Business Unit 2

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How can a business compete?
USP, Prices, Customer services, Research
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What are the benefits of competition?
Staff may become more motivated, Can see how to improve prices
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What are the drawbacks of competition?
May lead to unpopularity of a business allowing it to become bankrupt, May focus too much on competition rather than customers
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How does market size effect competition?
The larger the market the more competition, More opportunity for profit, Return for capital
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How does market price effect competition?
Allows the business to place prices competitively
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How do market expectations effect competition?
Looks at what consumers are used to or expecting
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What does porters five forces include?
bargainging power of customers, bargaining power of suppliers, Threat of substitute products and Threat of new entrants
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What are the benefits of inflation?
Raises the value of property and stock, If you borrow money when you need to pay it back the value will be less, Indirectly result in more productivity within companies, Mild inflation is good as if there's no rise in price deflation can occur
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What are the drawbacks of inflation?
discourage purchases on luxury items, suppliers may increase prices so the business will also have to, uncertainty of prices in the future may affect sales forecasts, when lending moey and it being repaid the value of it is less
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What happens when governemnt spending is increased?
May mean higher taxes, these high taxes reduce customer spending, potentially harmful to some firms expense of private sector spending, businesses rely on governemnt spending for their revenues and profit
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What happens when government spending is decreased?
Reduced number of subsidees given to a business, increased unemployment rate, may lead to market failures within the economy, reduced capital spending levels to negative externalities wich means business supply/trade routes can also be disrupted
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How does taxation effect a business?
decrease in income tax gives people more disposable income allowing for a multiplier effect, increase in VAT would increase costs to make products so companies would raise prices, High corporation tax will decrease the amount of new businesses
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What are the effects on a business due to exchange rates?
Appreciation in the exchange rates will reduce demand, This can conclude in less sales for the business and leave them with excess supply
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How will a rise in interest rates affect a business?
less people borrow as more money has to be repaid, Customers have more debts, businesses may have to use overdrafts, increase in monthly mortgage payments, less disposable income available to spend or save
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How will a fall in interest rates affect a business?
more disposable income as less money has to be repaid, business will be under less pressure to meet interest payments, consumer credit falls leading to more people buying big items, cheaper loans provide a platform for people to buy a house
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What are the effects of economic uncertainty?
selling prices would rise due to higher costs, businesses would be forced to increase their costs, suppliers could charge more for their supllies, businesses are dependent on their supply and must have measures in place for times of uncertainty
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Card 2

Front

What are the benefits of competition?

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Staff may become more motivated, Can see how to improve prices

Card 3

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What are the drawbacks of competition?

Back

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Card 4

Front

How does market size effect competition?

Back

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Card 5

Front

How does market price effect competition?

Back

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