Business

• Business Structure:

  • Local businesses operate in a small part of the country without expansion objectives
  • National businesses have branches throughout the country but do not operate in other countries
  • International/multinational businesses operate in more than one country
• International Trade:

  Pros:

  • Economies of scale
  • Access to better information
  • Spreads risks
  • Access to wider market

  Cons:

  • Diseconomies of scale
  • Higher transport costs
  • Higher competition and risk
  • Trade barriers
  • Cultural and language differences
• Protectionism:

  • Process of protecting domestic firms from foreign competition with trade barriers like tariffs, quotas, embargoes, and voluntary export restrictions
• Free Trade and Globalisation:

  • Free trade: no trade barriers while exchanging goods and services
  • Globalisation: increase in movement of labor, capital, goods, and services between countries
  • Trade blocs and trade organizations encourage globalisation
  • Benefits of free trade include wider choice of goods, economies of scale, improved living standards
• Multinational Businesses:

  • Businesses that produce in many countries
  • Reasons to become multinational: avoid tariffs, access cheaper raw materials, lower labor costs, closer to the market, better control, access to grants and subsidies
• Host Country:

  Benefits:

  • Economic growth
  • Higher employment
  • Higher tax revenue
  • Better infrastructure
  • Increased business opportunities

  Drawbacks:

  • May not reinvest profits in the country
  • Exploitation of labor
  • Pollution
  • Reduction in cultural identity
  • Drive out domestic firms
• Privatisation:

  Benefits:

  • Improved efficiency
  • Higher revenue for the government
  • Higher tax revenue
  • Higher quality
  • Higher competition
  • Wider choice
  • Higher investment

  Drawbacks:

  • External costs may not be considered
  • Monopolies may be formed
  • Exploitation of customers
  • Strategic industries require government support and control
• Size of Business:

  External Growth:

  • Business expansion through mergers and takeovers
  • Reasons for: share research facilities, economies of scale, larger customer base
  • Reasons against: diseconomies of scale, conflicts
• Applying technology to business - limitations:

  • Increased capital costs
  • Training costs
  • Redundancy costs
  • Reduced job security
  • Fall in motivation
  • Breakdowns can halt production
  • Legal constraints on the use of IT
  • Managers fear change
• IT and business decision-making:

  • Provision of a huge amount of data to management through the use of IT is known as management information systems
  • Benefits include obtaining data quickly, easy processing and analysis of data, quick decision-making, better communication
  • Challenges include information overloads leading to information loss, potential abuse of power, reduction in authority and empowerment, reduced job enrichment and motivation
• Introducing technology effectively:

  • Analyze the use of IT
  • Involve managers and other staff
  • Evaluate different systems and programs (cost, efficiency, budget)
  • Plan the introduction of a new system and training
  • Monitor the introduction and effectiveness of the system
• Social and demographic influences on business activity:

  • An ageing population
  • Changes in the role of women
  • Patterns of employment
  • Increase in temporary and flexible employment contracts
  • Increasing pressure on pensions and healthcare services due to an ageing population
• Environmental constraints on business activity:

  • The environment and corporate social responsibility
  • Arguments for and against adopting environmentally friendly business strategies
  • Environmental audits
  • Social audits
  • Evaluation of environmental and social audits
• Environmental and ethical issues - the role of pressure groups:

  • Pressure groups influence businesses and governments to change policies
  • How pressure groups operate and achieve their goals
• Economic objectives of governments:

  • Economic growth
  • Low price inflation
  • Low rate of unemployment
  • Exchange rate stability
  • Wealth and income transfers to reduce inequalities
• Economic growth:

  • Measured using GDP
  • Benefits of economic growth
  • Factors leading to economic growth
• The business cycle:

  • Phases: Boom, Recession, Slump, Recovery and growth
  • Effects of each phase
• Is a recession always bad?

