PESTLE factors Flashcards
(143 cards)
1
Q
What are legal factors?
A
=Laws that are designed to protect individuals, employees, customers and the environment from negative acts of a business. Legislation tends to restrict operations and can create extra costs.
2
Q
What is company law?
A
Concerns the legal rights and responsibilities of private and public limited companies. Plcs have more responsibilities such as the issuing of shares on the stock market.
3
Q
benefits and limitations of company law?
A
treats the business as a separate legal entity to the shareholders, which limits their liability. However there is a cost involved.
4
Q
What does a business risk if they do not comply with company law?
A
fines, struck off directors or compulsory liquidation is requested by a court.
5
Q
Benefits and limitations of employment law?
A
-Places extra costs in HR but staff will have more job security and satisfaction.
6
Q
Health and safety legislation?
A
Employers have a duty to take all reasonable care to ensure safety and wellbeing of employees, and make sure employees abide by safety rules.
Legal responsibility for safe working conditions and to train workers to deal with any unavoidable risks.
7
Q
Employee rights legislation?
A
Worker’s rights in regard to terms and conditions.
Have to be provided with a written contract of employment within two months. This states the level of pay, holiday, maternity pay, pension rights, disciplinary procedure and length of notice.
Also protects against unfair dismissal.
8
Q
Anti-discrimination laws?
A
Discriminating based on age, sex, sexual orientation, race or religion.
Applies to recruitment, dismissal, promotion, transfer, training and terms and conditions.
9
Q
What is consumer protection?
A
Aim to make sure businesses act fairly towards consumers and customers.
Goods must be of satisfactory quality, fit for purpose and safe.
Legislation, for example, makes it a criminal offence to give untrue or misleading descriptions of goods. As a result, manufacturers and retailers have to take a great deal of care about information presented on their packaging or within advertisements.
10
Q
Benefits and limitations of consumer protection?
A
All businesses must comply, so there are no competitive advantages in regards to extra costs. However some businesses may cut corners to reduce costs, and customers may end up at a disadvantage.
11
Q
What is competition policy?
A
Designed to ensure that fair competition takes place in each industry.
The CMA monitors potential mergers or take-overs of large businesses and may investigate. Another role of the CMA is to investigate cartels and investigate potential collusions.
Ensures consumers are charged a fair price and have enough choice.
12
Q
Why do governments want competition?
A
Governments believe that more competition leads to lower prices, a wider range of products and better quality products. Businesses in a monopoly or near monopoly position have control over price.
13
Q
When and why was minimum wage introduced?
A
Was first introduced in April 1999 to boost the pay of very low paid workers.
14
Q
What is minimum wage legislation?
A
Requires employees to pay a minimum hourly rate, regardless of if they work hourly, weekly or monthly.
Was first introduced in April 1999 to boost the pay of very low paid workers.
Has benefitted younger workers in sectors such as care, hospitality, cleaning and catering.
Overall wages also increased due to pressure to maintain wage differentials.
15
Q
Impact of minimum wage?
A
Stops employee exploitation however it is argued it has deterred investment in the UK, as businesses have moved operations to other countries where workers can be paid less. It has also caused a rise in zero hour contracts.
16
Q
What is intellectual property law?
A
Legals rights regarding designs/invention/artistic work.
17
Q
What are trademarks?
A
designs and artwork, such as packaging and logos. A copy infringes a trademark when it is similar enough to confuse customers.
18
Q
What is patent law?
A
covers inventions for a limited period (usually 20 years). Prevents the selling, making and using of the invention without permission. However it is expensive for small businesses to obtain.
19
Q
What is copyright law?
A
protects artistic work. It is an offence to copy, publicly perform, rent, lend, issue copies of work or adapt the work, without consent. Illegal downloading has made this more difficult.
20
Q
What is data protection law?
A
Data protection is concerned with how personal data gathered by organisations is used and kept secure. Businesses are required to have a Data Protection Officer who ensures that the Data Protection Act is met.
21
Q
What must the data gathered be?
