9707/1,2 9707/1,2Business BusinessStudies Studies A Levels

Unit Unit1: 1:Business Business& &Environment Environment

HIERARCHY CORPORATE OF OBJECTIVES OBJECTIVES

Starts wit !road aims and tar"ets and narrows down to individual o!#e$tives% ;a$tors w i$ determine t e $or'orate o!#e$tives: &or'orate aim / (ision 1% $or'orate $ulture 2% si/e and le"al .orm o. t e !usiness )ission Statement <% 'u!li$ or 'rivate se$tor !usinesses =% t e a"e o. t e !usiness &or'orate *!#e$tives >% .inan$ial stren"t o. t e !usiness +ivisionalOBJECTIVES *!#e$tives CORPORATE +e'artmental o!#e$tives ?% List an2 si0 t2'es o. $or'orate o!#e$tives a !usiness $an set% E0'lain wit t eir !ene.its and 'ossi!le limitations, t e .ollowin" two $or'orate o!#e$tives: ,ndividual -ar"ets a% 'ro.it ma0imi/ation &or'orate aim!% "rowt !asi$ "oal or "eneral "oal or 'ur'ose o. t e or"ani/ation e%"% esta!lis ment as an et i$al .irm or ma0imi/e s are olders value and returns% Ans% &or'orate o!#e$tives are t e "oals o. t e w ole or"ani/ation% - e2 are t e out$omes or )ission Statement lar"est t at t'ur'ose e !usiness o. or"ani/ation wants to "ain stated in order in words% to a$ 1 ieve en its t aims% e ' iloso' - e2 are 2 and s'e$i.i$, at a"reed u'on !2 times ever2one $ore s2stems% involved, -measura!le, e2 ma2 !e te$ realisti$ ni$alor ora$ emotional ieva!le and t eme are!ased% time s'e$i.i$% Si0 t2'es 3*+A3: o. $or'orate 1e ma4e o!#e$tives memories are: old we .orm .ilms and 'i$tures% - i@ e2 Survival are dis'la2ed at several 'la$es so em'lo2ees and visitors $an see% ii@ 9ro.it ma0imi/ation A56U)E7-S: iii@ 6rowt 7e"ative : ,ts not true $ontradi$tin" iv@ ,n$reasin" 'er.orman$e s are older "oods value t in"s are said !ut never done ver2 vo"ue v@ ,n$reasin" $an8t !e mar4et trans.erred s are into a$ ieva!le .a$ts% 9ositive: : served as a .ormalit2 vi@ So$ial, norms et i$al o. and $or'orate environmental world $onsiderations : 'rovides dire$tion to em'lo2ees "et to 4now t eir 'ur'ose and .ramewor4 o. PROFIT MAXIMISATION ow to wor4 - is is t e : ma2 main o!#e$tive el' in$rease assumed 'ro.its.or all esta!lis ed 'rivate se$tor or"ani/ations% ,t means to 'rodu$e at t e out'ut level w ere t ere is t e "reatest 'ossi!le di..eren$e &or'orate !etween o!#e$tives sales set revenue .or w and ole total or"anisaiton $osts% : Survival - e ma#or !ene.it is t at "reater returns are "iven to t e investors or s are olders o. t e : 6rowt !usiness% ,t means t at t e ris4:ta4es o. t e !usiness are satis.ied so more 'eo'le would : ,n$reasin" !e willin" mar4et to invest s are into t e !usiness and so raise $a'ital% Anot er su''ort is t at i" er : )a0imi/in" 'ro.its ma2 'ro.its mean "reater re:investment into t e !usiness !2 w i$ ot er o!#e$tives li4e : So$ial, "rowt environmental $ould !e a$ and ieved% et Also i$al $onsiderations% it is t ou" t as t e most rational t in" to a$ ieve - e2 "reatest are ver2 'ossi!le s'e$i.i$'ro.its and S)A5as ot erwise it would !e a missed o''ortunit2% S'e$i.i$ Aowever t ere are several limitations to it% - e owners o. small .irms ma2 not wis to )easura!le e0'and to t e e0tent o. rea$ in" 'ro.it ma0imi/ation 'oint% - e2 would !e more A"ree interested in retainin" $ontrol and $ould !e satis.ied wit t eir $urrent level o. 'ro.its and 5ealisti$ - e2 $ould also want to 4ee' t eir revenue !elow (A- levels as well as not li.est2le% -imeta!led em'lo2 more wor4ers% ;irms also usuall2 o't .or sales ma0imi/ation and !2 t is de$ide - e2 t seir ould 'ro.it 'rovide tar"ets% .ramewor4 9ro.it ma0imi/ation and "uidan$e is to an set a""ressive ot er o!#e$tives% s ort:term o!#e$tive t at would $ause $om'etitors to enter t e mar4et and endan"er lon":term survival% So .irms usuall2 +ivisional 4ee' o!#e$tives: lon":term t ese 'ro.its are as usuall2 t eir o!#e$tive% !ased on "eo"ra' Also it isi$ ver2 division di..i$ult t ou" to "at $ould er all !et!ased e on in.ormation su$ as 'rodu$t $osts, 'ri$es lines% and demand to determine t e 're$ise ma0imi/ation 'oint% Also t e 'ressure o. o!#e$tive o. ot er sta4e olders li4e wor4ers and $ommunit2 +e'artmental: ma4e 'ro.its t e2 are ma0imi/ation .or ea$ o. tim'ra$ti$al% e mar4ets, 'rodu$tion - en 'er.orman$e and ot er o..un$tional $om'an2 is divided !2 return on $a'ital em'lo2ed de'artment% rat er t an 'ro.its% ,ndividual: GROWTH mont l2 !asis% Strate"ies - e lon" "rowt term o. !usinesses 'lans to a$ is ieve t et in$rease e o!#e$tives, in sales "eneral and mar4et and !road% s are o. t e !usiness w i$ is usuall2 also an in$rease in t e total out'ut level o. t e !usiness% - ere are -a$ti$s s ort term s'e$i.i$ and narrow e%"% advertisin" ma"a/ines, $ annels and so on% Unit 1 9a"e 2 1 o. 11