  • Advantages and disadvantages of a recession
• Inflation:

  • Causes of inflation
  • Impact of inflation on business strategy
  • Business strategies during inflation
• Deflation:

  • Causes and effects of deflation
• Unemployment:

  • Types: Cyclical, Structural, Frictional
  • Causes and costs of unemployment
• Balance of payments (current account):

  • Records the value of goods and services traded between a country and the rest of the world
  • Deficit and problems of a BOP deficit
• Exchange rates:

  • Determination through demand and supply
  • Exchange rate fluctuations
  • Appreciation and depreciation of currency
• Appreciation of the currency:

  • Leads to cheaper raw materials and increased competitiveness
  • Reduces inflation
  • Cheaper imports may substitute domestic goods
  • Increases international competitiveness through non-price factors like product design, innovation, quality, effective promotion, extensive distribution, after-sales service, investment in trained staff, and modern technology
• Depreciation of the currency:

  • Results in cheaper prices in international markets and increased competitiveness
  • Leads to lesser price competition in the domestic market
  • Increases the cost of imported raw materials
  • Affects international competitiveness through non-price factors
• Macro-economic policies:

  • Impact the entire economy
  • Influence the level of Aggregate Demand (AD) and Aggregate Supply (AS)
  • Fiscal policy involves decisions on government expenditure and tax rates, leading to either a surplus or deficit
  • During a recession, governments adjust spending or tax rates to stimulate AD and increase output and employment
  • During economic booms, governments adjust spending or tax rates to control inflation, output, and employment
• Monetary policy:

  • Involves decisions on interest rates, money supply, and exchange rates
  • Lower interest rates during a recession to increase AD
  • Higher interest rates increase production costs, lower demand, and appreciate the country's exchange rate
  • Higher interest rates lead to the appreciation of a country's currency due to speculation
• Exchange rate policy:

  • Discusses the drawbacks of floating exchange rates and benefits of joining a common currency
  • Drawbacks of floating exchange rates include fluctuating prices of imported raw materials, unstable demand levels, uncertainty, and increased costs
  • Advantages of not joining a common currency include maintaining the central bank's status as the interest-setting authority, retaining independence in controlling tax rates, and using interest rates for other objectives
• Government policies and business competitiveness:

  • Supply-side policies aim to increase industrial competitiveness
  • Measures include lower rates of income and corporation tax, increased labor market flexibility and productivity, subsidizing training programs, funding higher education, encouraging immigration of skilled workers, and restricting welfare benefits
• Government intervention in industry:

  • Involves subsidies to lower prices, help loss-making businesses, grants for opening in specific locations, and financial support for consumers
• Market failure:

  • Occurs due to inefficiency in the market, leading to overproduction of demerit goods and underconsumption of merit goods
  • Private costs and benefits are borne by those directly involved, while external costs and benefits affect third parties
• Income elasticity of demand:

  • A numerical measure of demand responsiveness to income changes
  • Normal goods have a positive YED between 0 to 1, luxury goods have a YED greater than 1, and inferior goods have a negative YED
• HR department:

  • Responsibilities include deciding employment contracts, improving employee performance, and managing industrial relations
  • Contrasts between Hard HRM (cost-cutting, short-term contracts, autocratic leadership) and Soft HRM (developing workers, motivation, democratic leadership)
• Core VS Peripheral Workers:

  • Core workers are full-time and permanent, while peripheral workers are temporary or part-time
  • Core workers are key for business success and receive Soft HRM, while peripheral workers receive Hard HRM
• Employment contracts:

  1. Part-time contracts

  2. Temporary contracts

  3. Permanent contracts

  4. Flexi-time contracts

  5. Outsourcing contracts

  6. Zero-hour contracts
• Part-time and Flexi-time contract advantages:

  • Business advantages include reduced overhead costs, competitive advantage, more staff availability, employee efficiency assessment, teleworking, and lower costs
  • Worker advantages include greater variety and flexibility
• The Shamrock Organisation:

  • Core managerial and technical staff on full-time permanent contracts
  • Outsourced functions
  • Flexible workers on part-time or temporary contracts
• Measuring and monitoring employee performance:

  • Involves labor productivity, reject rates, customer complaints, and wastage levels
  • Ways to improve labor productivity include higher motivation, efficiency, reliable capital equipment, increased worker involvement, more training, and improved internal efficiency
• Absenteeism rates:

  • Calculated as the number of absent employees divided by total employees multiplied by 100
  • Lead to poor customer service, higher costs, and indicate poor motivation levels
• Employee performance improvement strategies:

  • Include regular performance appraisals, training, quality circles, cell production, financial incentives, advanced technology, and management by objectives