External influences on business activity
Topics Covered in the Unit - External influences on business activity
6.1 Government economic objectives and policies
6.1.1 How government control over the economy affects business activity:
- Government economic objectives, e.g. increasing Gross Domestic Product (GDP)
- Main stages of the business cycle; growth, boom, recession, slump
- How changes in taxes and government spending can affect business activity
- How changes in interest rates can affect business activity
- How businesses might respond to these changes
6.2 Environmental and ethical issues
6.2.1 Environmental concerns and ethical issues as both opportunities and constraints for businesses:
- How business activity can impact on the environment, e.g. global warming
- The concept of externalities; possible external costs and external benefits of business decisions
- Sustainable development – how business activity can contribute to this
- How/why business might respond to environmental pressures and opportunities; pressure groups
- The role of legal controls over business activity affecting the environment, e.g. pollution controls
- Ethical issues a business might face; conflicts between profits and ethics
- How business might react and respond to ethical issues, e.g. child labour
6.3 Business and the international economy
6.3.1 The importance of globalisation:
- The concept of globalisation and the reasons for it
- Opportunities and threats of globalisation for businesses
- Why some governments might introduce import tariffs and quotas
6.3.2 Reasons for the importance and growth of multinational companies (MNCs):
- Benefits to a business of becoming a multinational
- Potential benefits to a country and/or economy where a MNC is located, e.g. jobs, exports, increased choice, investment
- Potential drawbacks to a country and/or economy where a MNC is located, e.g. reduced sales of local businesses, repatriation of profits
6.3.3 The impact of exchange rate changes:
- Depreciation and appreciation of an exchange rate
- How exchange rate changes can affect businesses as importers and exporters of products, e.g. prices, competitiveness, profitability (exchange rate calculations will not be examined)