A Level Business: External Influences and Strategic Management

A comprehensive vocabulary flashcard set covering external business influences (political, legal, economic, social, environmental, international) and core business strategy concepts (SWOT, PEST, Porter's Five Forces, Ansoff Matrix, decision trees, and crisis management).

Political Influences

The ways in which government actions, legislation, spending, and stability from local, national, or international authorities affect business operations and decision-making.

Privatisation

The transfer and sale of state-owned enterprises or government assets to the private sector to improve efficiency, encourage investment, and generate state revenue.

Nationalisation

The process by which a government takes ownership and operational control of a privately owned business or industry to safeguard public interests or essential services.

Employment Law

Legislation that establishes worker protections and prevents exploitation, regulating minimum-wage rates, maximum hours, discrimination, trade union rights, and termination procedures.

Health and Safety Law

Regulations designed to protect the physical and mental wellbeing of employees and contractors by requiring protective equipment, hygienic environments, safe workloads, and risk protocols.

Consumer Protection Law

Legislation safeguarding buyer rights by mandating product safety, accurate information, fair contracts, cooling-off periods, and rights to refunds, repairs, or replacements.

Competition Law

Regulations designed to ensure open and fair markets by prohibiting anti-competitive behaviours such as price fixing, cartels, predatory pricing, and market-dominating mergers.

Market Failure

A condition in a free market economy where price mechanisms fail to allocate resources efficiently or equitably, resulting in overproduction of harmful goods or underprovision of beneficial services.

Public Goods

Non-excludable and non-rival goods, such as street lighting and national defence, that are not provided by private firms because consumers cannot be excluded from benefiting without paying.

Merit Goods

Goods and services with positive social benefits, such as healthcare and education, that are under-consumed in a free market because consumers do not fully appreciate their long-term value.

Demerit Goods

Products such as tobacco and sugary drinks that are over-consumed in a free market because consumers ignore or underestimate the harm caused to themselves and wider society.

Negative Externalities

Spillover costs and harmful side-effects, such as industrial pollution or traffic congestion, imposed on unrelated third parties and the environment during production or consumption.

Macroeconomic Objectives

The primary economic goals pursued by a government to maintain national stability, typically including sustainable economic growth, low unemployment, and low, stable inflation.

Monetary Policy

Central bank manipulation of base interest rates, quantitative easing, and exchange rates to control the money supply and regulate aggregate demand across the economy.

Quantitative Easing

An expansionary monetary policy where a central bank purchases government and commercial bonds with newly created money to inject liquidity into the commercial banking system.

Fiscal Policy

Government economic intervention through changes in public spending programmes and tax levels to influence the level of aggregate demand and economic growth.

Supply-Side Policy

Government economic measures designed to enhance productive potential and national competitiveness by improving efficiency, workforce skills, incentives, and market flexibility.

Currency Appreciation

An increase in the external value of a country's currency relative to foreign currencies, making exported products more expensive abroad and imported raw materials cheaper.

Currency Depreciation

A reduction in the external exchange value of a domestic currency against other currencies, making exports cheaper overseas and imported components more expensive.

Social Mobility

The degree to which individuals have the opportunity to improve their socio-economic status, income, and career level relative to their family or social background.

Corporate Social Responsibility (CSR)

The voluntary integration of ethical, social, and environmental principles into business operations and strategic stakeholder relationships beyond legal minimums.

Social Audit

An independent, systematic annual assessment and published report evaluating how well a business is meeting its ethical, community, and social responsibility goals.

Pressure Group

An organised body of individuals that uses public campaigning, lobbying, boycotts, or direct action to persuade businesses and governments to act in favour of a specific cause.

Demographics

The measurable data and statistical structure of a human population, including age distribution, gender, ethnicity, geographic mobility, and household composition.

Free Trade Agreement (FTA)

A formal international treaty between nations that reduces or eliminates trade barriers such as tariffs and quotas, facilitating frictionless cross-border commerce.

Multinational Company (MNC)

A business enterprise registered in a home country that owns or controls operating facilities, factories, or service hubs in multiple host nations.

Foreign Direct Investment (FDI)

Direct capital investment by a business entity or multinational into permanent operating facilities, business ventures, or physical assets located in a foreign country.

Transfer Pricing

An internal accounting mechanism where a multinational adjusts the prices charged between its subsidiaries across borders to shift declared profits to low-tax jurisdictions.