A
used fairly and lawfully, used for specifically stated purposes, used in a way that is adequate, relevant and not excessive, accurate, kept for no longer than is absolutely necessary, handled according to people’s data protection rights.
22
Q
Impacts of data protection law?
A
Businesses who fail would be subject to very large fines and a poor reputation.
This legislation adds to the costs of the business.
23
Q
Impact on stakeholders: employment law?
A
Compliance with employment legislation can be very costly and human resource departments are constantly having to deal with increasing amounts of legislation. Minimum wage legislation has an impact upon some businesses, although the majority of businesses pay over that level already. Complying is likely to improve motivation, thus reducing absenteeism, improving productivity and retaining staff.
24
Q
Impact on stakeholders: health and safety?
A
However, a good health and safety record will improve their image in the eyes of their customers. In addition to this, employee loyalty will be enhanced and motivation will improve. It is likely that workers operating in a safe and secure environment will prove to be more productive.
25
Impact of stakeholders: is legislation needed?
However it can be argued that in this day and age, legislation is not always needed, as the market would regulate itself in the freedom customers and employees have to choose where they work/purchase from. Therefore businesses that do not protect its stakeholders would be unsuccessful and would not survive anyway.
26
What are the economic factors?
Interest rates, exchange rates, economic growth, inflation, unemployment.
27
What is inflation?
A sustained increase in the general price level period of time (usually annually) which leads to lower purchasing power of money, because more has to be spent in order to purchase the same amount.
28
What is the ideal level of inflation and who controls this?
The ideal level of inflation is 2% +/- 1%. Low and consistent inflation encourages investment and spending. It gives certainty and shows profits won’t be worth less quickly. The Bank of England attempts to control inflation by setting interest rates.
29
How is inflation measured?
The Government measures inflation using regular pricing of a nominal ‘basket of goods.’ This basket of goods is meant to reflect the spending habits of the average person in the UK economy, and includes goods and services.
It is the percentage change of this year’s ‘basket’ compared with last year.
30
What is the consumer price index?
the target rate of inflation.
31
What are the two types of inflation?
cost push and demand pull.
32
What is cost push inflation?
Occurs when firms have rising costs of production and they respond to these higher costs by increasing the prices they charge their customers.
This could be the cost of raw materials, labour or increasing interest rates.
33
What is demand pull inflation?
Caused by excessive demand for goods and services. This enables businesses to increase their prices because demand is increasing.
Causes of increased demand are increased confidence amongst consumers, higher real incomes, or higher disposable incomes.
34
What is the inflationary spiral?
The inflationary spiral occurs when these two causes come together:
Cost of production rises-> prices rise -> cost of living rises-> wages rise-> cost of production rises.
35
Impact of inflation on businesses?
Increased and more regular pressure to increase wages. This means more management time spent on negotiating wages and the possibility of industrial action.
A business will have to continually reprice goods, meaning the cost of reprinting menus, brochures.
High inflation discourages business investment because profits and demand are less predictable as purchasing power decreases.
If inflation is higher in the UK than in other countries, costs of UK businesses are increasing faster, so exports are not as competitive.
36
Why can deflation also be a problem?
Deflation can also be a problem. For individuals, it can lead to falls in wage levels and increasing real debt burdens (value of debts increases relative to value of assets and income). Both factors discourage expenditure.
37
What are interest rates?
Interest rates are charged on loans and paid on savings. Using interest rates to help control the economy is known as Monetary Policy.
38
Who controls interests rates?
Interest rates are controlled by the Bank of England who set the base interest rate. Other institutions then can charge what they want on their loans/mortgages.
39
What do high interest rates mean?
Discourages borrowing and encourages saving, putting downwards pressure on inflation.
People have less disposable income, because more is spent on paying off loans and mortgages. So household consumption decreases and demand falls.
Consumers tend to cut back on luxuries so these businesses tend to be more affected.
The cost of borrowing for businesses also increases, reducing profit margins.
40
What do low interest rates mean?
Encourages borrowing and discourages savings, putting upwards pressure on inflation.
Household consumption increases, along with demand. Businesses are also more likely to invest because of increased consumer confidence.
