AQA GCSE Business: Globalisation and Legislation (8132) – Revision Notes

These notes condense AQA GCSE Business (8132) sections 3.2.4 Globalisation and 3.2.5 Legislation, from 3.2 Influences on business. For full explanations and worked examples, read the study guide first. Then test yourself with the practice questions. The specification gives no tier labels for these sections. Related pages: course hub | printable checklist | free diagnostics | technology and ethical considerations

3.2.4 Globalisation

Key definitions

Term	Meaning
Globalisation	Standard definition: the growing connection of the world’s economies and markets, so goods, services, money and ideas cross borders more easily
Exchange rate	How much of one currency buys a unit of another
Stronger pound	Each pound buys more foreign currency
Weaker pound	Each pound buys less foreign currency
Exporter	A business that sells goods or services to customers abroad
Importer	A business that buys goods or services from suppliers abroad

How UK businesses compete internationally

The specification lists two bullets: better designs, and higher quality products at lower prices. Splitting them into design, quality and price for analysis:

• better designs (differentiation; can support a higher price)
• higher quality products
• lower prices (needs low unit costs)

Quality and price together mean good value, but this squeezes profit margin.

Benefits and drawbacks of globalisation

Benefits	Drawbacks
Bigger market through exports	More overseas rivals in the UK market
Cheaper components and products	Longer supply chains and transport costs
Larger output can lower unit costs	Exchange rate risk
New ideas, skills and suppliers	Cultural, language and legal differences
Less reliance on the UK economy	Reputation risk from unethical overseas suppliers

Impact on the four functional areas

Area	Example effect
Operations	Overseas sourcing, longer supply chains
Human resources	Competition on labour costs; need for language skills
Marketing	Adapting products and promotion for other countries
Finance	Shipping costs, foreign income, currency risk

Exchange rates: direction of effect

	Exporter	Importer
Stronger pound	Exports dearer abroad, sales may fall or profit per item falls	Imports cheaper, costs fall, profit may rise
Weaker pound	Exports cheaper abroad, sales may rise	Imports dearer, costs rise, profit falls unless prices rise

You will not be asked to calculate exchange rate conversions. A firm that both imports and exports is partly protected.

Method in steps: an exchange rate question

1. Say whether the business imports, exports or does both.
2. Say whether the pound is stronger or weaker.
3. State the effect on price or cost, then on sales, then on profit.
4. Use any figures from the case study to size the effect.
5. For evaluation, say what the firm could do and what could limit the effect.

Worked reminder

A firm imports parts costing £150,000 a year and the cost rises 4%. Extra cost = £6,000. If profit was £40,000 it falls to £34,000, which is a 15% fall.

3.2.5 Legislation

Only brief knowledge of each law is needed. Put most effort into the effects on the business.

Four examples of impact the specification gives

Heading	What to discuss
Cost	Wages, equipment, training, adaptations, record keeping
Training needs	Managers and staff must know what the law requires
Recruitment	Fair selection, hiring plans, attracting staff
Consequences of failure	Penalties, compensation, legal costs, reputation, lost sales

The laws in the specification

Area	Law named	Brief meaning (general terms)
Employment law	National minimum wage/living wage	Legal minimum hourly pay; rates change, so check current ones
Employment law	The Equality Act (2010)	Unfair treatment because of characteristics such as age, sex, race, disability or religion is unlawful in areas such as hiring, pay and promotion
Health and safety law	Health and Safety at Work Act (1974)	Employers must keep the workplace reasonably safe; employees must take care
Consumer law	Trade descriptions	What is said about a product must be accurate and not misleading

Effects by law

• Minimum wage: higher wage bill, possible price rises or fewer hours, better motivation and lower staff turnover.
• Equality Act: fair recruitment procedures, training for managers, possible workplace adaptations, a wider pool of talent.
• Health and safety: spending on equipment and training against fewer accidents, less absence, better morale and reputation.
• Consumer law: checks on labels and adverts, quality control, refunds or recalls if wrong, trust from customers.

Benefits of a safe working environment

• fewer accidents and less absence
• better motivation and loyalty
• a stronger reputation, which helps recruitment
• avoiding compensation and legal action

Worked reminder

8 staff each work 15 hours a week for 52 weeks. The legal rate rises by 40p. Hours = 8 x 15 x 52 = 6,240. Extra cost = 6,240 x £0.40 = £2,496 a year.

Distinctions to remember

• Importer versus exporter: a stronger pound helps one and hurts the other.
• Cost of compliance versus cost of failure: the second is usually larger and less certain.
• Law versus ethics: law is the minimum a business must do. Ethical behaviour can go beyond it.

