A Level CIE Business: Business and its Environment

Topic 1

privatisation

the act of selling state-owned and controlled business organizations to investors in the private sector.

nationalisation

the transfer of privately owned businesses to state [government] ownership and control

political and legal influences on business activity:

privatisation, nationalisation and legal controls over business activity.

seven arguments for privatisation

• private sector businesses = greater efficiency than when a business is supported and subsidised by the state

• decision-making in state bodies slow and bureaucratic

• privatisation gives responsibility for success to managers and employees = motivating = more empowerment than state-owned businesses

• market forces operate = failing businesses will be forced to change or die and successful ones expand so profits of privatised businesses have increased following theirsell-off

• important business decisions taken for financial reasons, not political

• sale of nationalised industries can raise finance for gov which can be spent on other state projects

• priv businesses have access to priv capital markets = increased investments in these industries.

five arguments against privatisation

• state should take decisions about essential industries which can be based on needs of society not just shareholder interest e.g. keeping open ‘unprofitable’n business activity

• privately operated bus that compete with each other are unlikely to achieve a coherent and coordinated policy for the benefit of whole country

• accountable to country

• many strategic industries could be private monopolies if privatised and they could exploit consumers with high prices

• breaking up nationalised industries e.g. into several competing units, reduces opportunities for cost saving through eos

four arguments for nationalisation

• gov control of major industries

• integrated industrial policy e.g. for water supply is now possible

• prevents priv companies monopolies and customer exploitation

• eos achieved by merging al priv businesses in industry into one nationalised corporation

four arguments against nationalisation

• less profit motive so less incentive for efficiency and gov may provide subsidies to loss-making nationalised industries

• gov may intervene too much in bus decision making for politics

• cost of gov buying priv companies high

• removes ability of industry to raise finance from private source e.g. stock exchange

four categories of laws that control business decisions and activities

• employment practices, conditions of work and wage levels

• marketing behavior, consumer rights and controls over some products

• competition

• location of businesses

two main objectives of laws and employment practices

• prevent exploitation of workers by powerful employers by insisting on appropriate levels of health and safety and minimum wage rates

• control excessive use of trade union collective action

what three areas of employment practices do legal constraints cover

• recruitment, employment contracts and termination of employment

• health and safety at work

• minimum wages

what are the six forms of workers rights protections

• written contract of employment so that employee is fully aware of pay, working conditions and disciplinary procedures to be followed

• minimum age of employment

• max length of working week

• holiday and pension entitlements

• no discrimination during recruit+selection or while at work

• protection against unfair dismissal

four examples of EU protective legislation

• max weekly working hours can be long fiftytwohrs in CARbut thirtyseven in denmark

• no min wage law in sweden, norway and denmark

• minimum working ages vary; for example just ten yrs old in sri lanka

• h+s at work requirements less stringent if not agreed to adopt international labour org

h+s laws require businesses to do what four things

• equip factories and offices w/ safety equipment and train staff to use it

• provide adequate washing and toilet facilities

• provide protection from dangerous machinerye and materials

• give adequate breaks and maintain certain workplace temps

minimum wage

employers are not allowed to pay less than the set min wage per hour

monopoly

market in which there is only one supplier with no close competitors

collusion

businesses agree to work together and restrict competition by fixing prices and sharing contracts between themselves

why are h+s laws essential

to protect workers from discomfort and physical injury at work and providing a heathy and safe working environment but strictiness varies between countries.

what are the two main aims of minimum wage

• prevent exploitation of poorly organised workers by powerful employers

• reduce income inequalities between the high paid and low paid in the economy

two other effects of minimum wage

• increased standard of living and purchasing power of low paid workers

• a work incentive

three criticisms of minimum wage systems

• can be avoided by employers insisting on casual employment w/o contracts or job security

• raising labour costs can make businesses uncomp and make workers redundant

• other workers being paid just above will ask for raise and inflation raises business costs