Business A2 External Influences

Class notes on External Influences some topics missing

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  • Created on: 24-04-09 20:56
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Business Studies ­ External Influences ­ Class Notes
International Competitiveness
It measures the ability of business within a country to compete with those from overseas.
Firms aim to be competitive in order to gain / maintain market share. Competitiveness depends upon
price and non price factors.
Price Factors Nonprice Factors
Efficiency ­ productivity and reduced waste USP
Lowest price Brand ­ reputation
Location Ethics
Exchange rates Better customer service, lead time etc
Interest rates Training
Production process (JIT) Quality
Variable cost ­ cost of materials etc Marketing e.g. promotion, ads
Research and development and market research
Fixed costs, e.g. rent, labour etc
State of economy e.g. inflation etc
Government Policy
If the £ is strong it will be difficult for UKbased firms to compete. Nonprice factors include the quality
of design, the quality of production, service and after sales service plus the cleverness of the branding
and marketing. Mercedes cars are highly competitive internationally, even though they are premium
priced. For Ford, low costs are essential to enable the product to charge a competitive price.
International Competitiveness and Globalisation
What Factors might Constrain UK firms Global Activity?
Production Capacity
High Costs
Trade Barriers
Questions Pages 10 & 11
1. Analyse how changing location may contribute to a British firm's international competitiveness?
Cut costs = Reduce prices and increase sales
= Benefit from higher profit margins
Greater segments of the market to sell to, which could increase their market share.
Larger pool of skilled workers, new ideas etc.
Possible higher quality

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Legislation will have an impact
2. To what extent will a British firm protect itself from exchange rate fluctuations by relocating?
If they are producing in the location of their market they will not have to worry about how
exchange rates will affect imports and exports. Therefore they are predicted from exchange
rate fluctuations
3. Discuss the advantages and disadvantages of British firms relocating to locations where the standard
of living is lower than the UK
Positives Negatives
4. Cheaper labour etc 5.…read more

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Increased taxes allows governments more Not all regions get the same economic growth
spending on services / benefits.
European Union and its Implications for UK Businesses
In 1992 trade barriers were removed in the EU and in 2002 the Euro currency was launched.…read more

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The UK should not join the Euro as it would mean a sacrifice of control, which would greatly
disadvantage the UK economy. If we lose control of interest rates we put ourselves in a vulnerable
position. There are also extremely high costs involved in the transfer from the pound to the Euro.…read more

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Combine with others e.g. Through Employers Associations
Indirectly through actions e.g. threat to close plans and cut jobs
The success will depend on their access to politicians, the media etc and whether companies believe it is
a waste of time attempting or not.
Privatisation is transferring assets from the public sector to the private sector. It is likely to occur where
the government is pursuing a laissezfaire policy (businesses compete for themselves).…read more

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Impacts Puts off customers, investors, and Productive and committed employees
employees Cooperative community
Creates poor publicity Reliable suppliers
Satisfied customers
Ultimately damages profits Satisfied shareholders
Creates a positive cycle of profit, Growth that
benefits all.
Time Short term Long term
Which Model will a Business Choose?
It depends on... ...…read more

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Less scrutiny
Lenders…read more


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