1.5: Understanding
external influences
on business
❖
❖
❖
❖
Business stakeholders
Technology
Legislation
Economy
Products
INdustry
Customers
Competitors
1.4.1
CASE STUDY: THE WAVENEY HOUSE HOTEL
1.5.1 Business
stakeholders
Who business stakeholders are and their different objectives:
● shareholders (owners), employees, customers, managers, suppliers,
local community, pressure groups, the government.
Stakeholders and businesses:
● how stakeholders are affected by business activity
● how stakeholders impact business activity
● possible conflicts between stakeholder groups.
Keywords
■
■
■
■
■
Stakeholders
Shareholders
Dividends
Pressure group
Conflict
Definition of terms
■
Stakeholder: anyone who has an interest in a business.
It is not about ownership, it is about being interests in how
the business is run
Business stakeholders:
1.
2.
3.
4.
5.
6.
7.
8.
Shareholders
Employees
Customers
Suppliers
Local community
Managers
Pressure groups
The Government
Shareholders
Stakeholder
Shareholders
What is their main interest in the business?
They own part of the business (own shares e.g.
10%= 1 share)
Their main objectives
∙ Profit
∙ Business success
/survival in the long run
Employees
Stakeholder
What is their main interest in the business?
They work for the business. Their job
depends on the business surviving.
Their main objectives
∙ Job security
∙ Fair wages
∙ Business success
Employees
∙ Fair treatment
(employee rights)
∙ Good/Safe working
conditions
Customers
Stakeholder
What is their main interest in the business?
They buy the products (goods and services)
that a business makes).
Customers
Their main objectives
∙ Good customer service
∙ High quality products
∙ Low prices
∙ Business success (so
they can continue to
buy the products)
Suppliers
Stakeholder
What is their main interest in the business?
They sell materials and products to the
business. They allow the business to provide
products to the customers.
Suppliers
Their main objectives
∙ Fair price for
materials/products.
∙ Paid on time (cash).
∙ Business success (high
demand for the
product= high demand
for materials)
Local community
Stakeholder
Local
community
What is their main interest in the business?
They live in the area surrounding the
business.
Watch the video
see if you can
identify why the
locals are against
Tesco opening
https://www.youtube.com/watch?v=BPVAgsV8_4g
Why are the
Japanese
nationals
protesting against
the Olympics?
Their main objectives
∙ Low levels of pollution.
∙ Provision of activities.
Managers
Stakeholder
Managers
What is their main interest in the business?
They manage the business on a daily basis
and are responsible for:
- Business decisions (production and
pricing)
Their main objectives
∙ Fair salary.
∙ Job security.
∙ Business success.
∙ Profit (so might get
bonus)
Pressure groups
Stakeholder
What is their main interest in the business?
Pressure group - They are a group with a
shared interest in the business. They want
the business to change.
Pressure groups
Their main objectives
∙ Environmentally
friendly
∙ Fair wages
∙ Fair treatment of
workers
https://www.youtube.com/watch?v=9P1UXYS6Bmg
The Government
Stakeholder
What is their main interest in the business?
Their main objectives
The government- They set the rate of tax (% ∙ The business to pay
of profit/ income paid to government to fund
tax (% of profit).
public services e.g. NHS)- this will be studied
later. They also set the rules and regulations
The Government that the business must abide by.
∙ The business to abide
by the law
(employment and
consumer legislation
to be studied later).
Exam question
Exam question 1: (Answer in your handout)
State one stakeholder for The Waveney House Hotel. (1)
Customers: tourists from UK and mainland Europe
Exam question 2: (Answer in your book)
Explain one objective that an employee of The Waveney House Hotel may
have. (3)
Higher minimum wage law- now £9 an hour,
who does this affect
Definition of terms
■
■
Conflict: When different stakeholders have different
objectives, they might not agree, and this causes conflict.
When there is a disagreement between stakeholders.
Stakeholders conflict:
1.
2.
3.
4.
5.
6.
7.
Employees
Customers
Suppliers
Local community
Managers
Pressure groups
The Government
Possible conflicts between stakeholder
groups
■
Shareholders and owners want profit
Employees want higher wages – where is the conflict?
Managers want big bonuses – where is the conflict?
Customers low prices and high quality – where is the conflict?
Local communities want lower pollution levels – where is the
conflict?
Suppliers want to charge high prices for goods and
services they provide the business with – where is
the conflict?
