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A293 - External Environment Flashcards

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1
Q

What is perfect competition?

A

A market where a business has a lot of competitors

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2
Q

What are the features of competition? (5)

A

1) Many firm
2) Similar products
3) Low prices
4) Advertising + customer service important
5) Lower costs

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3
Q

How can a business increase competitiveness? (4)

A

1) New firms
2) Selling new products
3) Cutting prices
4) Increasing advertising

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4
Q

How can a business decrease competition in their market? (4)

A

1) Takeover/merger
2) Internal growth
3) Patent
4) Collusion - agreeing on prices

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5
Q

Why do businesses benefit from reduced competition?

A

Higher market share, more profit, less advertising, less need for quality

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6
Q

How can Holden respond to increasing competition?

A

Meet needs of customers better - superior product/price
Incentives
Market research - Kapok?

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7
Q

What is business ethics?

A

What is morally right or wrong for a business to do e.g. HR, sourcing of materials, production

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8
Q

What are advantages of good ethics? (3)

A

1) Customers willing to pay more
2) May increase sales
3) Good reputation

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9
Q

What are disadvantages of good ethics? (3)

A

1) Increase costs
2) May lose profits
3) Damaging if claim to be ethical but not

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10
Q

What is Fair Trade?

A

Trade between companies in developed countries and producers in developing countries in which fair prices are paid to producers

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11
Q

What are the benefits of using Fair Trade? (5)

A

1) Can charge more
2) Increased sales
3) Employees attracted to business
4) Looks good to investors
5) Reputation

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12
Q

What are negatives of using Fair Trade? (3)

A

1) More expensive
2) Reduced profit
3) If increase RRP - less customers

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13
Q

What is a social benefit?

A

Where something good comes to society from business activity e.g. employment, tax revenue - inward investment

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14
Q

What is a social cost?

A

Where a problem in society is caused by business activity e.g. pollution, redundancies

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15
Q

Why should Holden move to Bowton? (6)

A

1) Less tariffs
2) Less transportation (costs)
3) Better for environment
4) Lower fabric costs
5) Help UK recover
6) More ethical?

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16
Q

Why should Holden not move to Bowton? (4)

A

1) Chinese redundancies - expensive
2) Not helping Ch economy - ethics
3) Initial expense
4) May have to change supplier

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17
Q

What are sustainable materials?

A

Materials that can be obtained without diminishing ability to provide in the future

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18
Q

Why should Holden use Kapok? (4)

A

1) Better for environment - investors
2) Fair Trade - improve image
3) Can charge more
4) Catch up to competition - proven to work

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19
Q

Why should Holden not use Kapok? (5)

A

1) More expensive - recovering economy, luxury
2) Absorb or increase RRP?
3) More transport
4) Exchange rates
5) New supply chain

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20
Q

How does the government help with environmental problems? (6)

A

1) Taxation
2) Rules + regulations
3) Adverts + education
4) Carbon permits
5) Recycling
6) Grants + lower tax on biofuels

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21
Q

Why should green-belt areas be reduced? (3)

A

1) More businesses - unemployment
2) Economy improves
3) Inward investment

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22
Q

Why should green-belt areas not be reduced? (3)

A

1) Environment - bad long-term
2) Protest groups - businesses fail
3) Reduction in property values

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23
Q

Should Bowton reduce green-belt areas?

A

Yes - more likely to be positive

- More wealth - improve Bowton

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24
Q

How could Holden be sustainable if they build a new factory?

A

Recycled materials + build brand image, - expensive or low quality
Brown field + Support of Bowton, - not ideal

