2.5 external influences S Flashcards
(17 cards)
external influences
define external influences
elements from outside the business that affect performance such as competition and political and legal environment
external influences
define economic influences
factors that impact a business and its consumers such as inflation, interest rates, and unemployment
external influences
define the business cycle
the fluctuation of employment, income, expenditure, and output (gdp) in an economy over time
economic influences
define interest rates
the cost of borrowing money and the reward for saving it
economic influences
define inflation
the rate of increase in prices and fall in the purchasing value of money over a given period of time
economic influences
define cost push inflation
arises from an increase in firms’ costs
economic influences
define demand pull inflation
arises from increases in demand that outstrip supply which causes prices to rise. (there is too much money chasing too few goods)
economic influences
define exchange rates
the external price of a country’s currency expressed in terms of another currency
what are the abbreviations for the impact of exchange rates on imports and exports?
SPICED
WPIDEC
economic influences
define indirect tax
a tax imposed on producers by the government eg. VAT
economic influences
define direct tax
a tax levied on income, wealth, and profit eg. income tax, corporation tax, and capital gains tax
economic influences
how can an increase in tax negatively impact businesses
direct taxes increase = less money to reinvest in the business
indirect taxes increase = increase price of g+s or receive less profits
direct tax increase = consumers less disposable income leads to decrease demand for luxury goods
economic influences
define government spending
spending by the public sector on goods and services such as education and healthcare
legislation
define legislation
a set of laws put in place by the government to protect businesses, employees, and consumers. businesses must operate within these laws to ensure fair and safe treatment
legislation
examples of legislation
consumer protection
employee protection
environmetal protection
competition policy
health and safety
competitive environment
define competition
businesses that operate in the same market and offer similar goods and services as each other
competitive environment
impacts on a business of operating in a competitive market
pressure on pricing
increased innovation
increased marketing costs
need for efficiency and cost control