Impact of legislation on the four functional areas

Area	Example effect
Operations	Safer processes, quality checks so products match their descriptions
Human resources	Pay rates, fair recruitment, training in safety and equality
Marketing	Honest claims in adverts, packaging and online listings
Finance	Cost of compliance, and the cost of penalties, refunds or compensation if the firm fails

Consequences of failure (general terms)

• financial penalties and compensation claims
• legal costs and management time
• forced changes to how the business operates
• bad publicity, lost customers and difficulty recruiting
• do not quote figures for fines unless the case study gives them

Case-study skills

Building an analysis paragraph

1. Point: state the effect, for example “a weaker pound raises the cost of imported parts”.
2. Link: tie it to the business in the stem, using its name, product or figures.
3. Explain: follow the chain, from cost to price to sales to profit.
4. Consequence: say what it means for the business, for example lower profit or a need to raise prices.

Building an evaluation

Weigh both sides. For each, ask how big the effect is, how soon it happens and whether it lasts. Then give a reasoned judgement that answers the question set. A judgement that appears in the final line but is not supported by the earlier points earns little.

Command words in practice

General exam guidance, not taken from the AQA specification text (the specification does not define command words).

Command word	What to do
State, identify, define	Short answer, no explanation
Calculate	Show the working and give units
Explain, analyse	Give a reason, then follow the chain of consequences
Evaluate, justify	Weigh both sides and reach a judgement. Support it with evidence from the case
Recommend	Choose an option and give reasons that fit the business’s situation

Worked reminder: weighing a cost

A shop spends £600 on safety training for its staff. If the training avoids one accident costing £4,000 in absence cover and lost sales, the net saving is £3,400. A real answer also notes that the accident might never have happened, so the benefit is uncertain, while the training cost is certain.

Quick self-test

1. Name the ways the specification says UK businesses compete internationally: the design idea and the quality-and-price idea.
2. Give one benefit and one drawback of globalisation for a UK business.
3. A UK exporter faces a stronger pound. Explain the likely effect on sales.
4. A UK importer faces a weaker pound. Explain the likely effect on profit.
5. A firm imports goods for £90,000 a year and the cost rises by 5%. Calculate the extra cost.
6. Name the law that covers equality at work in the specification, and its year.
7. Name the health and safety law in the specification, and its year.
8. Give two benefits to a business of a safe working environment.
9. Give two consequences for a business of failing to follow consumer law.
10. 5 staff each work 20 hours a week for 52 weeks. The legal rate rises by 50p. Calculate the extra annual wage cost.

Answers

1. Better designs, and higher quality products at lower prices.
2. Benefit, for example a larger market through exports. Drawback, for example more overseas competitors in the UK market.
3. UK goods become dearer for overseas buyers, so sales may fall, or the firm cuts its price and earns less per item.
4. Imports cost more, so costs rise and profit falls unless the firm raises its prices.
5. 5% of £90,000 = £4,500.
6. The Equality Act, 2010.
7. The Health and Safety at Work Act, 1974.
8. Any two: fewer accidents, less absence, better motivation, stronger reputation, avoiding compensation.
9. Any two: penalties, refunds or recalls, legal costs, damaged reputation, lost sales.
10. Hours = 5 x 20 x 52 = 5,200. Extra cost = 5,200 x £0.50 = £2,600.

Where marks are usually lost

• Saying a stronger pound is good or bad without saying for whom.
• Trying to convert currencies, which the specification says is not needed.
• Naming a law but not explaining its effect on the business.
• Giving only costs of legislation and ignoring benefits, or the reverse.
• Not using figures or details from the case study.
• Treating the minimum wage as a fixed number. Rates change.
• Writing a list of points for an evaluation question with no judgement.
• Mixing up exports and imports.

Frequently asked questions

How does a stronger pound affect UK exporters and importers? A stronger pound makes UK exports dearer abroad, so an exporter’s sales or profit per item may fall. It makes imports cheaper, so an importer’s costs fall.

Which laws are named in AQA GCSE Business section 3.2.5? The national minimum wage and living wage, the Equality Act (2010), the Health and Safety at Work Act (1974) and consumer law on trade descriptions.

How do UK businesses compete internationally according to the specification? Through better designs, and through higher quality products at lower prices.

What is the difference between law and ethics in GCSE Business? Law is the minimum a business must do. Ethical behaviour can go beyond the law, for example by paying more than the legal minimum wage.

Official syllabus

AQA GCSE Business (8132), specification for first teaching from September 2017, published by AQA: sections 3.2.4 and 3.2.5.