business studies A2 Unit 2 CCEA

Macroeconomic Policy

Government's attempt to influence economy-wide demand for efficiency

Economic Growth Measurement

Measured by Gross Domestic Product (GDP) annually

Balance of Payments

Records a country's financial transactions with the world

Free Market Economy Resource Allocation

Resources allocated based on complete competition

Planned/Command Economy Resource Allocation

Resources allocated by the government/state

Mixed Economy Resource Allocation

Combination of public and private sector resource ownership

Advantages of Mixed Economies

Efficient incentives, limited government interference, fair competition reduced failure, equality

Disadvantages of Mixed Economies

Concerns about government intervention, inequality, and government failure

Social Enterprise

Organization for mutual benefit, not profit-oriented

Charitable Organization

Non-profit organization focusing on philanthropy and social well-being

Voluntary Sector

Social activities by non-governmental nonprofit organizations

Boom Phase of Business Cycle

Characterized by optimistic consumer and business confidence

Recession Phase of Business Cycle

Characterized by pessimistic consumer and business confidence

Slump Phase of Business Cycle

Characterized by low consumer and business confidence levels

Recovery Phase of Business Cycle

Characterized by rising consumer and business confidence

Business Confidence Importance

Influences economic decisions and progress based on expectations> Increased investment

Sustainable Development

Balances social, economic, and environmental activities for current and future needs

Inflation

General rise in prices affecting purchasing power, measured by CPI

Cost-Push Inflation

Inflation caused by increased production costs passed to consumers

Demand-Pull Inflation

Occurs when too much money chases too few goods, causing prices to rise

Problems of Inflation

Rises in wage costs, difficulty in cost control, and demand uncertainty

Opportunities of Inflation

Costs passed to customers, high stock valuations, and reduced real debt repayments

Frictional Unemployment

Temporary unemployment between jobs

Cyclical Unemployment

Occurs during recession when firms cut staff due to financial constraints

Structural Unemployment

Long-term joblessness due to economic shifts like tech advancements

Taxation Purpose

Revenue generation and demand influence by charging goods and income

Income Tax Impact

Reduces disposable income, curbing consumer spending

Corporation Tax Usage

Paid by companies on profits, as stipulated by the government

Value Added Tax (VAT)

Indirect tax on goods/services, affecting prices and demand

Custom and Excise Duties

Additional indirect taxes on goods/services, raising selling prices

Interest Rate

Cost of borrowing money

Interest Rate Impact on Spending

Higher rates encourage saving over spending, reducing inflation

Interest Rate Impact on Expenses

Highly geared businesses face increased interest payments

Interest Rate Impact on Currency Value

Rising rates attract foreign investment, increasing currency value

Interest Rate Impact on Investment

High rates raise costs for risky investments

Exchange Rate

Value of a currency in terms of foreign currency it can buy

Export Prices (Weaker £)

Decrease as the pound weakens

Import Prices (Weaker £)

Increase as the pound weakens

Export Prices (Stronger £)

Increase as the pound strengthens

Import Prices (Stronger £)

Decrease as the pound strengthens

Fiscal Policy

Government's income and expenditure plans

Monetary Policy

Government's cost and availability of credit plans

Supply-Side Policies

Government incentives for productivity increase

Globalisation

Integration of the world's economy

Arguments for Globalisation

Increased prosperity, job creation, wealth, efficiency, and employment

Arguments against Globalisation

Job losses, wage pressure, environmental concerns, economic power shifts

Foreign Direct Investment (FDI)

