2.5 - External Influences

Vocabulary flashcards covering key concepts, definitions, and theories from Edexcel A Level Business Section 2.5 on External Influences.

Economic Influences

The effects on businesses of changing economic variables.

Inflation

The general rise in prices in an economy over time.

Consumer Price Index (CPI)

A measure of monthly changes in the prices of a range of goods and services compared to earlier periods, used to calculate the rate of inflation.

Monetary Policy Target Rate

The $2\%$ inflation rate targeted by the UK government, which the Bank of England is tasked with maintaining.

Appreciation

An increase in the value of the £ against other currencies.

Depreciation

A decrease in the value of the £ against other currencies.

Exchange Rate

The value of one currency expressed in terms of another.

Interest Rate

A percentage reward offered for saving money, and the percentage charged for borrowing money.

Direct Taxes

Taxes levied on income, e.g. income tax and corporation tax.

Indirect Taxes

Taxes levied on spending, e.g. value-added tax (VAT).

Business Cycle

The upturns and downturns in the level of a country's economic activity (gross domestic product or GDP) over time.

Recession

Occurs when an economy experiences two consecutive quarters (six months) or more of negative economic growth.

Boom

A period of time in which an economy experiences increasing/high rates of economic growth.

Economic Uncertainty

Occurs when it is difficult to forecast the level of supply and demand in an economy.

MOPS

An acronym standing for Market, Objectives, Product, Situation, used as an evaluative tool to place business context at the heart of answers.

Legislation

Laws and regulations passed by governments that require businesses and individuals to conduct their behaviour in a particular manner.

Consumer Protection Legislation

Legislation aiming to ensure that consumers are treated fairly by the companies with which they interact.

Employee Protection Legislation

Legislation aiming to prevent the exploitation of workers.

Environmental Legislation

Legislation aiming to hold businesses responsible for their environmental impact.

Competition Legislation

Legislation aiming to protect the interests of both consumers and businesses by restricting anti-competitive practices.

Health and Safety Legislation

Legislation requiring businesses to operate in a way that protects the physical and mental well-being of their employees, contractors, and customers.

Competition and Markets Authority

A regulatory body that judges anti-competitive behavior and can take steps such as preventing mergers or instructing businesses to dispose of subsidiaries.

Health and Safety Executive

An organization that investigates serious health and safety breaches, which can lead to fines or prosecution.

Competitive Environment

Concerns the degree to which a business is affected by rivals that operate in the same market.

Market Size

Essentially the number of customers and sellers in a particular market.

Niche Market

A market with a small market size where specialized knowledge or skills may limit competition, but limited demand makes supporting high sales volumes difficult.

Bank of England Base Rate

The interest rate set by the Bank of England used as a central tool to control inflation.

Corporation Tax

A direct tax on business profits that affects business spending and investment by reducing retained profits.

Value-Added Tax (VAT)

An indirect tax on spending that makes products more expensive for consumers and increases business operating costs.

Uncertainty in Inflation

A condition occurring when businesses cannot predict prices even in the short term, often forcing survival to become the key business objective.

Public Sector Borrowing

A method used alongside tax increases by governments to fund increases in public sector spending.

HS2

High Speed 2, a planned rail line intended to connect London with cities in the North, which was significantly reduced in scale.

Just-in-case Approach to Legislation

A business strategy of ensuring compliance with legal standards to avoid the severe financial, legal, and reputational costs of breaching the law.

Abuse of Market Power

An anti-competitive practice restricted by competition policy laws to prevent dominant firms from limiting monopoly power.

Unique Selling Points (USPs)

Distinct features (such as local produce or speciality items) that allow independent businesses to differentiate themselves from larger rivals.