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Flashcards · 9609 · A Level Topic 6
Business and its environment (A Level) flashcards
17 cards on A Level Topic 6, subtopics 6.1 to 6.2. Pick a subtopic or study them all.
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6.1 External influences on business activity
- Privatisation vs nationalisation
- Privatisation: transfer of a business or industry from government to private ownership. Nationalisation: transfer from private to government ownership.
- Privatisation: advantages and disadvantages
- Advantages: an efficiency incentive, cash for government, investor capital. Disadvantages: unprofitable services may be cut, a private monopoly may form, job losses.
- The three macroeconomic objectives in the syllabus
- Low unemployment, low inflation and economic growth.
- Monetary, fiscal, supply-side and exchange rate policy
- Monetary: interest rates and money supply. Fiscal: taxes and government spending. Supply-side: training, deregulation, incentives (aims at productive capacity). Exchange rate: actions affecting the currency’s value.
- Effect of a stronger home currency on exporters and importers
- A stronger home currency makes exports dearer abroad and imports cheaper. A weaker currency does the reverse.
- A UK firm buys stock priced at €60,000. Find its cost at €1.25 per £1 and at €1.20 per £1.
- 60,000 ÷ 1.25 = £48,000. 60,000 ÷ 1.20 = £50,000. The pound has weakened, so the cost rises by £2,000 (about 4.2%).
- Social audit vs environmental audit
- Social audit: a review of the firm’s social impact and conduct. Environmental audit: a check of the firm’s environmental impact against targets; used by the firm to find waste and by stakeholders to check its claims.
- Multinationals: possible benefits and drawbacks for a host country
- Benefits: jobs, investment, skills, tax revenue, exports. Drawbacks: profit leaving the country, pressure on local firms, environmental harm, loss of control.
6.2 Business strategy
- The three stages of strategic management
- Analysis (where are we? PEST, SWOT, five forces, core competence), choice (which route? Ansoff, blue ocean, decision trees, scenario planning) and implementation (plans, budgets, leadership and control).
- SWOT vs PEST
- SWOT sorts internal strengths and weaknesses and external opportunities and threats. PEST scans only outside factors: political, economic, social and technological. Neither ranks the factors or makes the decision.
- Porter’s five forces
- Rivalry between existing firms, threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers. Used to judge how attractive an industry is.
- The Ansoff matrix
- Existing product, existing market: market penetration. Existing product, new market: market development. New product, existing market: product development. New product, new market: diversification (usually the riskiest).
- Core competence (Prahalad and Hamel) and blue ocean strategy (Kim and Mauborgne)
- Core competence: gives access to many markets, adds to perceived customer benefit and is difficult for rivals to imitate. Blue ocean: create an uncontested market by value innovation: eliminate, reduce, raise, create.
- Decision tree: invest £50,000. Success (0.4) pays £200,000; failure pays £20,000. Find the expected value and net gain.
- EV = (0.4 × 200,000) + (0.6 × 20,000) = 80,000 + 12,000 = £92,000. Net gain = 92,000 − 50,000 = £42,000. Only net gain subtracts the cost.
- Force field analysis
- Define the change, list driving and restraining forces, score each (for example 1 to 5), total both sides (net = driving − restraining), then plan to weaken the strongest restraining force. The scores are subjective.
- Contingency planning vs crisis management
- Contingency planning: done before an event; prepared responses for named risks. Crisis management: the handling of a crisis during and after it, to limit damage and recover.
- Transformational vs transactional leadership
- Transformational: inspires commitment to a vision, with intellectual challenge, attention to individuals and role-model behaviour. Transactional: reward and penalty for set tasks.