EXTERNAL INFLUENCES PART 3

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State a reason why demand falls for a business
may be because its product is being made cheaper by an overseas competitor or perhaps its product has gone out of fashion
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What is demand linked to?
consumer income
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Explain how demand is linked to consumer income
The more money a person makes the more expensive products become available to them
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What happens if consumer incomes fall?
consumers will have less money to spend and will look for cheaper products
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What is being unemployed?
is when you are able to work but don't
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State an effect of high unemployment
Customers have less disposable income as many are without jobs
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State an effect of high unemployment
people spend less so demand for goods falls and profits may fall
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State an effect of high unemployment
it is easier to fill jobs as more people are available
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State an effect of high unemployment
the business may be able to hire people for lower wages and this reduces the businesses costs and enables them to become more competitive
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State an effect of low unemployment
Customers have more disposable income as most people have jobs
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State an effect of low unemployment
people spend more money on goods so demand rises and so does profits
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State an effect of low unemployment
it is difficult to find good quality staff. The business may be forced to pay the staff more to get them/keep them
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State an effect of low unemployment
Paying more for staff means costs are increased. The business may then be forced to increase its prices and this makes it less competitive
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How can the size of the population affect a business?
this determines how much the business can grow
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How can population growth/decline affect a business?
businesses will move into growth markets. If a market is declining then businesses need to look at new markets to make their money
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How can UK has an ageing population affect a business?
businesses will adjust their product range and marketing to target the needs of older customers
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How can UK enjoys high level of immigration affect a business?
this brings money into the local economy and creates opportunities which creates new markets for businesses and it might also provide businesses with a greater range of people to choose from and perhaps even lower their wage costs
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What does inflation measure?
the rise in prices over time
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How is inflation measured?
measured using CPI (the consumer price index)
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State a reason why prices rise
Businesses put up prices because the price of their raw materials from suppliers have risen
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State a reason why prices rise
Businesses increase their prices because there is a lot of demand for their products
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State an effect of Inflation on a business
wage costs rise
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State an effect of Inflation on a business
suppliers/materials costs rise
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State an effect of Inflation on a business
wage negotiation and possible conflict with the workforce
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State an effect of Inflation on a business
price instability: Firms need to regularly update pricelists
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State an effect of Inflation on a business
Uncertainty: Firms may be reluctant to enter into long term contracts
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State an effect of Inflation on a business
Firms may be more likely to borrow as the value of money falls over time
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What is Globalisation?
is when businesses in different countries become more and more connected together
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What is International trade?
Businesses buy and sell to and from other businesses in the world. This gives them access to millions of new customers and also products which can't be produced in their own country
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What is Production abroad?
Businesses decide to set up their own factories and offices abroad. This gets around tariffs and quotas and gives the business easier access to the overseas customers and /or cheaper labour
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What is Outsourcing abroad?
A business in one country may pay a different business in another country to produce goods or services for it. The business might outsource some of its other functions there also. This is usually done to reduce costs
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What are Multinational corporations?
These are companies that have plants in different countries around the world
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What is Global branding?
The product becomes a brand name and sold worldwide
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What is People/labour movement?
Workers move to work in different countries
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State a benefit of Globalisation for the UK
Consumer choice: UK customers can enjoy products that can't be produced in the UK
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State a benefit of Globalisation for the UK
Lower Prices: UK customers can buy goods cheaper as they are produced in the UK
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State a benefit of Globalisation for the UK
Cheaper Labour: It is often cheaper to produce abroad. UK businesses that do this will enjoy lower costs
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State a benefit of Globalisation for the UK
A Larger market: Millions (even billions) of overseas customers
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State a benefit of Globalisation for the UK
Economies of Scale: The business will grow and average costs will begin to fall
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State a problem of Globalisation for the UK
Lower Profits: The UK business might be forced to lower prices due to competition from abroad
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State a problem of Globalisation for the UK
Business closures and loss of jobs: If the products are made overseas the firms in the UK won't need to employ as many staff
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State a benefit of Globalisation for developing countries
Jobs and living standards: Jobs are being created in these countries and wages are rising. Multi-national businesses usually pay higher wages than those paid by the countries own businesses. Therefore over time living standards begin to rise
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State a problem of Globalisation for developing countries
Exploitation: Workers in developing countries may be paid very low wages and have to work long hours in dangerous conditions
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State a reason why businesses trade overseas
Not all goods can be made/grown in the UK