Possible conflicts between stakeholder groups
■
Employees want
higher wages
but…..
Possible conflicts between stakeholder groups
■
Customers want
low prices and
high quality, but….
Possible conflicts between stakeholder groups
■
Suppliers want to
get good prices for
their goods and
services but…..
Possible conflicts between stakeholder groups
■
Local
communities
want lower
pollution levels,
but…
Possible conflicts between stakeholder groups
■
Managers want
big bonuses
but…..
Possible conflicts between stakeholder groups
■
Pressure groups
want businesses
to operate
ethically and
sustainably but….
Possible conflicts between stakeholder groups
■
Government want businesses abide
to legislations such as ensuring that
employees are safe by providing
them with Personal Protective
Equipment at work but…..
Exam question
Exam question 3:
Define the term “stakeholder”. (1)
Exam question 4:
Explain one conflict that might exist between stakeholders of The Waveney House
Hotel. (3)
Group TASK: You will be given a stakeholder:
1. Marks & Spencer owner 2. Local Shopper 3. A Local Business person 4. The Government 5. Potential Employee
Decide whether or not M&S should be given permission to open and explain your position and convince us that you are
right.
1.5.2 Technology and
business
Different types of technology used by business:
● e-commerce
● social media
● digital communication
● payment systems.
How technology influences business activity in terms of:
● sales
● costs
● marketing mix.
The impact of competition on business decision
Different types of technology used by business
making
WHAT ROLE HAS TECHNOLOGY PLAYED
IN A PANDEMIC?
1. Social media
■
Allows customers and
businesses to
communicate
efficiently using the
internet.
1. Social
media
■ Allows customers and
businesses to
communicate
efficiently using the
internet.
■
Promote their products as part
of their marketing strategy.
■
Adapt products to meet
customer needs ( keeping up
with trends using Twitter).
■
Lower cost of promotion
■
Access to wide target
audience
2. Payment systems
Allows individuals and businesses to
pay for goods and services in an
easier way
2. Payment systems
Allows individuals and businesses to
pay for goods and services in an
easier way
■
■
Lower costs (online, no
physical stores)
Higher sales as it is
more convenient for
customers to pay – for
items bought over the
Internet e.g. eBay
3. Digital communication
■
Digital communication means
exchanging information with
stakeholder using digital
means such as:
◻
◻
◻
◻
Text
E-mail
Mobile phone
Skype
Video here on using skype for business
3. Digital communication
■
Digital communication means
exchanging information with
stakeholder using digital
means such as:
◻
◻
◻
◻
Text
E-mail
Mobile phone
Skype
• Communicate
effectively and
conveniently with their;
customers, suppliers,
government agencies
etc.
• Lower costs instead of
paying for paper and
postage to send letters
• Improve the product
(know what the
customers want)l
Video here on using skype for business
4. E-commerce
■
E-commerce is the
business term for
shopping on the Internet
4. E-commerce
■
E-commerce is the
business term for
shopping on the Internet
• Easier to sell products
(no physical store)
• Access to larger target
market (online 24/7)
• Lower costs (no rent to
pay)
Exam question
Exam question 1: Write your answer in your grey books.
Explain one impact that using digital communication has on The Waveney House
Hotel . (3)
The Waveney House Hotel is a family run hotel situated in the picturesque Waveney Valley. It boats a superb river location with
stunning views across the surrounding countryside.
The hotel offers 12 luxury bedrooms, all with en-suite bathrooms. Each are individually styled. Two of the suites not only contain
a four-poster-bed but also have exceptional views across the river and Gillingham marshes. The hotel contains the top-class
Staithe Restaurant and Riverside Bar offering a range of seasonal dishes using locally sourced meat, fish and vegetables. Meals
are prepared and cooked to order, and are tailored to meet any dietary requirements. The hotel attracts many tourist, from both
the UK and mainland Europe, particularly those on boating holidays as there are local moorings available.
As well as targeting tourists, the hotel also targets the events and functions markets as it boasts its own large function room
complete with bar, lounge area, stage and dance floor. It forms an ideal venue for conferences, meetings, weddings, birthday
parties and other special occasions.
