Unit 3.5 Business Studies

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Ethics in Business

Business Ethics is ideas about what is morally correct or not, applied in a business situation.

What should be the minimum wage?

How much waste is each company allowed to produce?

Should business pay a fair price to their suppliers?


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Profit or Ethics

Trade off = something is given up in order to gain or achieve something else.

There is a trade off between profit and ethics.

Some businesses think...

  • acting ethically will lower profits. Paying higher wages, recycling and using only ethical product is likely to rise costs and lower profits

Some business think....

  • Acting ethically can be appealing for customers and can motivate employees. This can lead to higher productivity and more sales which will balance the costs

  

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Pressure Groups

Pressure groups are organisations that try to get business to change what they are doing.

Pressure groups mainly focus on issues such as:

  • Animal rights
  • Workers rights
  • Environment
  • World Poverty

Pressure groups can cause bad publicity which can damage their reputation.

Pressure groups methods include...  Lobbying, Protests, Working/Not Working with Businesses and Boycotting Products.

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Environmental Effects

Most businesses have an effect on the effect in both short term and long term.

The impact on the environment is closely linked to its growth. As businesses expand they will normally have a bigger impact on the environment.

Short Term Effects

  • Traffic Congestion, through transport and deliveries
  • Air, Noise and water pollution, through manufacturing and industry

Long Term Effects

  • Climate Change
  • Depletion of Land, Food and Natural Resources
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Business Oppurtunities

As consumers are becoming more environmentally aware, there is an oppurtunity for business to change their products to meet customer needs and make them more environmentally friendly.

E.g. Hybrid cars instead of your normall diesel cars

Ways of reducing the impact on the environment:

  • Recycling
  • Renewable Energy
  • Bio-degradable packaging
  • Reduction in Air/Food miles
  • Plant trees when you use them
  • Solar Power
  • Wind Power
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International Trade

Factors influencing trade:

  • How developed each country is (income, wages, quality and technology of products)
  • Goverment regulations on imports and exports (Quotas, Export Subsidies)

Developing countries and UK businesses

Many UK Business are looking abroad for materials or moving there whole business there. This is because:

  • Lower costs of production
  • Products cheaper when bought from abbroad and sold in UK
  • Cheap resources
  • Cheaper Wages

Developing countries may be a threat to UK businesses. e.g. if the UK buys cheap imports, then UK may suffer because of poorer quality etc. 

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Policies affecting international trade

Goverments can encourage international trade by supporting exports. They can restrict imports in order to protect their home markets.

Tariffs - Put tax on imports making them more expensive

Quotas - Putting a physical limit on the number of imports you are allowed

Export subsidy - Reduce the price of exports and encourage exporting firms

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Government and the EU

The UK government and the EU laws govern the way businesses in the UK operate, trade and deal with customers. The goverment aims to encourage competition, help businesses run efficiently and protect consumers and employees.

EU Regulations

  • Accounting Regulations
  • Trade Description Act
  • Health and Safety Laws
  • Minimum Wage
  • Maternity and Paternity rights

Businesses will often take measures to avoid these laws:

  • Move business to a country where corporation tax is lower (e.g. Ireland)
  • Producing products in countries with low minimum wages
  • Selling goods in countries with relaxed laws on health and safety
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Regulations

Regulations have both pros and cons for businesses.

Short term impact of the goverment regulations on businesses is increasing of costs.

However in the long term it should make them more competitive and ethical.

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Minimum Wage

Benefits

  • Small businesses are able to compete with big businesses who might force down wage rates
  • Increased productivity
  • Increased Customer Service

Drawbacks

  • Higher costs of labour
  • Higher prices to charge customers
  • Less poeple buy 
  • Less Sales
  • Less Profits
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Paternity and Maternity

Benefits

  • Better relationships with employees and work life balance
  • Increase Job Security
  • Increase Motivation

Drawbacks

  • Working days lost while employee on maternity
  • Less producitvity
  • Less products
  • Less Sales
  • Less Profits
  • Have to hire people who dont know the business code
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Health and Safety Regulations

Benefits

  • Fewer work related accidents and injuries
  • People feel safer
  • More productive

Drawbacks

  • Costs of health and safety regulations can hinder productivity
  • Costs to change work place
  • Higher price 
  • Less sales
  • Less Profits
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Tax

Goverment Tax includes:

  • Value Added Tax (VAT)
  • Corporation Tax
  • Income Tax
  • National Insurance 

Taxes High

Consumers spend less
Profits for businesses fall

Taxes Low

Consumers spend more
Profit and divedends rise 

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