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State a reason why businesses trade overseas
It is sometimes cheaper to buy goods from overseas
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State a reason why businesses trade overseas
Selling overseas gives the business access to millions of new customers
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State one of our main trading partners
European Union countries- a huge wealthy market on our doorstep
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State one of our main trading partners
USA and Japan- two wealthy developed nations
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State one of our main trading partners
BRIC countries-Brazil, Russia, India and China are developing countries that are rapidly growing. These will be some of the largest economies in the future and therefore present huge opportunities for growth for UK businesses
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State a barrier to International trade
Tariffs
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State a barrier to International trade
Quotas
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State a barrier to International trade
Trade Blocks
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What are Tariffs?
These are a tax on imported goods. They raise the price of goods from overseas
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What are Quotas?
Limit on the number of imports allowed into the country
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What are Trade Blocks?
Time period of waiting before goods are allowed into the country or blocking of trading specific goods
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State a reason for why to have a barrier
Many countries have barriers because they want to protect their home grown businesses
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What is the EU?
the EU is a group of 27 European countries who work together
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How many of the EU countries share a common currency called the Euro?
17
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State how being in the EU has developed trade by
The single market/free trade: As a member of the EU the UK is part of the single market. This means that no EU countries use tariffs and quotas on each other. This makes it easier for EU countries to trade with each other
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The EU still uses tariffs and quotas against what?
non-EU countries
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State how being in the EU has developed trade by
A bigger market: The population of the EU is nearly 500 million people. This is a lot of potential customers
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State how being in the EU has developed trade by
Free movement of goods: Goods can be transferred freely between member countries. This makes it very easy for businesses to buy and sell products and supplies. No customs barriers
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State how being in the EU has developed trade by
People and Services: Citizens of EU counties can live and work in each others countries without a VISA. This means businesses can recruit from a wider pool of people
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State how being in the EU has developed trade by
Possibility of grants: UK businesses can apply to the EU for grants. The grants are available for many reasons
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State how being in the EU has developed trade by
Common Standards: The EU enforces common standards of safety, quality and labelling of products
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State one way how the EU can cause problems for British Businesses
More competition: UK businesses now have to directly compete with other countries in the EU who can export their products into the UK
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State one way how the EU can cause problems for British Businesses
Greater rules and regulations: The EU social charter was set up to protect workers rights against bad employers. It establishes certain rules which is good for workers but adds to UK businesses costs
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State one way how the EU can cause problems for British Businesses
Additional environment standards: The EU has introduced new standards on water quality, waste recycling and pollution which adds cost to UK businesses
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State a key way UK businesses can compete with foreign competitors
Produce the right goods and services: UK businesses need to innovate and create new goods that meet the needs of customers better than existing ones
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State a key way UK businesses can compete with foreign competitors
Investing in new technology: This would allow UK businesses to produce goods at a lower cost
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State a key way UK businesses can compete with foreign competitors
Better marketing: UK businesses need to create a strong brand name that customers recognise and want to buy
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State a key way UK businesses can compete with foreign competitors
Outsourcing or moving abroad when necessary: not all of the activities of UK businesses need to be done in the UK. UK businesses might need to reduce their costs by having some parts of their work done overseas
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State a key way UK businesses can compete with foreign competitors
Delivering goods and services at the right time: Ensure distribution is efficient so that deliveries happen exactly as the customer expects
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State a key way UK businesses can compete with foreign competitors
Increasing value added: This is when a business makes a product that is worth far more than it costs to make
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Instead of competing with developing countries with low added value, what should UK firms use?
should use their expertise and technology to make high value added products
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What are exchange rates?
Exchange rates measure the price of one currency in terms of another
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What are Importers?
Businesses that buy goods from overseas
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What are Exporters?
Businesses that sell goods oberseas
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What happens for a Importer when the value of the pound rises?
It becomes cheaper to buy goods from overseas as we get more for our money
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What happens for a Importer when the value of the pound falls?
It becomes more expensive to buy goods from overseas as we get less for our money
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What happens for a Exporter when the value of the pound rises?
UK goods become more expensive for foreign customers to buy. Therefore UK firms becomes less competitive overseas and demand for their products falls
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What happens for a Exporter when the value of the pound falls?
UK goods become cheaper for foreign customers to buy. Therefore UK firms become more competitive overseas and demand for their products increases
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Other cards in this set

Card 2

Front

What is demand linked to?

Back

consumer income

Card 3

Front

Explain how demand is linked to consumer income

Back

Preview of the front of card 3

Card 4

Front

What happens if consumer incomes fall?

Back

Preview of the front of card 4

Card 5

Front

What is being unemployed?

Back

Preview of the front of card 5
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