9707/1,2 Business Studies A Levels

Unit 1: Business & Environment

several !ene.its to man2 sta4e olders !e$ause o. t e "rowt and e0'ansion o. a !usiness% - e "rowt o. a !usiness results in its !e$omin" more $om'etitive% 6rowin" demand leaves survival no more a $on$ern% Lar"er .irms are a!le to dominate a mar4et, en#o2 mono'ol2 'ower to a $ertain e0tent and raise 'ri$es too% - e2 are less 'rone to ta4e: overs and also !ene.it .rom e$onomies o. s$ale% 6rowin" !usinesses are a!le to !ene.it .rom diversi.i$ation and so redu$e ris4s% - e2 are a!le to introdu$e new ran"es o. 'rodu$ts so i. one ran"e .ails, t ere are man2 ot ers and so t e entire !usiness doesn8t .ails% )ana"ers are i" l2 motivated as t e2 ave "reater status "et i" salaries and .rin"e !ene.its i. t e2 ma4e t e "rowin" !usiness wor4 to .ull 'otential% +ire$tors and mana"ers also ave more 'ower and re$o"nition% - e em'lo2ees 'art o. an e0'andin" !usiness ma2 .ind t eir #o!s more se$ure Bi. $a'ital intensiveness isn8t used@ and $ould also "et i" er wa"es and so ma2 !e "reatl2 motivated% 6rowt ma2 also "ive i" er 'ro.its and so "reater returns to investors Bs are olders and owners@% But "rowt as its own draw!a$4% ,. !usiness "row !e2ond a $ertain si/e, t e2 ma2 .a$e dise$onomies o. s$ale !e$ause o. 'oor $ommuni$ation and .rustration amon"st wor4ers% -oo ra'id e0'ansion ma2 result in severe $as .low 'ro!lems t at $ould $ause a 'ro.ita!le !usiness to !e$ome insolvent% Also in$rease in sales ma2 ave !een 'ossi!le onl2 !2 redu$tion in 'ro.it mar"ins% So even t ou" t e !usiness "row, it as lower 'ro.it mar"ins% So even t ou" t e !usiness "rew, it as lower 'ro.its and so low returns to investors% - en t e !usiness ma2 !e re:investin" a i" er 'er$enta"e o. 'ro.its to "row w i$ would result in an"er amon"st t e owners / s are olders% ;inall2 it ma2 !e t at movin" into new mar4ets awa2 .rom t e C$ore8 a$tivities would result in a loss o. .o$us and una$om'lis ment o. t e $entral aim o. t e or"ani/ation leadin" to a loss o. dire$tion as well% - is would result in ine..i$ien$2, low 'rodu$tivit2 and in$reased $osts%