41
What is GDP?
the total value of all goods and services produced in a country in a particular period. It measures the annual output of an economy.
42
Why is GDP important?
Without growth, people’s standard of living will not increase.
43
What is the business cycle?
the natural rise and fall of GDP.
44
What are the characteristics of a boom?
Low unemployment, high demand and high profits. Budget surplus for the government is higher, due to high tax revenue and lower expenditure on social security. However, high levels of demand can increase prices, workers will often demand higher wages, thereby pushing up costs.
45
What are the characteristics of a downturn?
Rising unemployment, falling demand and profits. less investment by businesses. Higher inflation in a boom may have caused increased interest rates, so people are spending less. The economy may still be growing, but at a much lower rate.
46
What are the characteristics of a recession?
two negative quarters/6 months of negative economic growth. Low demand and profits, high unemployment. A decline in the levels of inflation and interest rates.
47
What are the characteristics of a recovery?
the recession will soon turn into a recovery). Businesses start to see opportunities so investment by some businesses will start to increase. New jobs are created, and unemployment falls, so consumers start to spend again. Falling unemployment, rising demand and profits.
48
What are exchange rates?
The price of one currency in terms of another.
49
How are exchange rates affected by market forces?
This is largely determined by demand and supply. When the demand for UK exports rises, the value of the pound increases, because other currency must be exchanged to pounds to purchase UK exports.
50
What does the impact of exchange rates on a business depend upon?
Impact on businesses depends on the degree to which they purchase/sell from/to other countries.
51
Impacts of appreciation of the pound on importers?
Imports will be less expensive in terms of their own currencies. Because the pound can purchase more of the other country’s currency. Businesses can either increase profit margins or pass the reduced cost onto the consumers in the form of lower prices.
52
impact of appreciation of the pound on exporters?
Exports will seem more expensive to overseas buyers. Businesses can either reduce their prices in £s to keep customers or keep the same, depending on elasticity and loyalty.
53
Impact of a depreciating pound on importers?
Imports will be more expensive in terms of their own currency. Businesses can pass this onto the consumer by increasing prices, or reduce their profit margins. Depends on margin size and elasticity.
54
impact of a depreciating pound on exporters?
Exports will seem cheaper to overseas buyers, so businesses will find attracting these export markets easier. They can increase their price in £s to increase profit margins, or try to increase market share with low prices.
55
What is the natural state of unemployment?
-Every economy has a natural state of unemployment which alters over time.
-It is estimated the current UK natural state is 3-4%. Economists argue that a reasonable level of unemployment is good for the economy as it prevents those in employment seeking higher wages.
56
What does unemployment depend upon?
-Depends on mobility of labour, availability of training, trade union power and skills.
57
What are the three types of unemployment?
Structural, cyclical, frictional.
58
What is structural unemployment?
appears when there has been large changes in patterns of demand or developments in technology, which have caused long term unemployment in regions or industries. For example, coal industry in South Wales. Providing a solution to structural unemployment is one of the government’s biggest challenges because it is hard to encourage investment in these areas.
59
What is cyclical unemployment?
Appears as a part of the business cycle. When the economy enters a downturn unemployment rises and peaks in a recession. The minimum level of unemployment is reached in a boom.
60
What is frictional unemployment?
occurs when there is a delay finding a job after losing a previously held job. It is a short term unemployment. The government still tries to reduce it by increasing information about job vacancies.
61
What do economic factors impact depend upon?
Will always depend on the size of the change and whether the target market’s incomes will be really affected. For example, if people can already afford fancy cars, will a recession really impact the rich?
62
Environmental costs of business activity: air pollution?
from factories and from the products produced by large businesses. Also through transportation. Businesses can be fined for not reaching emission standards. The UK aims for net-zero emissions by 2050.
63
Environmental costs of business activity: noise pullution?
for example, that of a passenger jet flying over a residential area. Airports now can fine airlines that break noise pollution levels, to protect the quality of life of the residents nearby.
64
Environmental costs of business activity: water pollution?
is a large burden for businesses. Large fines can be given for polluting water systems with harmful substances.