Environmental Audit

A comprehensive review assessing a company's environmental footprint, examining legal compliance, resource usage, emissions, waste generation, and mitigation plans.

Sustainability

Operational and resource management that satisfies existing business and social needs without depleting the natural capital required by future generations.

Business Strategy

A medium- to long-term plan establishing organizational direction, resource distribution, and operational priorities to achieve overarching corporate aims.

Strategic Management

The continuous, cyclical management discipline of assessing internal and external environments, formulating strategic choices, executing plans, and reviewing outcomes.

SWOT Analysis

A strategic audit tool evaluating an organisation's internal strengths and weaknesses alongside the opportunities and threats presented by the external environment.

PEST Analysis

A strategic framework that analyses external macro-environmental influences affecting business prospects across political, economic, social, and technological dimensions.

Porter's Five Forces

A competitive analysis model that determines industry attractiveness and profitability by examining industry rivalry, buyer power, supplier power, substitution, and entry barriers.

Cost Leadership Strategy

A Porter generic mass-market strategy where an enterprise becomes the lowest-cost producer in the industry, enabling it to offer lower prices or generate higher profit margins.

Differentiation Strategy

A Porter generic mass-market strategy based on delivering distinctive product attributes, superior design, or premium branding that customers value and will pay a premium for.

Focus Strategy

A competitive strategy where a company targets a specific, well-defined market niche by adopting either a dedicated cost-advantage or specialised product differentiation.

Stuck in the Middle

Michael Porter's term for a business that fails to successfully pursue either a distinct cost advantage or differentiation, resulting in poor competitive performance.

Blue Ocean Strategy

A strategic approach that simultaneously pursues product differentiation and low operating costs to unlock uncontested market space and render competitors irrelevant.

Four Actions Framework

A core Blue Ocean tool instructing businesses to formulate a new value curve by answering which factors to Eliminate, Reduce, Raise, and Create.

Core Competencies

The collective learning and distinctive technical capabilities of an organization that deliver meaningful customer value, enable entry into multiple markets, and resist imitation.

Ansoff Matrix

A strategic matrix used by firms pursuing growth objectives to categorize growth options across existing and new products versus existing and new markets.

Market Penetration

The lowest-risk Ansoff growth strategy that seeks to increase sales and market share of existing products within established consumer markets.

Market Development

An Ansoff growth vector involving the marketing of current products to new customer groups, geographic regions, or distribution channels.

Product Development

An Ansoff growth strategy where a company creates modified, updated, or entirely new goods and services to sell to its existing consumer base.

Diversification

The highest-risk Ansoff growth strategy where an enterprise develops completely new products and launches them into completely new, unfamiliar markets.

Force Field Analysis

A decision-making and change management model that identifies, scores, and balances the driving forces pushing for change against the restraining forces resisting it.

Scenario Planning

A forward-looking strategic method where businesses construct and examine plausible 'what-if' futures to identify risks, early indicators, and adaptable response options.

Decision Tree

A quantitative visual model that traces strategic choices from decision points and chance nodes, using probabilities and financial payoffs to identify the most lucrative option.

Expected Monetary Value (EMV)

The calculated financial outcome of a decision option determined by weighting the payoff of each outcome by its probability: $(\text{Success Payoff} \times \text{Probability}) + (\text{Failure Payoff} \times \text{Probability}) - \text{Cost}$.

Corporate Planning

The managerial discipline where executives formulate clear corporate targets, align internal resources, establish performance metrics, and build coordinated action plans.

Incremental Change

Gradual, low-risk, and ongoing adjustments made to operational systems, employee routines, or products that build cumulative improvements over time.

Disruptive Change

A radical and sudden structural transformation that establishes a new technological or business model, fundamentally reshaping an entire industry or competitive market.

Corporate Culture

The shared beliefs, behavioral values, traditions, and attitudes that define the internal working environment and guide organizational decision-making.

Transformational Leadership

A leadership style characterized by articulating a compelling vision, empowering cross-functional teams, fostering innovation, and inspiring staff beyond routine expectations.

Contingency Planning

The advance preparation of emergency procedures, resource reserves, and operational protocols to ensure business survival and continuity when disruptive events occur.

Crisis Management

The prompt operational handling, centralized control, transparent communication, and rapid decisions executed during an unexpected, damaging emergency.