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Unit 1: Business & Environment

CONSTRAINTS ON BUSINESS OBJECTIVES & STRATEGIES

&onstraint a $onstraint on !usiness a$tivit2 is a .a$tor t at limits or restri$ts 'arti$ular $ourses o. a$tion8s or strate"ies% 1% ,nternal &onstraints result .rom t e 'oli$2 and stren"t o. t e !usiness itsel. and are usuall2 $ontrola!le% : Stren"t s : 1ea4nesses : 9oli$2 BBusiness@ : 9eo'le and t eir !e aviour 2% E0ternal &onstraints are limits on !usiness a$tivit2 .rom outside t e !usiness and are usuall2 !e2ond t e dire$t $ontrol o. t e !usiness% : E$onomi$ &onstraints : 9oliti$al &onstraints : -e$ nolo"i$al &onstraints : Le"al &onstraints : So$ial, Et i$al and Environmental &onstraints E$onomi$ ,n.luen$es )a$ro e$onomi$ o!#e$tives o. a "overnment 1% maintainin" e$onomi$ "rowt 2% $ontrollin" in.lation <% redu$in" unem'lo2ment =% to maintain t e !alan$e o. 'a2ment >% to sta!ili/e e0$ an"e rate E$onomi$ "rowt in$rease in t e real 6+9 o. a $ountr2 in a 'arti$ular 'eriod o. time, usuall2 one 2ear% 5eal 6+9 is t e nominal 6+9 minus a..e$ts o. in.lation% Bene.its in$rease in 'rodu$tion in$rease in em'lo2ment in$rease e0'orts so !alan$e o. trade !alan$e o. 'a2ment sur'lus in$rease in 'ur$ asin" 'ower in$rease in 'ri$es investment: lo$al as well as .orei"n in$reases% 7e"ative 'ri$e in$rease t2'es in.lation ot er $ountries ma2 im'ose 'rote$tion measures tari..s, Duotas in$rease $osts

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Unit 1: Business & Environment