65
Environmental costs of business activity: climate change?
mpacts direct and indirect costs. Climate change is becoming a priority for consumers and governments. In 2013 a carbon tax was introduced. The reputation of a business will be impacted by how much they considered climate change contributions.
66
Environmental costs of business activity: congestion?
Congestion charges exist in some cities to prevent individuals and businesses using cars, to reduce pollutant levels.
67
Environmental costs of business activity: destruction of environment?
deforestation destroys habitats and also contributes to climate change. Supplies the businesses use must be ethically sourced.
68
Environmental costs of business activity: waste disposal?
important to the local community. Some businesses may attempt to put profit before the environment and not dispose of wasting responsibly or safely.
69
How does the government try to control environmental impact of businesses?
The government has introduced a range of laws and policies to try and combat environmental damage.
Air pollution- the Clean Air Act. Controls the amount of smoke, grit and dust expelled from chimneys.
Noise- rules on where new power stations, airports, roads, etc can be built.
Water pollution- Laws to prevent harmful chemicals ending in water supplies.
Climate change- emissions targets.
Waste disposal- Landfill tax makes it more difficult to send waste to landfills.
70
What is the impact of government taxes and laws of environmental business impacts?
businesses which are medium-sized face energy costs that are on average between 15% and 21% higher as a result of environmental policies. UK businesses often argue that such costs harm their ability to compete with businesses based in less developed economies where environmental regulation is not imposed.
71
What are pressure groups?
Organisations formed with the objective of influencing government or business policy at local, national or international level.
Can either use direct action (physical protest/court cases/meeting with MPs) or indirect action (boycotting).
They try to gain as much publicity as possible, as media attention often attracts awareness surrounding the issues.
72
Example of an environmental pressure group?
The WWF has helped change attitudes towards environmental issues across the globe. Its aim is to protect endangered wildlife and environments, tackle climate change and promote the sustainable use of resources. This type of pressure group has a wide range of activities and their roles can evolve over time.
73
how is education used to control the environmental impact of businesses?
Pressure groups try to educate consumers over potential environmental problems. This can cause consumers to boycott certain products/businesses.
74
Why is education not always effective?
Education is not always effective. For example in China, social media is heavily scrutinised, allowing businesses to carry on with harmful activities.
75
Why is responding to environmental costs not always a burden for businesses?
A sustainable business must also meet the needs of the consumer.
There does not have to be a conflict between profitability and protecting the environment. Resources are becoming increasingly scarce and prices are rising accordingly. Any opportunity to drive these costs down is welcomed.
76
How can businesses respond to environmental issues?
Waste- is a cost to businesses, so will aim to reduce the amount of waste produced as much as possible. Reduce, reuse, recycle. Manufacturers also are tied down by environmental laws.
Sustainable raw materials- for example, IKEA only purchases its wood from forests that are sustainably restocked and managed.
Emissions- legal requirements to emit as little as possible. Some factories use solar or wind power to reduce it. This is also cheaper in the long run.
77
Advantages of environmental policies?
Improved business and brand reputation.
Recruitment of employees who are ethically committed.
Greater customer loyalty from a growing number of ethical consumers.
Can create a unique selling point.
Can avoid the risk of large fines from using harmful substances.
78
Disadvantages of environmental policies?
Cost of redesigning products from new sustainable materials.
Some governments have no concern for the environment in favour of economic progress.
Large upfront cost for solar panels and wind turbines.
Lack of government investment in sustainable infrastructure.
79
What are political factors?
How government policies and regional, national and international regulations affect businesses.
80
What is the role of the government?
The role of the government is to create a stable environment for businesses to operate in, to encourage economic growth for citizens and businesses. An unstable network leads to more risk factors and therefore a lack of investment.
81
What is taxation?
a method that governments use to raise finance for government expenditure, by imposing charges on citizens and businesses.
82
What are direct taxes?
Taxes on individuals and businesses’ incomes. For example, income tax, national insurance, corporation tax, inheritance tax.
