2.5 External Influences

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What are the effects of inflation on business?
Firms with large loans benefit as it erodes value of money owed, can damage profitability, can effect UK companies competitiveness with foreign firms
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How does interest rates effect a business?
It affects consumer demand, interests charges affect the total operating costs (the higher the interest rate, the higher the costs of running an overdraft), the higher the rate the less attractive it is for a firm to invest in the firm
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How does a high exchange rate effect a business?
firms that export will prefer a low exchange, if importing a strong pound is preferred
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How can taxation and government spending effect a business?
If worried about inflation government may raise taxes limiting demand, reducing public spending means companies involved in areas like education will suffer
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How does the business cycle effect business?
This is the pattern of boom then slowdown. When growing companies and consumers spend and reinvest, in the slowdown lots of companies have to cut back and lay people off
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How does economic uncertainty effect the business environment?
In good times make sure cash supplies are built up, in bad times be alert for opportunities
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How does consumer protection effect businesses?
It creates a more level playing field in which competition has to be more on the basis of real product benefits
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How does employee protection effect businesses?
They protect the rights of employees at work
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How does environmental protection effect businesses?
It effects the processes firms are allowed to use in manufacturing and the material used
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How does competition policy effect businesses?
It stops a company buying a too large market share and destroying competition
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How does health and safety effect businesses?
It is designed to ensure the safety of employees and customers within the workforce, it includes the physical conditions they work in and how hazardous substances are dealt with
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How does competition change in different market sizes?
In big markets the number 1 has to remain innovative to stay there, competition can also be found from niche brands. In small markets there tends to only be two major players
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Other cards in this set

Card 2

Front

How does interest rates effect a business?

Back

It affects consumer demand, interests charges affect the total operating costs (the higher the interest rate, the higher the costs of running an overdraft), the higher the rate the less attractive it is for a firm to invest in the firm

Card 3

Front

How does a high exchange rate effect a business?

Back

Preview of the front of card 3

Card 4

Front

How can taxation and government spending effect a business?

Back

Preview of the front of card 4

Card 5

Front

How does the business cycle effect business?

Back

Preview of the front of card 5
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