Investment in business interests in another country

Advantages of FDI

Increased capital investment, infrastructure, export capacity, competition, jobs

Disadvantages of FDI

Inequality, poor ethical standards, limited job creation effects

TNCs

Companies bringing in their own managers and specialists over local employment

Monopsony power

Ability of TNCs to negotiate favorable trade terms and tax relief

Bartlett & Ghoshal Model

Provides strategic options based on local responsiveness & global integration

Global Strategy

High global integration, low local responsiveness

Transnational Strategy

High global integration, high local responsiveness

International Strategy

Low global integration, low local responsiveness

Multi-Domestic Strategy

Low global integration, high local responsiveness

Franchising

Method of entering global markets by licensing

Joint ventures

Method of entering global markets through partnerships

Licensing

Method of entering global markets by granting rights

Direct investment

Method of entering global markets by ownership

Exporting

Method of entering global markets by selling products abroad

Mergers

Method of entering global markets by combining companies

Business ethics

Moral values governing business activities and individual behavior

Organisational culture

Values, attitudes, and beliefs defining how members relate within an organization

Ethical code of conduct

Guidance document for staff to make appropriate decisions and maintain business integrity

Advantages of an ethical code

Benefits include clarity, quicker decision-making, PR, customer loyalty, staff motivation, and supply chain relationships

Ethical Code Disadvantages

Challenges include time investment, potential omissions, and decision-making influence.

Business Ethical Responsibilities

Includes adherence to labor laws, intellectual property rights, anti-bribery, environmental care, and consumer safety.

Ethical Responsibilities Impact on Culture

Leads to bureaucracy, professional training, and cautious decision-making.

Ethics as Competitive Advantage

Provides clarity, quick decision-making, PR, integrity reputation, staff motivation, and supply chain relationships.

Ethics Not as Competitive Advantage

When costs outweigh benefits, industry-wide standards exist, or other marketing aspects are prioritized.

Sustainability Definition

Balancing present needs without compromising future generations, focusing on economic, social, and environmental aspects.

Sustainable Business Activities

Incorporate renewable energy, recyclable components, waste reduction, emissions control, employee safety, and public health support.

Advantages of Sustainable Business

Efficiency, reduced waste, lower costs, corporate objectives achievement, staff motivation, enhanced image, recruitment savings, and customer loyalty.

Disadvantages of Sustainable Business

Capital investment, value distraction, training costs, and promotional expenses.

Corporate Social Responsibility Definition

Business activities benefiting society beyond legal requirements, often focusing on environment, community, and employees.

Advantages of Corporate Social Responsibility

Cost reduction, improved image, revenue increase, and management attitude enhancement.

Disadvantages of Corporate Social Responsibility

Capital investment, focus distraction, training costs, and promotional expenses.

Carroll's CSR Pyramid Levels

Economic, Legal, Ethical, Philanthropic responsibilities in order of importance.

Stakeholder Groups

Customers, employees, suppliers, government, community, and shareholders.

Organisational design

The formal process of integrating people within a business.

Organisational structure

How management is organized, with authority, power, and roles flowing through a chain of command for efficiency and motivation.

Advantages of tall hierarchical structure

Closer supervision, clear instructions, and visible career progression opportunities for staff.

Advantages of flat structure

Fosters creativity, autonomy, communication, collaboration, and innovation.

Informal structure

Lacks strong reporting relationships, with ad hoc interactions between coworkers.

Formal structure

Involves strong reporting relationships, supported by staff and economic resources.

Centralisation

Concentration of planning and decision-making activities within a specific location or group.

Decentralisation

Delegating decision-making authority to lower levels, showing fewer tiers, wider span of control, and bottom-to-top flow of ideas.

Chain of command

System of reporting relationships within an organization.

Span of control

Number of subordinates under a superior.

Delegation

Passing authority/responsibility from a superior to a subordinate.

De-layering

Removing managerial layers in an organizational hierarchy.

Downsizing

Reducing capacity by making staff redundant.

Outsourcing

Transferring business activities responsibility to an external firm.

Monopoly

Market structure with a single firm supplying the entire output, lacking competition and having entry barriers.

Spectrum of competition

Describes the number of firms and degree of competition in a market.

Market concentration

Measures the extent of market share concentration among a few firms to assess competition intensity.

Merger

Two companies combining to form a larger, more dominant business.

Takeover

Parent company acquiring control of a target company by purchasing a majority of its shares.

Horizontal integration

Acquiring or merging with another company in the same industry and value chain level.