External influences- Business

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PEST Analysis
Used to asses the likely impact of external factors on a business; Political Economical Social Technological
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SWOT Analysis
Analyse the business' current position and external factors that might affect it; Strengths Weaknesses Opportunities Threats
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Market
Where buyers and sellers meet to exchange goods and services
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Difference between a physical and non-physical market
Physical= shop, Non-physical= Online
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Advantage to a Physical market
See actual product, create brand loyalty (customer service)
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Disadvantage to a Physical market
More costs (higher overheads)
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Advantage to a non-physical market
Cheaper (lower overheads)
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Disadvantage to a non-physical market
Hard to create brand loyalty
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Competiion
Other firms in the same market
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Market structure- Perfect competition
Many competitors so will all have to charge the same price eg; agricultural
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Market structure- Monopolistic
Many small firms with different products, Each firm has a small market share eg; restaurant
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Market structure- Oligopoly
Small no. of firms each with a large market share, compete on non-price factors eg; supermarket
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Market structure- Duopoly
One supplier so has control over price eg; only pub
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Porter's model of 5 competitive forces
Analyses wether or not a business can be profitable based on other businesses in the industry.
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Market size
Volume or value of sales for a particular good/service across firms
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Market share
What % of sales a business holds for a certain type of good/service
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Marke growth
Increase in volume/value of sales for a good/service across an industry
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Demand
The no. of g&s consumers are willing to purchase at a given time
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Supply
The no. of g&s firms are willing/able to provide at any given point.
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How is price determined
When demand= supply
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Equlibrium
When demand= supply
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Price elasticity of demand
A small change in price results in a proportionate change in demand
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Price elasticity of supply
How responsive quantity supplied is to a change in price
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Price elastic demand/supply
Quantity demanded will change when price changes (has substitutes)
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Price inelastic demand/supply
Quantity demanded will not change when price changes (is a necessity)
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Formula for PED
Change in QD/ Original QD x Original P/ Change in P
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Formula for PES
Change in QS/ Original QS x Original P/ Change in P
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How to interpret figures from PED/PES
If >1 it is elastic
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Competitiveness
A firms ability to compete against other firms
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How can markets change over time
they become more or less competitive/change in size
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Advantages of competition to stakeholders
force firms to minimise costs
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Disadvantages of competition to Stakeholders
prevent firms from achieving economies of scale
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How is market dominance measured
by the market share of the business
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How can a firm increase its market dominance
better customer service or sell more to existing customers
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What factors could be entry barriers
large setup costs/customer loyalty to existing firms
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What factors could be barriers to exit
redundancy costs
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Why do barriers to entry and exit affect market dominance
some prevent new firms from entering the market
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How does small firms operate in markets with dominant firms
by having an individual brand image
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example of anti-competitive practices
limit the degree of competition
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What is the CMA
competition and markets authority regulates competitiveness
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Ways of measuring an increase in business size
employees number of assets profit/revenue
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Why do some businesses want to grow
to increase revenue increase profit so they can expand
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Why does some businesses want to remain small
good customer service and employee relations
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Internal growth
more buildings
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External growth
takeovers
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Integration
a takeover/merger to grow a business
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Horizontal integration
buying a business that sells the same thing (Increases market share)
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Backwards vertical integration
buying a supplier to you (Lower costs)
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Forwards vertical integration
buying a retailer (guaranteed custom)
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Lateral integration
Widen product range
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Conglomerate integration
completely different business (diversify)
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Increase market share
lowest costs guaranteed custom widen product range diversify
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What restrictions are on growth
finance time availability
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Globalisation
the process of increasing social and economic integration
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Advantages of globalisation
allows countries to specialise consumers get a wide variety of products lower costs
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Disadvantages of globalisation
unemployment in developed countries increase environmental and ethical problems increased competition
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Why is globalisation occurring
improvements in transportation
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Global branding
brands that are recognised throughout much of the world
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How can countries reduce the impact of globalisation
tariffs quotas administrative costs
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What is a MNC
a multinational company operate production or sales based in more than one country though its ownership is based in a single country e.g. Hilton or Tesco
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Advantages to MNC’s
is expands sale spread risk lower costs
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Disadvantages to MNC’s
language barriers exchange rates may need lots of capital
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What will international competitiveness be affected by
costs of product exchange rates USP brand appeal
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Advantages to countries with MNCs
located in job opportunities increased exports
