Unit 2- External Influences

Question 1

Explain what is meant by a market?

Answer 1

A market is where buyers and sellers meet, can be physical or virtual.

Question 2

Explain what is meant by competition?

Answer 2

Completion is the rivalry between businesses in similar markets.

Question 3

Explain what is meant by market size?

Answer 3

Market size is the amount of potential customers in a given market that the business is trying to sell to.

Question 4

Explain what is meant by market growth

Answer 4

Market growth is the rate of the market size increasing, usually expressed as a percentage

Question 5

Explain the importance of market size

Answer 5

It’s important because businesses can estimate how much profit they would achieve and what areas of the business to invest in

Question 6

Evaluate how a business could increase their market share.

Answer 6

Through mergers, acquisitions, external and internal growth

Question 7

Describe the key features of an oligopoly, monopoly, and monopolistic competition

Answer 7

Oligopoly- a market controlled by a few businesses.
Monopoly- a market controlled by one business.
Monopolistic competition- a type of imperfect competition that many businesses competing with each other

Question 8

Analyse the relationship between market structure and a business decision making power

Answer 8

Different markets are structured differently depending on the type of industry, product and service the business is selling, these characteristics effect how the business can operate.

Question 9

Explain what is meant by demand, supply and equilibrium

Answer 9

Supply- the amount of goods and services a business is willing and able to supply
Demand- the amount of goods and services customers are willing and able to supply.
Equilibrium- the middle point where supply and demand meet and where the market forces meet.

Question 10

Explain how supply and demand interact to establish equilibrium?

Answer 10

When the price of a product or service and the demand for it is equal

Question 11

Give examples of the determinants of demand and supply

Answer 11

Tastes, preferences,income status, price of complementary goods,exceptions on the price of goods, number of buyers, popularity.

Question 12

Explain how changes in the determinants of demand and supply effect price and outputs decisions.

Answer 12

Price increases if- demand is high, supply is low

Price decreases if- demand is low, supply is high

Question 13

Evaluate factors that effect supply and demand in a market.

Answer 13

Price fluctuations, trends, income, commercial advertising, seasons and availability of alternatives.

Question 14

Evaluate the effects of excess and shortages in a market.

Answer 14

Excess supply causes price to decrease, shortages cause prices to increase.

Question 15

Evaluate the impact of market forces on a business and its stakeholders.

Answer 15

Market forces can influence the price and availability of products/services, it can force prices up when supply is low and demand is high vice versa.

Question 16

Recommend how a business should respond to market forces

Answer 16

Spot the change early to lessen the potential damage it has on the business, diversify holdings

Question 17

Explain how a business is effected by the dynamic nature of the market

Answer 17

The business has to adapt quickly and develop new ideas for products and services in order to keep up with the latest technologies and trends.

Question 18

Distinguish between physical and non physical markets

Answer 18

A physical market is usually a brick-and-mortar store, non physical is a market that exists virtually, on the net

Question 19

Explain why firms would choose to operate in a physical or non-physical market.

Answer 19

To fit niche of the product or service they offer

Question 20

Evaluate how the strength of completion affects a business

Answer 20

If there is strong competition in market it would force the business to sell good quality goods/services at a lower price to attract customers

Question 21

Analyse the barriers of entering and exiting a market

Answer 21

Entering- strong brand loyalty, special tax benefits for existing firms, pre-existing firms have too big of a market share

Exiting- lost goodwill with customers, reduced value of owned equipment, redundancy costs

Question 22

Evaluate the impact of competition on a business, its stakeholders and the market

Answer 22

Business- lower cost manufacturing process
Stakeholders- can improve the conduct of managers
Market- effects the overall market price

Question 23

What is meant by market dominance, mergers, acquisitions and organic growth

Answer 23

Market dominance- a business having 25% of the market share
Mergers- when a business merge with another similar business
Acquisition- the takeover of another business
Organic growth- growth from within the business, like producing more products

Question 24

What is meant by a monopoly?

Answer 24

A monopoly is when a business is the only one that supplies a certain good or service

Question 25

Explain how mergers, acquisitions and organic growth leads to the creation of a dominant firm

Answer 25

Mergers and acquisitions of another business in the same market would lead to increased market share, organic growth leads to a dominate firm as the business is focuses on internal improvements like producing more products

Question 26

Evaluate the impact of a business of a dominate firm operating in its market

Answer 26

They could charge the price they want at the quality that they want if they were one of the dominant firm as there are little alternatives to the goods or service they offer

Question 27

Explain how market dominance is restricted and regulated in the uk?

Answer 27

Competition and markets authority (CMA)

Question 28

Evaluate the importance of market regulation to a business and its stakeholders

Answer 28

It makes it a “fair game” for the businesses in the market, keeps things competitive allowing for better quality goods to be produced

Question 29

What is meant by globalisation?

Answer 29

The growing interdependence for businesses operating at a international level

Question 30

Explain the factors that facilitate globalisation

Answer 30

The internet, trade liberalisation, advancements in transport and communication and technology.

Question 31

Why are some businesses affected by globalisation more than others

Answer 31

Businesses that operate at an international level are increasing the level of global competition in those foreign markets, smaller businesses are likely to feel the result of that eg pushed out of the market

Question 32

Explain the role of multinationals on globalisation

Answer 32

The production of goods in one country to be sold in another increases the interconnectedness of the economies by interacting with local suppliers to combine the market

Question 33

Distinguish between global strategy and globalisation

Answer 33

Global strategy is the business strategy of trying to sell there products other countries to reap in the rewards, globalisation is trying to interconnect the economies so that countries businesses are dependant on each other

Question 34

Recommend how a business would overcome the challenge of increasing globalisation

Answer 34

Find lower cost ways on there production process

Question 35

Evaluate the opportunities and threats of globalisation

Answer 35

Opportunities- new products are available, lowers cost of products Threats- developing countries usually get exploited, multinationals are only really open to this so results in small local businesses dying out

Question 36

What is meant by global branding

Answer 36

A brand that can be recognised across the global, not niche enough to only exist in one country

Question 37

Evaluate the opportunities and threat to a business of the increase in global brand

Answer 37

Opportunities- Threats-