unit 7 external environment Flashcards
average rate of return
average annual profit as a percentage of the initial investment
ARR
total net cash flow ÷ no of years / initial investment X100
barrier to entry
factors that make it difficult / impossible to enter an industry
boom
above trend growth of GDP
• characterised by high consumer / business confidence, high investment rising prices, low unemployment
BRIC economies
four large emerging economies Brazil Russia India China
budget deficit
taxation receipts are less than government spending
boosts overall demand for firm’s products
budget surplus
taxation receipts greater than gov spending
reduces demand in economy
business (trade) cycle
regular fluctuation of income and output (GDP) within an economy over time
boom, recession, slump, recovery
carroll’s csr pyramid
sets out priorities for business to become good corporate citizens philanthropic ethical legal economic
cartel
formal / written agreement to restrict competition and boost profits
competitive advantage
distinctive feature that gives a firm an edge over rivals
competition and markets authority
main UK organisation set up by gov to enforce competition law / tackle constraints on competition
investigate mergers / monopolies / firms who abuse market power
competition policy
gov action to prevent abuse of monopoly power and restriction of competition
policy focused on monopoly / mergers/ restrictive practices
conflict of interest
diff individuals / stakeholders want diff outcomes / decisions to be made
contractionary policy
leads to reduction in demand within economy due to gov action
higher interest rates / taxation / lower gov spending
core competencies
key area of strength for the business
gives competitive advantage
corporate objectives
specific time based targets relating to the role business
cost push inflation
general rise in prices cause by an increase in costs
CSR
commitment to behave ethically and contribute to economic development
improve quality of life of workforce / wider community
CPI (consumer price index)
measures average change month to month in prices of consumer goods
using typical basket of items
customs union
group of countries that do not impose tariffs (taxes on imports) on each other’s goods
agree to impose common external tariffs on goods outside customs union
demand pull inflation
general rise in prices due to nationwide rise in demand for products
disposable income
the amount of income available to spend after taxes / benefits have been dealt with
disposable income =
gross income - direct tax + state benefits
disruptive technology / innovation
introduction of a new process / product that radically changes competitive advantage of an existing market
economic growth
rise in the real GDP meaning an increase in the amount of goods / services produced per head of population over a period of time
Elkington’s triple bottom line
accounting framework in which businesses assed not only financial impact but social / environmental impacts
people, profit, planet
emerging market
country whose GDP is growing faster than average and has potential for further growth
enterprise finance guarantee scheme
gov loan guarantee scheme to help provide additional lending to viable small / medium sized enterprises that lack adequate security of track record for a commercial loan
enterprise policy
gov action to encourage the start up of new businesses and health / growth of young businesses
environmental audit
check up on the level of pollution emissions / wastage / energy consumptions / recycling levels and use of non renewable resources of a firm
exchange rate appreciation
a rise in value of the currency compared to other currencies
exchange rate depreciation
a fall in the value of the currency compared to other currencies
expansionary economic policy
any gov action that stimulates the increase in GDP
fiscal policy
government spending and taxation to influence the economy
functional decision making
policies and tactic adopted by the individual business departments
globalisation
growing trend towards worldwide markets in products / services / capital / labour unrestricted by barriers
increasing integration go worlds regional / local economies into single international market
greenwash
broadcasting of misleading information by an organisation to conceal its abuse of the environmental order in order to present a positive public image
GDP
total value of goods and services produced by a nation within a year
hedging
any technique designed to reduce / eliminate financial risk
•insuring against future exchange rate changes
income elasticity of demand
shows how income changes affect demand for certain goods
YED
% change in q / %change in income
inferior good
a good for which demand falls as income rises
negative YED value
inflation
sustained increase in average prices of goods / services
represents a fall in the purchasing power of money
inflation target
level of inflation that the gov expects bank of England’s monetary policy committee to achieve through ue of monetary policy
infrastructure
physical organisation of structures / facilities needed for the operation of a society
social capital assets business operations
investment appraisal
judging the attractiveness of a plan to generate future income
Kaplan and Norton’s balanced scorecard
strategy performance management tool that focuses on a broader range of KPIs financial performance customer perspective internal business process performance learning / growth perspective
m commerce
buying and selling of goods and services through mobile devices
mission statement
memorable sentences that encapsulate the key reason that the business exists
• for employees
monetary policy
control of interest rates / money supply in order to influence level of spending in economy
multi channel
marketing strategy that offers customers choice of ways to buy products
new enterprise allowance
gov scheme to support new business
grant loan helps start up costs (repaid within 5 years)
offered a mentor
normal good
a good for which demand rises as income increases
positive YED
oligopoly
market wherein an industry is dominated by a small number of businesses who are inter-dependent
free trade
open trade
no discrimination against imports from exports to foreign jurisdictions
free trade
payback
time taken to recover cost of investment
philanthropy
desire to promote the welfare of others
desire to promote ethical practice
donation
porter’s generic strategies
4 general ways to gain competitive advantage cost leadership cost focus differentiation differentiation focus
porter’s 5 forces
framework for analysing level of competition and profitability within an industry contestability alternatives buyer power supplier power
pressure group
an organisation whose members have a common cause, seek to influence political / corporate decision makers to achieve a declared objective
prime mover advantage
benefit of being the first business to produce a product / enter a market
protectionism
attempt by gov to impose restriction on trade in goods / services
tariffs / quotas
quantitative easing
increasing of money supply by electronic money creation
gov use this money to buy bonds to reduce long term interest rates / encourage private banks to lend more