The hotel has embraces technology in how it communicates with customers. It has a fully informative website detailing everything
about their accommodation, dining and function services. The website also allows customers to book directly online and via other
travel sites such as booking.com. It also has a link to Tripadvisor, a review website, so that customers can see other guests
thought of their time at the hotel. There is an e-brochure that customers can download which provides them with more detailed
information on all the hotel’s services. The Waveney House Hotel also utilised Facebook and Twitter to inform the customers
about the latest events and offers. The hotel has to also pay strict attention to legislation, particularly around the serving of food
and drink. In recent months, they have also had to respond to new legislation in terms of keeping its staff and customers safe
How does technology influence
business activity?
■
Impact on sales
■
Impact on costs
■
Impact on marketing mix
Sales
Sales
■
■
■
Use of technology can improve
sales
Customers may be unhappy with
slow service in a shop – whereas
shopping online is instant
Customers get the convenience of
shopping when they want – for shift
workers this is a huge bonus as the
internet can sell goods 24/7 orders
can be processed by staff the next
working day
Costs
Read this online article. How
many employees did BHS have
when they had high street
stores? How many staff will
run their website?
Costs
■
■
■
■
Using e-commerce and
payment systems means that
just about anyone can start
their own business online
All they need is a simple
website, a good product and
a PayPal account
One person can run an entire
business online
No need for premises like a
shop which reduces costs
Marketing mix
■
Technology means that now
marketing campaigns have more
speed, relevance and reach
■
If a business starts a marketing
campaign on TV it can back it up
with social media and then use
targeting to send out e-mails
Marketing mix
■
Technology means that now marketing
campaigns have more speed, relevance
and reach
■
If a business starts a marketing campaign
on TV it can back it up with social media
and then use targeting to send out e-mails
Product
e.g. Nike uses social media to
identify new trends or look at
customer profile
Price
Prices can be cheaper as there’s
reduced costs from not having a
physical store
Place
e.g. Customers can access
Amazon’s products worldwide
Promotion
Wider target market and the use
of social media influencers.
Exam question
Exam question 2:
Explain one drawback of the use of technology on The Waveney House Hotel . (3)
1.5.3 Legislation and
business
The purpose of legislation:
● principles of consumer law: quality and consumer rights
● principles of employment law: recruitment, pay,
discrimination and health and safety.
The impact of legislation on businesses:
● costs
● consequences of meeting and not meeting these obligations.
Definition of terms
■
Legislation: the laws set by the government of a country
that a business must abide by.
Laws are designed to protect several stakeholders and the
business.
Consumer Rights Act 2015
Have you ever had to take anything back to a shop? What did you
take back and what happened?
https://www.bbc.co.uk/news/technology-35474221
https://www.bbc.co.uk/bitesize/clips/z2xkq6f
Consumer Rights Act 2015
Legislation that states products must be as described, of a
satisfactory quality and fit for purpose.
One new law – consumer rights Act 2015
■
Goods must be:
Goods must be satisfactory quality
■
Goods shouldn't be faulty or damaged when you receive
them.
Goods must be satisfactory quality
Goods must be as described
■
The goods supplied must match any description given to
you, or any models or samples shown to you at the time
of purchase.
Goods must be as described
Goods must be as described
Goods must be fit for purpose
■
The goods should be fit for the purpose they are supplied
for, as well as any specific purpose you made known to
the retailer before you agreed to buy the goods.
Goods must be fit for purpose
Principles of consumer law: quality
If something’s gone wrong with
an item a customer has
bought, they may be entitled to
a refund, repair or replacement
It doesn't matter whether they
bought the item new or second
hand – the consumer still has
rights
Consumers have legal rights if
the item bought is:
1.
2.
3.
broken or damaged ('not of
satisfactory quality')
unusable (‘not fit for
purpose’)
not what was advertised or
doesn’t match the seller’s
description
Consumers won’t have any legal rights if:
1.
2.
3.
It was damaged by wear and
tear, an accident or misuse
The consumer knew about
the fault before they bought
the item
The consumer has just
changed their mind
Whoops
!