5eal 6+9

*ver eatin" Boom

Boom 6rowt 5e$ession Slum' time Boom ma2 lead to in$rease in 'ri$es t at $auses .all in a""re"ate demand and so em'lo2ment is redu$ed and so overall 6+9 .alls and 'ur$ asin" 'ower de$reases% At slum' stron" investors !u2 sto$4 at t is 'oint as sto$4 'ri$es are low so t e2 4now t at 'ro.its on$e "row t e sto$4s would !e ver2 i" % 2% ,n.lation "eneral and 'ersistent rise in t e levels o. 'ri$es over a 'arti$ular 'eriod o. time% &auses o. ,n.lation% Ba@ $ost 'us in.lation B!@ demand 'ull in.lation B$@ monetarist view o. in.lation Ba@ - is is w en $osts o. 'rodu$tion in$reases e%"% .uel 'ri$e rises, raw materials in$rease, i" er wa"es so 'ri$es are in$reased% B!@ )onetarist view is t at w en mone2 su''l2 in$reases so 'ri$es in$reases, interest rates de$rease, installment !u2in" is en$oura"ed so .low o. mone2 in$reases so a""re"ate demand in$reases t at 'us es t e 'ri$es% 6overnment monetar2 'oli$2 is related to t e mone2 su''l2 : re.lationar2 / e0'ansionall2 monetar2 'oli$2 : de.lationar2 / $ontra$tionar2 monetar2 'oli$2 5e.lationar2 "overnment de$reases rates, installment !u2in" leasin", !orrowin", s'endin" and so overall mone2 su''l2 in$rease% So all t ese measures in$reases demand so 'rodu$tion will in$rease% +e.lationar2 "overnment in$reases interest rates leasin", installment !u2in", s'endin", !orrowin" so over all mone2 su''l2 de$reases so all t ese measures de$reases demand to lower in.lation% +e.lation de$rease in 'ri$e +is:in.lation level o. 'ri$es are "oin" u' !ut at a slower rate t an !e.ore% Slum' in.lation in$rease in in.lation, so em'lo2ees ave to !e laid o.. !e$ause o. $ost o. 'rodu$tion, $ause o. slum'% -raditional relation is, w en in.lation is i" unem'lo2ment is low%

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9707/1,2 Business Studies A Levels

Unit 1: Business & Environment

Fiscal policy of o!"#$%"$&s' 6overnment !ud"et: "overnment 5evenue -a0ation i" ta0es "overnment E0'enditure So$ial 1el.are, dis'osal in$ome +e.en$e, distri!ution o. wealt / serve 'ri$es .all demand .alls redu$es e$onom2 <% Unem'lo2ment is a situation w ere 'eo'le w o are willin" and a!le to wor4 $annot .ind 'ro'er #o!s% Bor a''ro'riate #o!s@ -2'es: Bi@ &2$li$al Unem'lo2ment Bii@ Stru$tural Unem'lo2ment Biii@ ;ri$tional Unem'lo2ment Biv@ Seasonal Unem'lo2ment Bv@ -e$ nolo"i$al Unem'lo2ment Bvi@ 5e"ional Unem'lo2ment Bvii@ (oluntar2 Unem'lo2ment Bviii@ 5esidual Unem'lo2ment 1% &2$li$al is due to re$ession in overall e$onom2% 2% +eindustriali/ation% Stru$tural is due to an2 reason a industr2 Be%"% te0tile@ is de$line% Even in tertiar2 se$tor <% 1 en 'eo'le swit$ #o!s so in !etween time is .ri$tional% =% 1 en em'lo2ment situations $ an"e due to season e%"% a"ri$ulture, woolen "arments in summer, $onstru$tion w en 'ro#e$ts are !ein" made so on$e $om'leted t e 'eo'le are unem'lo2ed% >% -e$ nolo"i$al is due to automation i%e% w en industries !e$ome $a'ital intensive% E% 1 en .a$tories move .rom one re"ion to anot er so unem'lo2ment in t e le.t re"ion% 1 en unem'lo2ment o$$urs in an2 one re"ion% 7% (oluntar2 is w en 'eo'le $ oose not to wor4 !e$ause o. unem'lo2ment !ene.its even t ou" t e2 are a!le to wor4% Bwillin" & a!le !ut want to dela2@ e%"% wantin" .or a i" er salar2 'a2% F% 5esidual is due to disa!ilities o. 'eo'le i%e% w en t e2 !e$ome ' 2si$all2 and mentall2 disa!led !ut to onl2 a $ertain e0tent% - ese are 'eo'le wit sim'le disa!ilities% I%pac&s of U$"%ploy%"$& 1% lowered a""re"ate is demand due to de$rease in 'ur$ ase 'ower as in$omes are low as unem'lo2ment & % +ue to t is out'ut de$reases% 2% lesser ta0 revenues .or t e "overnment "overnment e0'enditure in$reases, !urden on wor4in" 'o'ulation in$reases% <% so$ial $osts $rime rate , .rustration and sui$ide , measures a"ainst "overnment% =% wasta"e o. a ver2 im'% .a$tor o. 'rodu$tion i%e% la!our 'rodu$tion 'ossi!ilit2 $urve not a$ ieved e..i$ient utili/ation o. ;*9s is not 'ossi!le% Unem'lo2ment means e0'loitation o. em'lo2ees are 'ossi!le as t e2 are des'arate% So low wa"es rates% >% !alan$e o. 9a2ments ,t is a summar2 o. all t e 'a2ments made !2 a $ountr2 and 'ro$eeds ta4en !2 a $ountr2 over a 'arti$ular 'eriod o. time w i$ is one 2ear% ,t is a$tuall2 t e monetar2 re$ord o. transa$tions o. one $ountr2 wit t e rest o. t e world% ,t is a summar2 o. $as .lows% Sur'lus o. !o' o "overnment invests t e mone2 into some ot er $ountr2% o "ive loans to ot er $ountries Unit 1 9a"e E o. 11

