Chapter 6 External Influences on Business

Privatisation

The sale of public sector organisations to the private sector

advantages of privatisation

1. improved efficiency

2. Improved efficiency

3. Higher revenue for the government

4. Higher tax revenue

5. Higher quality

6. Higher competition

7. Minimal government influence

8. Wider choice

9. Higher investment

Problems of privatisation

1. External costs may not be considered

2. Monopolies may be formed

3. Exploitation of customers – higher prices

4. Strategic industries require government support and control

5. Reduce opportunities of economies of scale

nationalisation

Governments take control of privately run businesses.

Advantages of nationalisation

1. Greater economies of scale

2. integrated industrial policy

3. prevents monoplies and exploitation of customers by priv businesses

4. economies of scale can be achieved
   

problems of nationalisation

Less profit motive and less efficiency
increased government intervention
Cost of buying is high
No opportunity to raise finance from private sources

minimum wage

lowest legal wage that can be paid to most workers

PESTLE analysis

Political, Economic, Social, Technological, Legal, Environmental

Consumer Protection Laws

• sale of goods act

• trade descriptions act

• consumer protection act

Monopoly

A market in which there are many buyers but only one seller.

collusion

secret agreement or cooperation

Demographics

statistical data relating to the population and particular groups within it.

Corporate Social Responsibility (CSR)

A business's concern for the welfare of society.

Globalization

the increasing interconnectedness of people, businesses, and countries throughout the world

Protectionism

Economic policy of shielding an economy from imports.

Tariff

A tax on imported goods

quota

A limit placed on the quantities of a product that can be imported

Free Trade Area

A group of countries committed to removing all barriers to the free flow of goods and services between each other, but pursuing independent external trade policies.

Greenwashing

A practice in which companies promote their products as environmentally friendly when in truth the brand provides little ecological benefit.

environmental audit

Assess the impact of a business on the environment (independent audit best)

Sustainability

meeting the needs of the present without compromising the ability of future generations to meet their own needs

green consumerism

the trend for consumers to only buy products that are produced sustainably without environmental damage