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25
How could Holden be sustainable if they rent in Bowton?
Green energy + less electricity from fossil fuels, - expensive Recycled packaging + less raw materials USP, - quality
26
How could Holden be sustainable if they stay in China?
Improve waste disposal + reduce pollution, - expensive | Reduce packaging + cheaper, - limit to effectiveness
27
What is GDP?
Gross Domestic Product - total value of country's output in a year
28
What is economic growth?
Businesses produce and sell more, employment + consumer income rises
29
What is recession?
Fall in GDP - demand falls, less production, less jobs + income, luxury businesses fail
30
What is the boom and bust cycle?
Boom, downturn, recession, recovery, boom...
31
What does the recession mean for Holden?
Spend less on luxury, lower SR, can't pay costs, failure?
32
What are interest rates?
The cost of borrowing money or reward for saving money (£ rate = amount borrowed * rate% / 100)
33
What does an increase in interest rates mean?
Costs more to borrow | Rewards for saving
34
What is inflation?
General rise in price
35
What happens when inflation is too high?
Increase interest rates - reduce demand so businesses sell less and have to lower prices
36
What happens when inflation is too low?
Lower interest rates - people spend more, increasing demand so businesses can charge more. This stimulates the economy
37
What would happen to Holden if interest rates rose?
Borrowing expensive - mortgage increased, customers save, luxury product demand falls
38
What could Holden do if interest rates rose?
Increase SR - Adverts - Increase price - Decrease price/absorb costs - Lower costs
39
Why are interest rates currently low?
To combat the recession - business payments minimised, people more likely to spend - more tax to Bowton
40
Why are low interest rates good for Holden?
More SR and profit - expansion, relocate, ethical investment, charge less to beat competition
41
What could Holden do about the rising price of latex?
Alternative supplier Increase selling price Absorb costs
42
What are the advantages and disadvantages of using an alternative supplier?
+ Lower costs + Keep same selling price - Quality - brand image - Reliability
43
What are the advantages and disadvantages of increasing selling price?
+ Maintain profit + Simple - Luxury competitive environment - price elasticity - Recovering economy - sell less
44
What are the advantages and disadvantages of absorbing the costs?
+ Same selling price + Same sales, quality - Lower profit - less dividends - Consider how much difference
45
What is the fiscal policy?
UK policy on spending and tax - Money spent of public services - More tax on social costs e.g. cigarettes
46
What is the multiplier effect?
Funding one thing can help whole country e.g. roads, builders, tax and disposable income, more spent, help economy
47
What could increased tax mean for businesses?
Income = less disposable Corporation = less spending money Air travel = higher costs Tax = inward investement
48
Why does Bowton want to encourage firms to locate there?
Reduce unemployment - employees or construction | Disposable income - demand for local products - tax
49
Should businesses be given grants?
Spending cuts = can't afford it | Reduce unemployment - less benefits paid + increased tax revenue etc - self-financing
50
What is globalisation?
When a business is connected in several countries
51
What are the benefits to the UK of globalisation? (5)
1) Larger export markets 2) More employment from foreign businesses 3) Lower business costs 4) More consumer choice 5) Economies of scale
52
What are the disadvantages to the UK of globalisation? (3)
1) More competition 2) Lower profits/sales 3) Unemployment in UK
53
What are the ethical advantages of globalisation? (2)
1) Raised standard of living | 2) More job opportunities
54
What are the ethical disadvantages of globalisation? (4)
1) Worker exploitation 2) Local culture affected 3) More transportation = CO2 4) Pollution - less legislation
55
How could Sierra Leone benefit from Holden's globalisation?
Jobs, income, improved standard of living, economy improves
56
What will Holden be affected by in globalisation?
Exchange rates Inflation in other countries Tariffs
57
What is the EU?
Family of democratic European countries that removes barriers to trade to member countries e.g. tariffs
58
What are the advantages of the EU? (3)
1) Single market - more customers 2) Free movement of workers - more/cheap labour 3) No trade barriers - cheaper+easier
59
Why is foreign competition increasing?
Developing countries = lower labour costs, do same as UK and are very skilled - better products Internet = foreign business take markets
60
What would an increase in import taxes mean for Holden currently?
Increase prices of stock sold in EU = reduce demand = less profit
61
What is unfair competition?
Using unethical means to achieve a competitive advantage e.g. child labour
62
Why does the government believe competition is good?
Greater choice | Better value - efficiency = lower prices / more services
63
What do increasing wage rates in China mean for Holden?
Increased costs = less profit - Increase selling price (only if no substitute, Holden superior or competition also increasing prices) - Reduce other costs - quality - Minimise labour - machinery - Relocate to emerging economy
64
What is exchange rate?
The value of one currency in terms of another | £1 = Le6789
65
What happens if exchange rates rise?
More SLL per £, so buy more or cheaper, could reduce RRP, stimulate demand, beat competition
66
SPICED?
Strong Pound Imports Cheaper Exports Dearer
67
What does a strong pound mean?
Charging same £ is higher in $ etc so less demand
68
What is the Eurozone?
Euro using countries Interest rates set by European Central Bank (ECB) No exchange costs, easier price comparison
69
What are the positives of using retailers? (3)
1) Cost effective to reach large market - don't need additional staff/buildings to sell abroad 2) People trust retailers, can touch products 3) Retailers do promotion
70
What are the negatives of using retailers? (3)
1) Less control of price end customer pays 2) Can be difficult to get contract 3) Retailers have power - can insist on quality or price

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