Influences on Business Flashcards
(25 cards)
What are the effects of the National Minimum and Living Wage?
- Companies can’t cut their costs by paying customers less than the legal minimum
- If law is broken they could get a fine and bad publicity
- The laws increase costs - increases prices - possible fall in sales - reduced income
- Better motivated staff and increased productivity
What are the effects of health and safety legislation?
- Fewer accidents - fewer injuries - less time off work - more productive
- Encourages people to apply to work there
- Can be expensive
- Can be fined/prosecuted/closed down if not followed
- May have to pay compensation to anyone injured - bad publicity
What are the 3 conditions set for products in the Consumer Rights Act?
1 - Product should be fit for purpose
2 - Product should match description (E.g size/quantity/properties)
3 - Product should be of satisfactory quality
How do Consumer Laws affect businesses?
If broken they are faced with cost and inconvenience (refunds/replace/repair)
- case could end up in court
- harm reputation - cause reduction in sales
Staff needs to be trained properly
How has technology changed how businesses operate?
- Can buy and sell online - wider markets
- Made processes faster - People can communicate with people faster
How can firms communicate digitally with stakeholders?
Websites
Emails (quick communication on a personal level)
Apps (communicate with customers/provide info)
Live chats (customer service)
Video calls
Social media (advertisement)
What are the benefits and drawbacks of businesses working ethically?
Benefits
- Can emphasise ethical policies in marketing - gain customers - increase profits
- Shareholders more likely to invest
- Workers are more motivated - more productive
Drawbacks
- Can be costly (e.g higher labour costs)
- Difficult to find suppliers - higher price
- Increased costs means less profit
How can businesses effect the environment?
- Produce waste - ends up in landfill
- Can cause traffic congestion - customers/suppliers/workers drive there
- Factories/Cars/Lorries can cause air, noise and water pollution
How can businesses reduce their impact on the environment?
- Reduce amount of packaging
- Recycle things (e.g delivery boxes/unwanted goods)
- Dispose of hazardous waste carefully
- Encourage car share schemes to reduce traffic
- Buy more efficient machinery
- Buy quieter machinery / put up sound barriers or insulation
How are businesses working to be more sustainable?
- Using more renewable energy resources (e.g wind and solar power)
- Use vehicles that produce less carbon dioxide / Electrical goods that are more energy efficient
What are the pros and cons of being environmentally friendly?
Pros
- More people are buying environmentally friendly products
- Gives firms competitive advantage - attract new customers and increase sales
Cons
- New equipment / developing new processes is expensive
What are the effects of unemployment in society?
Economy as a whole produces less output so everyone suffers from unemployment
What are the effects of unemployment in a business?
Pros
- Able to pay lower wages
- Fill jobs without difficulty
- Government may give grants to businesses that provide jobs in the area
Cons
- Less employment means less money to spend - Lack of demand
- People lose skills whilst unemployed - may need retraining
How can changes in price and income affect businesses?
Over time people’s earnings as well as the price of goods and services but not always at the same rate
If prices rise faster than income:
People spend more money on needs
Less money to spend on wants - businesses that provide wants will suffer
Stores selling with discounts will benefit
If prices rise slower than income:
Less money spent on needs - more money to spend on wants
Businesses providing wants will have increased sales
Stores selling with discounts may see profit go down
What is interest?
When you borrow money you usually have to pay it back with interest
- If you save money, you earn interest - the amount of money in your savings account will increase over time
- The amount of interest you pay/earn depends on the interest rates
What do low interest rates lead to?
Low interest rates:
It’s cheaper to borrow money - pay less interest. Also earn less interest
Consumers have more money to spend so demand for goods and services increases
Businesses may borrow more because of low interest rates
High interest rates:
Opposite of effects of low interest rates
What 3 things can market mean?
- Place - where goods are traded between customers and suppliers (in person or online)
- Product - trade in particular type of product
- People - potential customers for a product
What is a competitive market?
A market where there is a large number of producers selling to a large number of consumers
Why do some businesses have little to no competition?
When a business creates a new product they will initially have no competition.
They might take out a patent, which means other businesses can’t copy their idea for a set period of time and keeps competition low
What is globalisation?
The process by which businesses and countries around the world become more connected
Benefits and drawbacks of globalisation.
Benefits
- Larger market to sell to - Increased sales - higher profit
- Larger market to buy from - buy cheaper supplies - Reduces costs - higher profit
- Can set up factories in other countries so closer to raw materials or market - reduced transport costs
Drawbacks
- Higer wages in UK means can’t compete with firms from other countries
- Different currencies so profits are affected by exchange rates
- May get bad publicity if seen - exploiting or endangering workers in other countries where Labour is cheaper
What are exchange rates?
An exchange rate is the price at which one currency can be traded for another
- affected by the economy of the country that uses the currency and the global economy
What is the rule about exchange rates, imports and exports?
SPICED
Strong
Pound (makes)
Imports
Cheaper (but)
Exports
Decline
What are 3 risks of running a business?
1 - Starting a business - may fail and all money invested could be lost
2 - The health of the economy - unemployment levels / interest rates / exchange rates - can affect demand and how much investment there is in the business
3 - The actions of competitors - if they put out a new product or claim more market share the business could fail
