Potitcal Factors Flashcards
(31 cards)
What does external environment mean?
Factors outside a business that can affect its operation by influencing its activities & choice & determine its opportunities and risks
What are some political factors?
-Government policies and regulations
-Political stability
-Trade relations
-Government spending
-International relations
What does it mean by government policies?
government policies and regulations on taxes, trade, labor laws, immigration, and industry-specific rules can influence business costs and opportunities
How does government policies affect businesses?
Costs and Expenses-Changes in tax policies, labor laws, and trade regulations can directly impact the operational costs of businesses.
Market Access and Opportunities-Policies around trade, tariffs, and market entry rules determine whether businesses can easily access domestic or international markets.
Workforce and Labor Management- Immigration laws and labor regulations impact the availability and cost of labor.
What does it mean by political stability?
Stable governments allow businesses to plan confidently for the long term.
Political unrest or leadership changes create uncertainty for businesses.
This uncertainty can delay investments and business growth.
How can political stability affect businesses?
Long-term planning: In a stable political environment, businesses can plan and invest with confidence, knowing that policies and regulations are unlikely to change suddenly
Business Confidence: When the government is stable, businesses feel secure about hiring, expanding, and entering new markets
Investment: Stability attracts more investment, as companies are more willing to take risks in a predictable setting
What does it mean by trade relations?
The UK’s trade relations after Brexit impact businesses by changing trade deals, tariffs, and customs rules. These changes affect supply chains, imports, exports, and how competitive industries like manufacturing, agriculture, and services can be.
How can trade relations affect businesses?
Market Access: Good trade relations open up foreign markets for businesses, allowing them to sell products abroad. Poor relations, like trade restrictions or tariffs, can limit this access.
Supply Chains: Strong trade agreements make it easier and cheaper to import raw materials and components
Costs and Prices: Tariffs, customs fees, and trade restrictions can raise the cost of goods, making products more expensive for businesses and consumers
What does it mean by government spending?
Government spending and on infrastructure, education and healthcare can create opportunities for businesses.
Changes in government spending can impact the demand for goods and services
How can government spending affect businesses?
Infrastructure Development: When governments invest in infrastructure, it improves transportation and utilities, making it easier and cheaper for businesses to operate and expand.
Public Services: Spending on education, healthcare, and social services can increase the overall productivity of the workforce, benefiting businesses through a healthier, more skilled workforce.
Government Contracts: Businesses that supply goods and services to the government benefit directly from government spending, receiving contracts for construction, defense, technology, and more.
What does it mean by international relations?
Political relationships between countries can affect through trade agreements, tariffs and sanctions
How can international relations affect businesses?
Trade Opportunities: Positive international relations promote trade agreements, opening up new markets for businesses to sell their products and services globally. Negative relations, like trade disputes or sanctions, can limit access to international markets.
Supply Chain and Imports: Strong relations facilitate smooth cross-border trade, making it easier to import raw materials and goods
Foreign Investment: Stable and positive diplomatic ties encourage foreign investment, providing businesses with more opportunities for expansion, partnerships, and access to capital.
What is fiscal policy?
Refers to the taxation and government spending. The government adjusts its expenditure and tax rates to influence the economy.
What are the key objectives for the government?
- keep inflation on target (2%)
- stimulate economic growth
- higher employment
- trade balance
What does ‘boom’ and ‘bust’ mean?
Boom: low employment, increase in disposable income, lots of spending
Bust: high employment, decrease in disposable income, less spending
What is taxation?
Taxation is the process by which a government collects money from individuals and businesses to fund public services and programs, such as schools, roads, and healthcare
What are the types of taxations?
Direct and indirect taxs
What is direct taxes?
Taxes charged to individuals/ businesses that are paid directly to the government
What are indirect taxes?
Taxes charged on goods and services that are paid on third party in the first instance (VAT)
What are the types of direct taxes?
-income tax
-national insurance
-corporate tax
What are the types of indirect taxes?
-VAT
-excise duty
-stamp duty
-air passenger duty
-fuel tax
What are subsidies?
Financial assistance provided by the government to support the economic and social activities it wishes to encourage
What are the advantages of subsidies?
Reduced Costs: Subsidies can lower production costs for businesses, allowing them to offer goods or services at lower prices and remain competitive.
Increased Profitability: By offsetting costs, subsidies can help improve a business’s profit margins, enabling reinvestment into growth or expansion.
What are the disadvantages of subsidies?
Dependency: Businesses may become reliant on subsidies, which can deter innovation and efficiency. If subsidies are reduced or removed, companies may struggle to survive.
Market Distortion: Subsidies can distort market dynamics by giving certain businesses an unfair advantage, potentially leading to inefficiencies and misallocation of resources.
