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External Influences - Business Study Notes

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Introduction

ECONOMIC GROWTH Economic growth is an increase in the nation's production of goods and services. It is measured in GDP. * Growth potential of an economy depends on the amount and quality of economical resources available (eg labour and fixed assets). * Also depends on productivity (how hard a nation works) * Governments can make short term growth by lowering tax and interest rates. This makes businesses borrow money for production and make consumers borrow money to spend. = increase in demand in economy What can economical growth do? Businesses - * growth in GDP means higher revenues and higher profits * gives economies of scale * increases confidence in businesses and helps plan for the future * BUT may cause shortages of raw materials and skilled labour due to fast growth Governments - * Higher revenue = more investment in new projects = more jobs = less to pay for welfare benefits * increase revenue through taxation * BUT high rates of growth lead to recessions! governments counter this by keeping growth at a sustainable level yy Environment - * High economical activity can kill off non-renewable resources * Increased pollution due to large economical activity GDP - GROWTH DOMESTIC PRODUCT INDICATES THE SIZE OF A NATIONS ECONOMY IT IS THE TOTAL MARKET VALUE OF GOODS AND SERVICES PRODCUED BY A NATION WITHIN THAT NATION DURING A PERIOD OF TIME gdp = total consumer spending + business investment + government spending + value of imports - value of exports BUSINESS CYCLE - a pattern of regular growth and recession BOOM = * HIGH PRODUCTION * POPULATION REACHES MAXIMUM CAPACTIY WHICH MEAN SHORTAGES AND THEREFORE INCREASED PRICES * SKILLED LABOUR SHORTAGES = HIGHER WAGES RECESSION = * ...read more.

Middle

Selling to a larger market is a opportunity of more sales revenue and grow your business 2. Allows economies of scale THREAT 1. Foreign businesses may undercut domestic businesses on domestic markets and abroad BUSINESSES TRADING ABROAD NEED TO BE INTERNATIONALLY COMPETITIVE * INTERNATIONAL COMPETITIVNESS means the ability to compete with businesses abroad * The business has to be competitive in terms of price. The business has to keep costs and prices down - this can be done by a productive workforce and efficiency * Have to also compete in terms of quality * A good public image is useful - e.g. BP tries to show its environmentally friendly by researching into sustainable fuels * Businesses need to market their ideas properly and understand the culture of the country they are trading in. Overseas markets have different tastes and values. The market plan has to account for this otherwise the business may not be successful. * When exporting, firms usually use an agent in the target country to handle distribution. The agent gets the product into wholesalers and retailers THE E.U THE EU IS A SINGLE MARKET SO TRADE BETWEEN MEMBER STATES IS EASY! * No trade barriers between EU member states - this is called a single market. * No tax to pay when importing goods from other EU countries * EU has a customers union, so the same custom duties apply in all EU countries * Single market smoothes out price differences between EU members * Freedom of movement for all factors of production within the EU. Factors of production = raw materials, finished goods and workers. ...read more.

Conclusion

Environment audit shows how a business is affecting the environment Shows if the business is meeting environment targets Shows where they need to change their waste management process PRESSURE GROUPS TRY TO INFLUENCE GOVERNMENT POLICIES AND BUSINESS DECISIONS Their aim is to influence the people who have the power to make decisions They use different methods: ACTION DESCRIPTION LOBBYING Discuss issues with business decisions makers and politicians to influence their thinking DIRECT ACTION Pressure groups organise protests against a specific business (e.g. blockade of shell petrol stations) PUBLICITY Try to make the public more aware of the situation - may prevent them buying the product PETITIONS List of signatures prove that people agree with the group LEGAL ACTIONS Can fight through courts if the pressure group thinks the business is acting illegally LOBBYING takes time! * The pressure group wants the politician on their side, but it takes time * Usually politicians give the people what they want, so the pressure group has to show the politician that the people agree with the group then the politician will change their minds DIRECT ACITON is a very powerful tool against a business * Businesses hate negative publicity. It can lead to lower sales and loss of reputation * Can take in the form of picketing protest outside the factory, a boycott or illegal violent action against a businesses property * Same thing with politicians! If the business thinks the people agree with the pressure group, it may have to give into its demands otherwise it could be bad for the business (loss of sales to competitors, bad public image) ...read more.

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