
The removal of legal barriers to allow firms to enter an industry, enabling them to trade in a market.