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Disadvantages to countries with MNCs
low wage bill bad conditions jobs often low skill
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Exchange rate
the price of currency in terms of another
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Types of exchange rate
floating (can go up or down) fixed/managed (can only drop/go above a certain level)
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And increased exchange rate would affect British firms…
Negatively as people won’t buy as we are more expensive
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A decrease in exchange rate would affect British firms…
Positively as we are more competitive therefore will sell more
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International trade
when goods and services are bought or sold over country borders
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Benefits of international trade
specialisation economic growth greater competition greater range of products lower prices
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Costs of international trade
increased unemployment environmental issues loss of culture
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Barriers to international trade
tariffs (tax) quotas (physical limits)
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What types of EU legislation exists
Regulations directives recommendations
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Advantages to EU membership
support; financial and in war free movement encourage trade
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Disadvantages to EU membership
promotes immigration to UK all have the same rules
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EMU
European monetary union
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Advantages to adopting the euro
avoid currency change
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Disadvantages to adopting the euro
too much monetary interdependence pound has the Queen on it
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What is collusion
when businesses merge leaving no other substitutes therefore they can charge anything as consumers have no other options
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Privatisation
passing ownership from public to private was key in the 70s and 80s
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Advantages of privatisation
efficient and profitable
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Disadvantages of privatisation
loss of economies of scale
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Demand side policies
policies that affect demand in the economy
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Supply-side policies
policies that affect supply
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Business cycle
The patterns of upturns and downturns in demand and output within the economy
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Slump
Slump The phase in a business cycle when demand and output are low
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Boom
The phase in the business cycle when demand and output are high
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Unemployment
When people who are willing and physically able to work do not have a job
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Inflation
A continued increase in the general price level
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Taxation
Changes on individuals by organisations and government
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Direct tax
Taxes on income profit/wealth
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Indirect tax
Taxes on goods and services e.g. VAT
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Interest rate
Cost for borrowing money or award for saving
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Economic growth
When real income/output/expenditure of an economy grows over time
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GDP
Gross domestic product, value of all newly produced goods and services produced in the economy in a given time period
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Imports
goods brought in from another country
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Exports
Goods sold to other countries
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Balance of payments
record of transactions between one country and the rest of the world
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Tariffs
a tax/duty
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Quotas
government imposed trade restriction
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The circular flow of income
shows connections between different sectors
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An increase in unemployment will make the demand for goods and services…
Go down
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And increase in unemployment will make the revenue received by businesses…
Go down
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And increase and imply meant will affect the demand for workers by a business…
Negatively as people will have less money to spend there for products will be in less demand
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Ethical behaviour
Actions and decisions that are seen to be morally correct
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A rise in the price of raw materials will affect the business…
Negatively
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Ethics can affect decisions relating to…
What do you produce who to sell to who to buy from how to behave how to advertise
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Benefits of ethical behaviour
Good reputation higher sales people want to work for you
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Costs of ethical behaviour
Costly can reduce sales opportunities
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Technological change
Adopting new applications of practical or mechanical science is to industry and commerce
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Benefits of introducing new technology
Reduced waste, new production methods therefore quicker
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Costs of introducing new technology
Barriers to entry immediate costs long-term costs e.g. upgrading
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Criminal law
Behaviour that is or can be taken as an offence against the public society or state
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Civil law
Behaviour that constitutes an injury to an individual or the private party
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What is EU law
System of rules operating within the member states of the European Union
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How laws benefit businesses
Claim ownership of ideas
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How long is benefit employees
Minimum wage
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Contract law
The body of law that governs in forces and interpret agreements related to exchange goods and services
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Competition law
Aims to ensure fair competition takes place in each industry to ensure left their competition takes place in each industry
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Purpose of customer protection
Gives consumers protection against unfair selling prices
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What happens if a business breaks the law
Fines lawsuits bad publicity civil penalties
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What is the difference between social costs and private costs
Financial costs (private costs) + external costs (to people other than the producer) e.g. pollution = social costs
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Environmental audit
And assessment of the extent to which an organisation is observing practices which minimise harm to the environment
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Other cards in this set

Card 2

Front

SWOT Analysis

Back

Analyse the business' current position and external factors that might affect it; Strengths Weaknesses Opportunities Threats

Card 3

Front

Market

Back

Preview of the front of card 3

Card 4

Front

Difference between a physical and non-physical market

Back

Preview of the front of card 4

Card 5

Front

Advantage to a Physical market

Back

Preview of the front of card 5
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