83
What are indirect taxes?
a tax on spending, imposed on suppliers of certain goods and services. For example, VAT, excise duties, council tax, business rates.
84
How do taxes affect businesses?
Taxes affect the disposable income of the consumer which affects demand for goods/services and also the costs of the business, which affects their ability to FMOP. Higher levels of VAT will be passed onto consumers in the price of the good which will affect demand.
85
What are subsidies?
financial assistance provided by the government to support economic and social aims. For example, the government may wish to reduce pollution so will offer a subsidy to build wind/solar farms.
86
How do subsidies affect businesses?
Therefore subsidies can help to increase/decrease the supply of certain products and services. It can also help to increase demand if a subsidy leads to lower prices for the consumer.
87
What is fiscal policy?
the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy.
88
What are the aims of fiscal policy?
control inflation (around 2% - price stability), stimulate economic growth (GDP – higher output), higher rates of employment, trade balance (exports>imports).
89
How does fiscal policy affect businesses?
Fiscal policy encourages investment in particular areas of the economy so affects businesses. For example, the UK’s lower corporation tax and training schemes aim to have businesses located in the UK rather than the US.
90
What is monetary policy?
the process by which the Bank of England decides on interest rates to control inflation and confidence in the currency.
91
How do different levels of interest rates impact businesses?
Low interest rates encourage borrowing and spending and discourage saving, which stimulates demand, sales and profits. High interest rates discourage spending which can reduce demand in luxury products.
Through this careful monitoring, the Bank of England tries to keep prices stable and consumer/business confidence is maintained.
92
What is the governments role as a purchaser?
The government buys goods and services from the private sector. For example: defence contractors and road builders.
-For some businesses, the government is their only customer.
93
Why does the government encourage a public-private relationship?
The government tries to encourage a private-public relationship to reduce the tax burden on the consumer which helps maintain disposable income for demand.
94
How has the view around government spending changed?
Government purchasing had been seen as a source of easy profits, but now, all government departments are looking for cost savings and efficiencies. Regular reviews of supply contracts are now the norm, putting pressure on traditional suppliers but offering opportunities for new businesses.
95
Positives of a government relationship with businesses?
-The closer a business works with the government, the easier it is to persuade them to adopt rules that support its endeavours.
-Businesses may be able to obtain grants and loans from the government at a lower cost than banks.
-Businesses may be able to access research and development and trade talks which allows for cheaper introduction of new products and emerging markets.
96
Limitations of government relationship with businesses?
Governments may have conflicting priorities and may not be willing to listen to business concerns.
Businesses often feel the consultation process with the government yields little help from the government.
97
What are technological factors?
Describes the ongoing development of invention, innovation and sharing of technology or processes.
98
What is the most common definition of technology?
the application of science to solve problems
99
Examples of technological factors?
Automation, e-commerce and m-commerce, social media, CAD/CAM, robotics.
100
What is automation?
Using machines instead of humans to perform repetitive tasks in manufacturing. Very few cars made today will have not been produced by an automated process.
101
Examples of where automation is used?
-It can now also be utilised by retailers- self checkouts. Has increased efficiency.
-In agriculture, product quality checking is now carried out by machines. They take digital photos of vegetables, clean, sort and finally, package and label the vegetables to match customer needs.
-Utilities- smart metres are replacing the need for manual readings.
102
Advantages of automation?
Lower employee costs: less to be paid in wages, sick pay and pensions.
Increased productivity- increases sales revenue.
Improved safety and quality as the chance of human error is removed.
Less management time spent in negotiating and disputing with employees.
103
Disadvantages of automation?
Large upfront investment that many businesses cannot afford.
Greater environmental impact as more energy is needed.
Social costs and loss of reputation from job losses. Redundancy payments.
104
What is communications technology?
Stresses the role of unified communications and the integration of telecommunications and computers. Has an impact now on all functions.
105
ICT: internet marketing?
Internet sales are increasing year on year. Businesses that have already entered this lucrative market have seen share values rocket, as well as sales.
106
ICT: web based relations?
it is becoming more popular in the financial industry (banking) to have entirely web-based customer relations. All services can be done over the internet.
