component 3 context Flashcards
(10 cards)
risk management
. Natural Disasters & Supply Chain Risk:
Example: Houthi attacks on Red Sea shipping routes (2024).
Context: Disruption of global logistics, increased insurance and fuel costs.
Application: Importance of contingency planning, supplier diversification.
2. Product Failures:
Example: Boeing 737 MAX 9 grounding (2024).
Context: Safety issue caused reputational damage and regulatory scrutiny.
Application: Importance of crisis management and transparent communication.
3. Economic Risk:
Example: UK interest rate rises to curb inflation (2023–2024).
Context: Increased borrowing costs affecting investment.
Application: Evaluating risk to expansion projects and cash flow planning.
political
Example: UK windfall tax on oil/gas firms (2023)
Impact: Affected profits of BP and Shell; led to rethinking investment in UK.
Stakeholders: Shareholders vs government/public needing revenue
Government Taxes on Businesses
The UK government increased corporation tax from 19% to 25% (planned).
This means businesses pay more tax on profits, which can reduce money for investment or hiring.
2. Trade Deals and Brexit
New trade agreements (e.g., UK-Australia deal) mean some goods can be imported cheaper.
UK farmers may struggle to compete with cheaper imports, affecting their sales and profits.
3. Employment Laws
The government raised the National Minimum Wage.
Businesses have to pay workers more, increasing costs, especially for small firms.
4. Regulation of Online Businesses
New laws require social media companies to monitor harmful content.
These companies have to spend more on compliance, which costs money and affects profits.
5. Government Spending
Government investment in infrastructure projects like HS2 creates opportunities for construction companies.
These firms can win big contracts and grow their business.
6. Political Stability
Frequent changes in government leadership can make businesses unsure about future rules.
This uncertainty can delay decisions like opening new stores or investing in equipment.
7. Energy Policy and Price Caps
Government capped energy prices to protect consumers.
Energy companies might earn less profit and reduce investment in new projects.
economic
Example: UK GDP near stagnation in 2024
Impact: Retailers like John Lewis reported lower consumer demand.
Link: Shows business cycle influence on strategy and forecastin
nflation and interest rates (2023–25): Persistent inflation led to high interest rates (base rate peaked at 5.25%). This dampened consumer spending and business investment, especially in sectors relying on credit like housing and retail.
UK GDP growth stagnation (2023–24): Flat growth rates signal weak demand and limited opportunities for expansion, affecting confidence and hiring plans.
social
veganism and health trends: Growth in plant-based products (e.g., Greggs’ vegan menu) shows how consumer tastes shift industries.
. Demographic Changes
The UK has an aging population.
Businesses like healthcare providers and retirement homes see growing demand.
3. Workforce Diversity
More focus on equality and inclusion in hiring (gender, ethnicity, disability).
Businesses create more inclusive policies and training to attract talent and improve reputation.
4. Health and Lifestyle Trends
More people exercise and care about health.
Fitness companies and sportswear brands like Gymshark grow quickly.
5. Social Media Influence
Social media shapes brand reputation quickly.
Companies must engage positively online or risk boycotts (e.g., backlash against unethical brands).
6. Changing Work Preferences
Rise of remote work and flexible hours after COVID-19.
Businesses invest in digital tools and rethink office space.
7. Consumer Activism
Customers expect businesses to act ethically on issues like climate change and fair trade.
Brands like Patagonia highlight their environmental work to attract loyal customers.
Would you like examples linked to specific sectors or how these social factors impact business decisions?
technological
Example: Amazon expanding use of warehouse robotics
Impact: Improved efficiency but reduced low-skill jobs.
Link: Tech reshapes labour demand and capital investment need
AI in business (e.g., ChatGPT, 2023–25): Firms like Microsoft and Google are investing in AI to improve customer service and operations. Retailers like Ocado use AI for warehouse automation, cutting costs but reducing manual jobs.
E-commerce growth: Continued rise of online platforms (e.g., TikTok Shop, Shein) disrupts traditional retailers and drives investment in logistics.
ethical
Boohoo & unethical supply chains: Exposed for underpaying workers in Leicester (2020), leading to reputational damage, increased regulation, and lost sales.
Nestlé and palm oil: Faced pressure from Greenpeace and consumers over deforestation; responded with supply chain audits and sustainability pledges.
Conflict between ethics and profits
Ethical practices may raise costs (e.g., Fairtrade sourcing, better working conditions) but also attract conscious consumers (e.g., Tony’s Chocolonely, Ben & Jerry’s).
legal
xample: UK minimum wage increase (April 2024)
Impact: Increased labour costs for hospitality/retail (e.g., Wetherspoons).
Stakeholder impact: Employees benefit, but price rises may affect consumer
Data protection (GDPR enforcement): Meta (Facebook) fined for privacy breaches; highlights the need for compliance with data laws.
Uber drivers (2021 ruling): Supreme Court ruled UK drivers are workers, not self-employed. Sets precedent for gig economy legal responsibilities (pay, holidays, etc.).
environmental
Example: M&S ‘Plan A’ for sustainability
Context: Reducing carbon footprint and sourcing responsibly.
Stakeholder impact: Increased costs in short run; long-term brand value.
BP and Shell (green transition): Pushed to invest in renewables by shareholders and policy changes, despite high profits from fossil fuels.
Plastic ban (UK 2023): Ban on single-use plastic cutlery and plates – affects hospitality, supermarkets, and food delivery businesses (e.g., Just Eat moved to compostable packaging).
Tesco’s net-zero target: Investing in sustainable supply chains, e-vehicles and energy efficiency in stores.
international trade and globalisation
- Brexit trade frictions:
Example: Food exporters facing higher costs due to customs delays.
Impact: Disrupted supply chains, limited EU market access.
2. New UK–Australia FTA (2021–23):
Impact: Boost for some UK exports (e.g., Scotch whisky), competition for UK farmers.
Link: Businesses adapting by seeking global growth outside the EU.
Brexit customs frictions: UK exporters (e.g., seafood industry in Scotland) face delays and costs due to new EU checks, reducing competitiveness.
Australia–UK trade deal (2023): Cuts tariffs, but controversial for UK farmers due to cheaper imports.
China–UK tensions: UK firms reassessing reliance on China due to political risks and supply chain insecurity (e.g., fashion and electronic
EU
Example: EU product safety and GDPR rules still affect UK firms exporting to EU
Impact: UK firms must comply even post-Brexit to access EU markets.
Link: Regulatory alignment is key for market access.
Friction in labour and goods movement: Shortage of EU workers post-Brexit impacted farming, hospitality, and care sectors.
Regulatory divergence: UK businesses needing to meet both UK and EU rules to export, increasing compliance costs (esp. in pharmaceuticals and food).
Financial services sector shift: Some banks moved jobs to EU cities like Frankfurt, reducing London’s dominance.