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Unit 1: Business & Environment

o 'ut in reserves de.i$it o. !o' o ta4e loans .rom ot er $ountries B,);, 1-*, 1orld Ban4@ o invite investors to invest in $ountr2 o ta4e out mone2 .rom reserves ,m'a$ts o. !o' de.i$it o lia!ilities in$rease o !an4ru't$2 o interest 'a2ments in$rease o e$onom2 $an "o to a slum' o .orei"n e0$ an"e rate de$rease as demand o. $urren$2 .alls o reserves "o down so out'ut de$rease unem'lo2ment in$reases ,m'a$ts o. !o' sur'lus o in.lation in$reases due to mone2 su''l2 in$reases and value o. mone2 de$reases% o -radin" $ountries $an im'ose 'rote$tion measures% ,m'ortant as'e$t, "oods o &urrent A/& visi!le trade & invisi!le trade o &a'ital A/& !i" .orei"n investments air !us% se$tor / loans o *t er investments !an4 transa$tions, remittan$es EG&AA76E 5A-ES o ,t is t e value o. one $urren$2 a"ainst anot er $urren$2 a''re$iation s'end less o. $urren$2 to !u2 o ,n$rease o. value s'end less to !u2 one unit o. anot er o &urren$2 de're$iation o +e$rease in value s'end more o. $urren$2 to !u2 one unit o. anot er o +e'ends on demand and su''l2 o. $urren$2

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9707/1,2 Business Studies A Levels