107
ICT: business to business: B2B?
the internet can be used to find suppliers. It is estimated that a business can save 5-10% of its cost by doing all purchasing online.
108
ICT: manufacturing resource planning?
used to plan all business activity. Takes forecasts and turns them into objectives and targets for each department. It can also model ‘what if?’ questions. This can replace an entire layer of management.
109
ICT: electronic point of sales?
reading bar codes at checkouts, stock control database and automatic reordering systems. Retailers can also use EPOS to determine promotions, staff requirements and space allocations. EPOS increases efficiency of all areas.
110
ICT: CAD CAM?
This reduces the time for initial design to production, which increases competitiveness. Modifications can easily be made which saves time and it is an effective method of quality assurance. CAM improves efficiency and quality, as reduces the chance of human error. Can be used by small businesses such as tailors using machines to cut fabric in the most economical way.
111
Advantages of ICT?
Can access products more easily.
Employees can work from home.
Shareholders may see increased dividends.
112
Disadvantages of ICT?
Staff redundancies.
Continual upkeep is expensive.
Training to use new systems.
Some countries do not have access to this technology.
113
Impact of technology on businesses: location?
large businesses have the option to outsource certain functions to save costs. For example, call centres in India. However, quality control is more difficult. But when quality can be remotely managed, many businesses will choose to also outsource production, such as Apple.
114
Impact of technology on businesses: product life cycle?
businesses are able to develop and sell products at a faster rate, so product life cycles have become much shorter. Products must become profitable quickly, as they soon will be obsolete.
115
Advantages of technology to the consumer?
Internet provides easy price comparison for similar products, and review sites provide more information. More choice/convenience and lower prices from cost savings. Improved quality from technology used in production.
116
Disadvantages of technology to the consumer?
Online shopping/banking can increase risk of fraud and scams, especially for more vulnerable members of the population. Rapid technological change leads to pressure to buy the latest products, due to shortening life cycles.
117
What is social change?
Refer to changes in society that can have consequences for businesses. These include demographic changes and changes in consumer tastes and fashions.
118
What is demographic change?
The changing structure of the population.
119
How does an increase in overall population impact businesses?
An increase in the overall size of the population means the size of the market also increases. It effectively shifts the demand curve to the right because there are more people at every price point.
120
How does an ageing population impact businesses?
The baby boomers are now moving towards or entering retirement. Improvements in healthcare also means people are living longer.
These people are generally more well-off, owning homes with paid off mortgages and high value salary pensions.
This means a large amount of disposable income for luxury products.
121
How has migration impacted the demographic?
A major factor in the UK’s changing population.
Young immigrants have added to the working population and undertake jobs which the UK population is reluctant to do.
Immigrants can also fill the skills gap. 35% of NHS doctors are not of British nationality.
122
What are examples of lifestyles changes?
-An increase in the number of economically active women over the last half century means industries such as childcare are booming.
-Society is becoming increasingly health conscious, increasing the demand for markets such as the fitness industry and healthy foods.
-There are more ways of purchasing and accessing goods and services but targeting these consumers with marketing campaigns are becoming increasingly problematic, as there is a need to focus on a wide spread of media.
-Consumers are now willing to spend £3 for a take-away coffee.
-There have been changes towards becoming more environmentally friendly.
123
Impact of social change on businesses: income?
businesses must monitor consumer income levels in order to stay competitive, in that their products can satisfy demographic changes. For example, businesses like Aldi and Poundland have responded to the increasing number of people of lower incomes by offering discounted products.
124
Impact of social change on businesses: age?
many businesses may need to alter their products to target the 50+ market. Failure to do so may result in lower sales and loss of competitive advantages.
125
Impact of social change on business: geographic region?
businesses that can adapt to unique needs of people in specific areas will gain higher market share and sales. For example, a 2015 survey found Blackpool and Burnley were the biggest consumers of takeaways. This information is key for a takeaway business.
126
Impact of social change on businesses: lifestyles/tastes?
need to be considered to ensure products are targeted at the correct audience and reflect current lifestyles and fashions. Higher sales will be achieved if a business can adapt to these changes.
