Assessing Changes in the Business Enviroment; Unit 4 - Notes

Notes made from a combination of resources including the Malcolm Surridge text book and Philip Allan revision guide.

Covers the 'assessing change' in the external enviroment third of the course; economic, political, legal, social, technological, competitive, enviromental,

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Page 1

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Economic Environment
Economic Environment and Business Strategy:
Long term plans through which it seeks to obtain its corporate objective.
Plans may be:
Increase innovation
Enter new markets
Takeover or merging
Unemployment varies according to the shape of the business cycle
Inflationary pressures more likely in a boom
Inflation and interest…

Page 2

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Recession:
Income/Output falls
Labour and materials cost more and increase in demand
Costs rise
Government increase interest rates to prevent inflation
Falling profits / High interest
Delayed investment
Space capacity
More firms fail

Slump:
Some firms skip a slump and start rising
Increase in government spending
Lower interest rates
Low…

Page 3

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Slump: cut interest rates and taxes
Boom: Increase interest rates and availability of resources
Firms need to take into account the likely effects of the counter-cyclical policies and help avoid the
worse extremes of booms and slumps
Business Strategy:
Firms selling demand sensitive to income goods: rise in boom/fall in…

Page 4

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An increase in the supply of £ will lower its price

Exchange Rate:
Price of a currency expressed in terms of another
Varies regularly according to balance of supply and demand of currency

Why Buy Foreign Currencies:
Pay for goods and services bought abroad
Expected to pay using the currency…

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Requires supplies to price their products in a different currency to minimise fluctuations and
lessen effects and ensure it pays, in some currency it receives

Inflation:
Persistent rise in the price level and the associated fall in the value of money
Major problems when inflation is high
Historically lower over…

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Demand-Pull Inflation: Demand for goods and services exceed its ability to supply these products

Unemployment:
People not in work who are seeking work
Represents a waste of resources as labour is unused
8.3% rate of unemployment

Types:
Each type requires a different remedy

Structural:
Occurs due to change in the…

Page 7

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Assist with the provision of state training schemes
Develop relevant vocational courses
Business Action:
Replace labour with technology ­ boost productivity
Relocate
Give junior / unskilled employees more skills to carry out more jobs

Economic Growth:
Increase in the value of goods and services produced by a nation's economy
Negative…

Page 8

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Trends towards Globalisation:
Increased free trades between nations
Benefits:
Increase in global food production
Decrease in malnutrion
Less developed countries have access to healthcare
Leaders in major economies and firms protect and promote global trading and its benefits

Business:
Opportunities:
Increased gales revenue and profit
Cheaper resources
Economies of scale…

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Rapid growth rates
Natural resources

Weaknesses:
Poor transport infrastructure
Inflation
Important restrictions (tax)
Lack of appropriate workforce
Vulnerability to responsibility

Strategies:
Relocation
Diversification
Retrenchment or cost cutting
Merger or takeover
Joint ventures
Depends upon a range of factors:
Product
Financial position of the firm
Change in economic environment
Extent of…

Page 10

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Altering interest rates
Controlling money supply
Manipulating exchange rates
Government tends to rely on altering the interest rates to affect the level of economic growth
Increase:
Increased unemployment as production declines
Falling demand and reduces inflationary pressure
Reduced economic growth as output drops
Increased value of the pound
Improved current…

Comments

davidsalter

Report

This is a 22 page document which provides excellent notes on the economic aspects of unit 4. It includes the business cycle, economic indicators and a full précis on PEST analysis. It can be adapted for revision purposes in many ways.

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