Unit 6 – External Influences on Business Activity

Business/Economic Cycle

Globalisation

Specialization ç Opportunities ç
Increase market share (sales and profit) ç
Economies of Scale ç
Expansion/New business opportunity ç
Lower cost (wage) and taxes ç
Skilled labour ç
Technology ç
Role of Ø Economic Objectives Ø Price Stability Competition (import and workforce) ç Threats ç
Government Ø Employment Difficult to attract skilled employees ç
Ø Economic Growth Economies of scale ç
Ø BOP Capital availability ç
Ø Public expenditure Exchange Rates ç
Ø Policy Instruments
Ø Taxes
Ø Interest Rates
Ø Policies/Legal Controls Ø Trade barriers – tariffs/quotas/embargoes
Ø Subsidies
Multinationals

Ethics and
Private Costs + External Costs = Social Costs
Environment
6.1 Economic Issues
Ø Sustainable Development 6.2 Environmental and ethical issues
Private Benefits + External Benefits = Social Benefits
Ø Pressure Groups 6.3 Business and the international economy
Ø Legal Controls and Policies 6.4 Statement of financial position
WHAT YOU NEED TO KNOW
1. How can public expenditure, taxes and interest rates effect
business activity?
2. How can pressure groups be effective?
3. What actions could be taken to initiate change to the cause? (5)
4. Why is globalization important?
5. What are the threats and opportunities of globalization?
6. Why is the importance of trade barriers?
7. What are the benefits of multinationals to economies?
8. How can exchange rates effect international competitiveness?

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