127
What are the limitations of social change impact?
-Focusing marketing solely on social changes may lose customers who do not fit the average trend.
-Monitoring social change relies on primary and secondary research which is costly and time consuming.
-Demographics and lifestyles are constantly changing so this further increases costs. It has been argued that businesses should focus on creating a product that will always be needed.
128
What is an ethical business?
An ethical business is one that considers the needs of all stakeholders when making business decisions and takes into consideration its social responsibilities.
-Ethical businesses consider the moral rights and wrongs of any strategic decisions that are made.
-Businesses today have a much wider set of social responsibilities than in the past.
129
Ethical considerations: treatment of workers?
Should treat employees as their most valuable asset. This means taking care of their health and safety, ensuring high conditions of work and also paying a living wage. Those working for suppliers are equally as important, and they should ensure all workers in the supply chain are paid well and treated ethically.
130
Ethical considerations: animal welfare?
Should look down the supply chain to ensure the welfare of animals, and can focus their marketing on how well supplying farmers treat their livestock. The demand for ‘free range’ products is a good example of how retailers have responded to their customers’ concerns. Clothing retailers too have responded to animal rights issues in relation to the raw materials they use. Testing cosmetics on animals is also considered unethical.
131
Ethical considerations: suppliers?
This means sticking to agreed contracts and not forcing renegotiation upon suppliers. It means sharing burdens of developing, supplying products, paying on time and not putting pressure upon suppliers’ cash flow. Fair Trade is a well-known organisation which ensures fair play to suppliers in all stages of the supply chain.
132
Ethical considerations: customers?
Customers want a quality product or service at a fair price. Businesses which act unethically fail to fulfil this moral commitment to customers. For example, the PPI scandal was a double failure on the part of many of the major banks in the UK. The end result has been billions of pounds of compensation payments to customers who were mis-sold PPI.
133
Ethical considerations: environment?
Environmental pressure groups have become increasingly effective in influencing business decision makers. Prominent international organisations such as Greenpeace or Friends of the Earth have been able to effectively change the course of action of numerous enterprises..
134
What is corporate social responsbility?
The willingness of a business to assess and take responsibility for its actions and its impact on a range of stakeholders.
135
What is the concept of CSR based on?
Based on the concept that society needs businesses to employ staff, make investments and raise taxes from profits, and businesses also need society to provide infrastructure and legal protection.H
136
How do large businesses deal with CSR?
Some large organisations now audit relevant activities and make a corporate responsibility report available to the public.
137
Examples of the conflict between ethics and profits?
Paying a living wage instead of minimum wage will increase costs.
Providing more facilities for employees increases satisfaction/productivity but also increases costs.
A retailer using fair trade suppliers will face higher costs.
Can improve public relations and reputation.
Can attract more customers in the ethically conscious social movement.
138
Positive impact on profits of acting ethically?
higher revenues for customer support, improved brand recognition and awareness, better employee motivation and new sources of finance.
139
Negative impact on profits of acting ethically?
higher costs and higher overheads which means lower profit margins. Could experience cash flow problems and lose competitive price advantage.
140
Evaluating ethical stance: employees?
are likely to trust the business if it asks them to apply a fair way of marketing/creating the product. Improves staff motivation and retention. Ethical rewards also include profit sharing/bonuses. However, it may cause conflict and higher costs lead to cuts in other areas. Earning by commission is not seen as ethical.
141
Evaluating ethical stance: customers?
reputation improves and may benefit from better products and long term reductions in the costs of purchasing goods because of recycling/sustainable materials. However, higher costs may increase prices and businesses may window dress.
142
Evaluating ethical stance: shareholders/owners?
if the shareholder is interested in long term growth and sustainability then they will benefit and want to invest in ethical practice. However higher costs and short term impact on profitability means shareholders looking for short term gains will not achieve these.
143
Evaluating ethical stance: suppliers?
ethical suppliers will see more sales and get a fair price for products. However, more pressure to be ethical and own costs will increase.
