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Business > 1.5 understanding external influences on business > Flashcards

1.5 understanding external influences on business Flashcards

1
Q

What is a stakeholder?

A

Anyone who has a vested interest in a business

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2
Q

How are owners stakeholders?

A
  • make a profit if the business is successful
  • decide what happens to the business
  • Limited company, shareholders are the owners
  • shareholders usually want high dividends and a high share price
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3
Q

How are managers and employees shareholders?

A
  • job security and promotion prospects (improved if firm is growing and profitable)
  • employees want decent wage, good working conditions
  • benefit from profit, growth and ethics objectives
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4
Q

How are suppliers shareholders?

A
  • firms buy raw materials
  • profitable and growing firms buy more materials, suppliers get more business
  • benefit most from profit and growth objectives
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5
Q

How are the local community stakeholders?

A
  • suffer if firm cause noise and pollution
  • gain if firm provide good jobs and sponsor local activities
  • firm employ local people, employees spend in local shops, boost local economy
  • benefit from minimising environmental impacts, ethics, profit and and growth objectives
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6
Q

How are the Government shareholders?

A
  • recieve taxes from firm making profit
  • benefit from profit, growth or job creation objectives
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7
Q

How are the customers shareholders?

A
  • want high quality products at low prices
  • benefit from customer satisfaction objectives
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8
Q

How are pressure groups shareholders?

A
  • can influence firms decisions by creating bad publicity if they dont agree with firm’s actions
  • many satisfied with objectives of ethics or minimising environmental impacts.
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9
Q

What is a pressure group?

A
  • an organisation that tried to influence what people think about a certain subject
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10
Q

How do stakeholders influence business decisions?

A
  • Owners make firm decisions (most influential stakeholders)
  • no firm can ignore its customers (won’t sell products, wont survive)
  • may want to hold onto money for longer, supplier will be unhappy if unpaid on time
  • unhappy workers= unproductive
  • can be unpopular in local community if they sell more elsewhere
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11
Q

What is National Minimum Wage?

A

Workers ages 22 and under but of school leaving age have to be paid a minimum amount
- exact amount depends on age and type of work

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12
Q

What is National Living Wage?

A

Workers ages 23 and over have to be paid a minimum amount
- slightly more than NMW

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12
Q

What effects to NMW and NLW have on a business?

A
  • businesses can’t cut costs by paying workers less than legal minimum (otherwise breaking the law)
  • can be given large fines if they don’t pay enough, could get bad publicity, consumers stop using the business
  • can increase firm’s costs, lead to increase prices, fall in sales, reduced income for firm. May not be able to afford to pay, have to lose some staff to survive
  • can lead to more motivated staff and increased productivity
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12
Q

What is the Equality Act 2010?

A

Recruitment procedures must not discriminate against anyone because of religion, gender, race, age, sexual orientation or disabilities.
All employees must be paid the same if they do the same job (or work of equal value) for the same employer

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13
Q

What are legal consequences of discrimination in companies?

A
  • if a company is found to discriminate against employees, they will have to pay compensation
  • if an employee is accused of discrimination, the company can be help responsible, can take steps to prevent (staff training, company policies about equal rights)
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13
Q

What are legal rules of who firms can recruit?

A
  • New recruits have to have legal right to work in the UK
  • extra work for firm to carefully check recruits documents (passports, visas etc)
  • illegal employment can result in big fines and possible closure of firms
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14
Q

What does Health and Safety regulation mean for businesses?

A
  • risk assessments to identify possible dangers and take reasonable steps to reduce risks (accident books, first aid trained, health and safety training, suitable safety equipment ie hardhats)
  • safe environment, fewer accidents, fewer injuries, more productive workforce (less time off work to recover)
  • expensive to pay for courses
  • can be prosecuted, fines or closed down for ignoring law
  • may have to pay compensation to injured, could get bad publicity
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15
Q

What is the Consumer Rights Act 2015?

A

Ensures that goods:
- product is fit for purpose
- product should match description (must match trade description, size, quantity, materials, properties) Also illegal to claim false endorsement of persons or organisations
- product should be satisfactory quality (well made)

if a product doesn’t fit these requirements, customers can ask for refunds, repairs or replacements

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16
Q

How does Consumer laws affect businesses?

A
  • if a firm breaks law, faced with costs and inconvenience of refunds, repairs or replacement
  • could go to court (costs lots and more if customer wins)
  • can harm reputation, lead to reduction in sales
  • train staff properly, sell products accurately, understand consumer rights
  • firms have to keep up to date with laws, make appropriate changes, may have to retrain or rewrite terms and conditions etc
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17
Q

What does unemployment mean for the economy?

A

The economy as a whole produces less output than if everyone was employed

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18
Q

How can firms benefit from unemployment?

A
  • able to pay lower wages (people desperate for jobs)
  • easily fill jobs
  • areas of high unemployment-> government give grants to firms providing jobs, encouraging firms to grow when high unemployment
19
Q

How can firms be negatively affected by high levels of unemployment?

