THE FROG’S EQUATION: BUSINESS STUDIES FOR IGCSE

CHANGING BUSINESS ENVIRONMENT

Government influence

Aims of government:
 to protect individuals and groups
 to provide essential industries and services
 to help the economy run smoothly and to protect employment

Government economic objectives:

 Low inflation- inflation is the increase in the average price level of goods
and services over time.
 low levels of unemployment- in unemployment total level of output is
lowered and government has to spend a lot of money
 economic growth- when the country’s gross domestic product increases;
more goods and services are produced
 growth-unemployment falls, higher living standards
 boom- prices rise and shortage of workers
 recession- falling demands and profit
 slump- long-drawn-recession, high unemployment
 balance of payments- records the difference between a country’s exports
and imports
 exchange rate: the price of one currency in terms of another

Government economic policies: governments have a lot of economic power

 Fiscal policy- any change by the government in the tax rates or public
sector spending
 Taxes
o Income tax- on peoples incomes, it mostly is progressive
o Profits or corporation tax- on profits of business
o Indirect taxes- added to prices of goods and taxpayers pay as
they purchase goods
o Import tariffs and quotas- import tariff is a tax on an imported
product; import quota is a physical limit to the quantity of a product
that can be imported
 Monetary policy and interest rate- monetary policy is a change in interest
rates by government or central bank; interest rate is the cost of borrowing
money
 Supply side polices- used by governments to improve the efficient supply
of goods and services in their country

1
Paula Hohne-Tarragona
THE FROG’S EQUATION: BUSINESS STUDIES FOR IGCSE

Government help in businesses: government can encourage businesses

 Regional assistance- problems can emerge from having rich areas and
poor areas in one country. Governments try to spread development by
leading firms to poorer areas
 Small firms- governments help small businesses because they help the
overall economy
 Exporting of goods and services- government support exporters by
encouraging banks to lend them lower interest rates, offering subsides or
tax reductions, and by trying to keep the exchange rate as stable as
possible

Technology

Technological changes:
Advantages
 New products encourage to buy more often
 First producers of new idea have huge competitive advantage
 New high tech production methods increase productivity and
lower average costs
 Fewer workers are required- fewer to recruit and manage
 New methods can be adapted quickly- gives firm flexibility to
meet consumers needs
Disadvantages
 Expensive to research and develop new ideas and products
 Non developing firms lose sales and market share
 New production methods are expensive
 Workers need retraining or lose their jobs- fear of this may lead
to fall in motivation

Introducing- some people are afraid of changes in production methods

Firms try to involve workers in changes rather than just letting them deal
with it.
People are probably more positive about this if they are told why they are
needed and how they will be trained to use them.
Workers may be encouraged to make suggestions to make work more
efficient.
Positive effects need to be made clear to workers.

E-commerce: buying and selling over the internet

2
Paula Hohne-Tarragona
THE FROG’S EQUATION: BUSINESS STUDIES FOR IGCSE

Market changes

Consumer spending patterns: the typical products bought by consumers.

These are heavily dependent on income, but also affected by lifestyle.

Competitive markets: markets have become more competitive

 shrinking globe - easier to transfer products and services around
 access to overseas markets - reduced taxes and barriers
 low cost of setting up business
 privatisation of industries

3
Paula Hohne-Tarragona