Factors & their impact on Firms

The 3 main factors are Investment (I), Technological Change (TC), Ethical Decision-Making (EDC).

These are the impacts they have within a firm:

Production methods

  1. Expanding and buying capital to increase volume and efficiency

  2. Replaces manual tasks, advance machinery, results in increased efficiency.

  3. Dictates the rules of production, (e.g. switching to renewable energy, not usin harmful resources)

Price

  1. large capital injections allow for internal Economies of Scale.

  2. new software or machinery allows for increased efficiency which lowers the cost of production

  3. firms can charge “premium” prices to cover the costs of wages, organic, no slave labour, etc.

Employment

  1. spend money to open new warehouses and locations which allows firms to hire more people but also buy omre capital goods wihch leads to worker retrenchment

  2. machines take over jobs whic hledas to less manual labour required adn workers are retrenched.

  3. fair wages, safe conditions, no explotation, no offshore workers (often illegal or part of the slave trade)

Output

  1. Increases

  2. increases but with the same output

  3. may intentionally reduce output/cahnge input (e.g. over-fishing)

Profits

  1. requires, short term= lower profits, long term = higher profits

  2. reduced production costs= increased revenue which leads to profitability

  3. ethical suppliers and fair wages = more expensive = reduced profits

Type of products

  1. used to make new/improve products, innovation

  2. creates new categories of goods, innovation

  3. more ethical products

Globalisation

  1. capital to set up shops, factories. etc. in other countries, access to international banks

  2. connects global firms

  3. ensures firms don’t explout cheaper countries

Environmental Sustainability

  1. funds waste reduction and “green” capital (investments in environmental sustainability)

  2. new ways to operate wihtout harming the planet, reduce/repair harm

  3. ensures firms prioritise the planet by making ethical decisions.