Unit 1: Business & Environment

MACRO ECONOMIC POLICIES

?% E0'lain ma$ro e$onomi$ 'oli$ies o. t e "overnment% : monetar2 'oli$2 : .is$al 'oli$2 : e0$ an"e rate 'oli$2 Ans% - e ma$ro e$onomi$ 'oli$ies o. t e "overnment are t ose t at a..e$t t e overall e$onom2 o. a $ountr2% - ere are t ree t2'es o. ma$ro e$onomi$ 'oli$ies% Bi@ ;is$al 'oli$2 Bii@ )onetar2 'oli$2 Biii@ E0$ an"e rate 'oli$2 ;,S&AL 9*L,&H - is 'oli$2 is related to t e "overnment !ud"et w i$ is t e "overnment in$ome t rou" ta0ation, its e0'enditure as well as !orrowin"% - is 'oli$2 is used to $ontrol t e a""re"ate demand as well as in.lation to sta!ili/e t e e$onom2 i%e% avoid man2 unwanted slum's or !ooms t at ma2 !e !ad .or overall e$onomi$ "rowt % 1 en t e e$onom2 is in re$ession and t e rates o. unem'lo2ment are i" , t is means t at two o. t e o!#e$tives o. "overnment are not !ein" met w i$ are e$onomi$ "rowt and low unem'lo2ment% -o $ounter t is, t e "overnment would in$rease its s'endin" !2 $onstru$tin" new os'itals and s$ ools% - e "overnment would also redu$e dire$t and indire$t ta0es w i$ are $or'oration ta0, in$ome ta0 and value added ta0 res'e$tivel2% - is would result in a rise o. dis'osa!le in$ome i%e% an in$rease in t e 'ur$ asin" 'ower o. t e 'u!li$% - ere.ore, t e a""re"ate demand .or "oods and servi$es would in$rease% So t ere would !e an in$rease in t e industrial out'ut i%e% a rise in 6+9% Also em'lo2ment would in$rease as more 'eo'le are reDuired to 'rodu$e t e in$reased out'ut% Aowever, i. t e e$onom2 is !oomin" and is in dan"er o. over eatin" t en t ere ma2 !e ver2 i" rates o. in.lation and $urrent a$$ount de.i$it% ,t ma2 !e due to a ver2 i" a""re"ate demand% So to $ounter t is, t e "overnment would redu$e its e0'enditure !2 $uttin" !a$4 on road $onstru$tion% Also, i" er ta0es $ould !e im'osed li4e in$ome ta0 or value added ta0 Bt is would in$rease 'ri$e@% +ue to t is t e $onsumer demand .alls as t eir dis'osa!le in$ome is de$reased% - ese measures would $ontrol t e e0$essive e$onomi$ "rowt and $urrent a$$ount de.i$it would redu$e% )*7E-A5H 9*L,&H - is 'oli$2 is related to t e $ an"es in interest rates t at $auses an in$rease or de$rease in mone2 su''l2% - is in turn wor4s .or t e re"ulation o. in.lation and so t e e$onomi$ "rowt is 4e't in $ e$4% 1 en in.lation is in$reasin" and is .ore$asted to rea$ levels !e2ond t at w i$ t e "overnment wants, t en de.lationar2 or $ontra$tionar2 monetar2 'oli$2 is used% So t e $entral !an4 or state !an4 in$reases t e interest rates% - is leads to de$rease in leasin", installment !u2in" and !orrowin" o. mone2 as no one wis es to 'a2 i" er rates o. interest% - ere is also a .all in s'endin" and so t e mone2 su''l2 is redu$ed% - ere.ore, t e overall a""re"ate demand .alls and t is would lead to a de$rease in in.lation as 'ri$es are lowered% Also t e e0istin" loans and morta"es would now ta4e u' a "reater 'art o. t e in$ome as interest on t em in$reases% - is .urt er redu$es t e dis'osa!le in$ome o. t e $ustomers and is anot er .a$tor t at leads to .all in a""re"ate demand% *n t e ot er and, i. t e in.lation rates are too low, t en t e "overnment would de$rease t e interest rates% - is would en$oura"e t e $ustomers to !u2 "ood es'e$iall2 ouses, $ars and ma$ iner2 on !orrowed loans, !2 leasin"s and t rou" installment !u2in" as less interest as to !e 'aid% Also t e interest on e0istin" loans and morta"es would de$rease and so t e dis'osa!le in$ome o. $ustomers in$rease% - ere.ore, t e2 are a!le to !u2 more 'rodu$ts and so t e a""re"ate demand in$reases% - is would 'us u' Unit 1 9a"e F o. 11