A
  • more people have less disposable income-> lack of demand in products, fall in sales
  • may need to retrain unemployed people who haven’t worked recently
20
Q

How can firms respond to a lack of demand for products?

A
  • reduce prices, output or make staff redundant
21
Q

What is Tax?

A

money that goes to the government

22
Q

In what ways to consumers have to pay tax?

A
  • income tax (money they earn)
23
Q

In what ways do businesses have to pay tax?

A
  • profits
  • environmental tax (environmentally harming activities)
24
Q

How does income tax falling affect businesses?

A
  • consumers need to pay less income tax-> more disposable income, increase consumer spending, increase revenue
25
Q

How does income tax increasing affect a business?

A
  • consumer spending will fall (more tax, less disposable income, less spending, less revenue)
26
Q

How does an increase in the tax a business pays affect a business?

A
  • reduces amount of money available to reinvest-> slow growth.

Environmental tax increase-> firm can become more eco, avoid paying extra tax (more recycling etc)

  • force firm to cut costs (make staff redundant) to survive + meet profit targets
  • relocate business abroad to country with lower tax rates
27
Q

How does the government reducing the tax a business has to pay affect a business?

A
  • more money to reinvest-> increase growth
  • can encourage businesses to move from abroad to UK, increasing competition, lead to fall in UK businesses sales
28
Q

What is Inflation?

A

the increase in the price of goods and services?

29
Q

How can inflation have an effect on consumer spending?

A
  • go up short term (buy more products before prices further increase)-> extra revenue, higher profits
    BUT if wages go up at a different rate to inflation, demand can fall
30
Q

How can inflation have an effect on the cost of labour?

A
  • pressure from employees to employers to increase wages to afford higher prices being charge-> increase business costs, reduce profits
31
Q

How can inflation have an effect on global competition?

A
  • makes UK exports expensive-> UK firms become globally less competitive. Exporting businesses see sales fall
    IF LOW inflation-> exports sales increase
32
Q

What effect does high inflation have on the growth of a business?

A

Low growth, hard to predict costs and sales-> become reluctant to take risks + invest

33
Q

How does income rising at a slower rate than inflation affect a business?

A

Spend more income on necessities (food etc), less disposable income for luxuries (cinema, shoes etc), demand decreases. Luxury product businesses suffer, decrease in sales, decrease profits.

Could lower prices or increase demand through more advertising-> likely still leads to lower profits

34
Q

How can some businesses benefit from low incomes?

A

discount stores see increase in sales, more customers make efforts to buy cheap products

35
Q

How does income rising at a faster rate than inflation affect a business?

A

less income spend on necessities, more disposable income for luxuries, demand for luxury goods and services increases. Luxury product businesses increase sales, profits increase

36
Q

How are discount stores negatively affected by higher income?

A

may see sales and profit decrease, people worry less about cheapest possible prices

37
Q

What is interest rate?

A

a percentage that expresses how much you have to pay or earn
- usually from a savings account
- base rate set by Bank of England, other rates are based on this
- base rate fluctuates depending on how good the economy is

38
Q

How does low interest rates affect banking?

A
  • cheaper to borrow money
  • less interest on saved money
39
Q

How do low interest rates affect consumers?

A
  • borrow more, save less
    Have more money to spend, demand for goods and services increases-> firms are more likely to make more profit, increase output
40
Q

How do low interest rates affect firms?

A

-borrow more, save less
Borrow money to finance spending (overdrafts, loans), smaller interest repayments-> more money to reinvest into other aspects of business.
Can borrow more with low rates -> ie grow the business

41
Q

How do high interest rates affect banking?

A

Borrowing money becomes more expensive, savers get better returns on investment

42
Q

How do high interest rates affect consumers?

A

less money available to spend, pay higher rates on borrowed money. Also try to save more-> take advantage of higher returns

43
Q

How do high interest rates affect firms?

A

Less money to spend (pay higher interest rates), try to save more (take advantage of higher returns)
- reduce demands for products-> sell less, profit decreases
- may not afford to pay employees-> redundancies, increased unemployment

44
Q

What is an Exchange rate?

A

the price at which one currency can be traded for another

45
Q

What are exchange rates affected by?

A
  • economy of country that uses currency
  • global economy
46
Q

What does the value of the pound decreasing mean for imports/exports?

A

MORE EXPORTS, FEWER IMPORTS
- buy fewer dollars etc for the same price as before
- cheaper pound, exports become less expensive abroad-> more sales + profit for firms exporting abroad
- more expensive for imports-> less competition for UK firms
- imported raw materials are more expensive-> production costs are higher, increase product prices, decrease sales + profits

47
Q

What does the value of the pound increasing mean for imports/exports?

A

LESS EXPORTS, MORE IMPORTS
- exports more expensive, imports cheaper
- British firms exporting decrease sales + profits. More expensive products, less people buy them. (Can move part of business abroad, trade in local currency, less affect by exchange rate)
- import raw materials to British firm, make products more cheap, increase profits

Business (11 decks)

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