9707/1,2 Business Studies A Levels

Unit 1: Business & Environment

'ri$es leadin" to i" er rates o. in.lation% - is is $alled re.lationar2 or e0'ansionall2 monetar2 'oli$2% &ontrollin" in.lation so t at 'ri$es don8t in$rease a lot nor de$rease too mu$ sustains t e real 6+9 and so $ause $ontinuous e$onomi$ "rowt t at also 4ee's levels o. unem'lo2ment low% EG&AA76E 5A-E 9*L,&H E0$ an"e rate is t e 'ri$e o. one $urren$2 or t e value o. a $urren$2 in t e terms o. anot er $urren$2% - e 'oli$2 o. t e "overnment would !e to de$ide i. t e2 want it to .loat or to !e .i0ed% A .loatin" e0$ an"e rate is determined !2 t e demand and su''l2 o. t e $urren$2 in t e international mar4et% ,. t e demand in$reases, t en t e e0$ an"e rate a''re$iates as its value in$reases e%"% w en t e interest rates o. t e $ountr2 are i" % - is is "ood .or t e im'ortin" !usinesses as t e2 !u2 more in t e same amount o. mone2% Aowever, w en t e demand .alls, t en t e $urren$2 de're$iates and its value .alls e%"% i. E0 5u'ees I USJ1 and t e USJ de're$iates t en >0 5u'ees I USJ 1% - is s ows t at t e value o. ru'ee a''re$iates as less is to !e "iven in return o. J1% - is is "ood .or e0'orters% Aowever, too man2 .lu$tuations in t e e0$ an"e rate 'rove !ad .or domesti$ industries and its t e "overnment8s dut2 to 4ee' t e rates sta!le%

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Unit 1: Business & Environment

FURTHER ECONOMIC CONSTRAINTS

La!our )ar4et: one o. a t2'es o. mar4et ;a$tors determinin" t e demand o. la!our: 1@ +emand .or t e .inis ed 'rodu$t Bla!our as a derived demand@ i%e% in.luen$ed !2 a demand o. .inis ed "ood% 2@ - e e..e$ts o. te$ nolo"2 or t e 'ri$e and e..i$ien$2 o. la!our savin" ma$ iner2% 9ri$e o. ma$ iner2 e..i$ien$2 o. ma$ iner2 t en demand o. uns4illed la!our and demand o. s4illed la!our % <@ - e trend o. t e industr2 to in$rease $a'ital intensit2% ;a$tors e..e$tin" su''l2 o. la!our: 1@ 'o'ulation si/e 2@ mo!ilit2 o. la!our ;or t e e$onom2 <@ Ko. wor4in" 'o'ulation =@ no% o. 'eo'le w o are not willin" to wor4 >@ unem'lo2ment E@ wa"e rate o..ered !2 'arti$ular industr2% 7@ availa!ilit2 o. suita!le la!our in ot er industries F@ level o. unem'lo2ment Bstru$tural unem'lo2ment Unem'lo2ment su''l2 'eo'le are read2 to wor4 even at lower wa"es

-o t e industr2

,. t ere is s4ill sur'lus t en wa"es will de$line and i. t ere is s4ill s orta"e t en wa"es will rise% -o $over s4ill s orta"es 1@ -o ire more trained sta.. 2@ -rainin" 2our e0istin" em'lo2ees Advanta"es o. irin" new trainin" em'lo2ees 1@ Saves time 2@ 7ew em'lo2ees $an !rin" new ideas to !usiness% +isadvanta"es 1@ .rustration would !e $reated !e$ause t e2 Be0istin" em'lo2ees@ will t in4 t at t e2 s ould !e trained rat er t en trainin" new 'erson% 2@ $ost o. trainin" in$reases% State intervention to andle la!our mar4et + 1@ "overnment set u' a minimum wa"e rate S i. "overnment in$reases t e level o. wa"e rate t en su''l2 would !e more !ut demand would !e less so em'lo2ees .rom A to B will !e$ome unem'lo2ed% S + A B

Unit 1 9a"e 10 o. 11

9707/1,2 Business Studies A Levels

Unit 1: Business & Environment

MARKET FAILURE
)ar4et .ailure w en t e resour$es are not utili/ed e..i$ientl2% 5esour$es $an !e underutili/ed i%e% w en resour$es are not .ull2 used 5esour$es $annot !e over utili/ed% -2'es o. mar4et .ailure Be0am'les@ 1% E0ternal $ost Be..e$t on "ood, $onsumers and wor4ers@ 2% ,nadeDuatel2 trained la!our Be..e$t on "ovt%, $onsumer and $om'anies@ <% E0'loitation !2 mono'olies

Unit 1 9a"e 11 o. 11