Employment law over the years
■ Equal Pay Act 1970 – it is unlawful to discriminate between men and women
in terms of pay and working conditions
■ Sex Discrimination Act 1975 – it is unlawful to discriminate because of a
person’s gender or marital status
■ Race Relations Act 1976 – it is unlawful to discriminate because of race,
colour, nationality, ethnicity or religious beliefs
■ Disability Discrimination Act 1995 - it is unlawful to discriminate because of
a person’s disability. Reasonable adjustments should be made to
accommodate disabled people in the workplace e.g. New buildings have lifts
■ Employment Rights Act 1996 – terms and conditions of employment should
be laid out in a single document
■ Employment Relations Act 1999 – increased employee rights for union
membership, maternity/paternity leave and unfair dismissal
■ Age Discrimination Act 2006 – it is unlawful to discriminate because of a
person’s age
Principles of employment law: 1. Recruitment
■
The recruitment process
involves; advertising,
selecting, interviewing and
hiring the staff needed for
the business
■
The Equality Act 2010
makes sure that there is no
discrimination in this
process on age, race,
gender, religion etc
Equality Act
Principles of employment law: 2. Pay
What do you think is the
difference between the National
Living Wage and the Minimum
Wage?
The National Living wage
■
The National Living Wage is
higher than the National
Minimum Wage - workers get it if
they’re over 25.
■
The National Living Wage. The
Government's National Living
Wage was introduced on 1 April
2016 for all working people aged
25 and over, and is set at £8.72
per hour.
Principles of employment law: 3.
Health and safety
■
■
■
All workers have a right to work in places where risks to
their health and safety are properly controlled.
Health and safety is about stopping you getting hurt at
work or ill through work.
The employer is responsible for health and safety, but the
How might businesses ensure
employees must help.
the health and safety of their
employees?
Activity
■
Read this Health and Safety Law leaflet and see how
many of them you can identify on the graphic on the next
slide
■
Leaflet here
Health and safety law you are entitled to:
HSE video
Exam question
Exam question :
Explain one reason why The Waveney House Hotel would abide by legislation. (3)
1.5.4 The economy and
business
The impact of the economic climate on businesses:
● unemployment, changing levels of consumer income, inflation, changes in
interest rates, government taxation, changes in exchange rates.
Section 1 – What is the Economy?
RLB – TASK 1
Cc – Definition of economy
The collection of business transactions that take place
throughout the country, throughout the year. It is made up of:
a) firms selling to customers;
b) firms buying and selling with each other;
c) the government raising money and spending it.
Cc – Definition of economic climate
Refers to changes in the economy / the performance of the
economy.
E.g. better economic climate = more transactions taking place
and more money changing hands.
Cc – Definition of economic Agent
An individual that makes decisions in the economy.
Who makes decisions?
What decisions do they make?
1.
2.
3.
4.
Consumers 🡪 buy or not buy
Businesses 🡪 produce or not produce
The Government 🡪 set laws and rate of taxes (%)
Banks 🡪 how much to lend and at what interest rates
Section 2 – What is consumer
income?
Cc – Definition of consumer income
The amount of money individuals earn.
E.g. wages or salaries paid to individuals from working hourly
or annually.
Section 3 – what is the impact of
changes in consumer income on the
business?
WHAT IS THE IMPACT OF RISING
CONSUMER INCOMES?
As consumer incomes rise they choose to buy _____ goods
from the business.
(use more or fewer)
Why?
Cc – Definition of luxury goods
■
Goods that are not needed by consumers and are
typically expensive to purchase.
WHAT IS THE IMPACT OF RISING
CONSUMER INCOMES?
As consumer incomes rise they choose to buy _____ goods
from the business.
Luxury goods
Why?
Consumer incomes
■
As consumer incomes rise so does
demand for different goods and services
WHAT IS THE IMPACT OF FALLING
CONSUMER INCOMES?
As consumer incomes fall they choose to buy _____ goods
from the business.
(use more or fewer)
Why?
Cc – Definition of substitute goods
■
Goods that are cheaper to purchase and similar to
products with a strong brand.
Can you think of any examples?
WHAT IS THE IMPACT OF FALLING
CONSUMER INCOMES?
As consumer incomes fall they choose to buy _____ goods
from the business.
Substitue goods
Changing levels of consumer income
■
As consumer incomes
rise, they choose to
buy better products –
luxuries
■
As consumer incomes
fall, they will need to
buy cheaper products –
inferior products
Changing levels of consumer income
■
■
Disposable income is the amount of money left after all of
the compulsory expenses are paid e.g. tax and national
insurance
Discretionary income is what is left from take home pay after
all other commitments have been covered e.g. mortgage,
insurance, utility bills
◻
◻
Unfortunately, this can be quite small!
We can spend this at our discretion i.e. on what we want
Exam question
Exam question 2:
Explain one impact on The Waveney House Hotel of an increase in consumer
income . (3)
Section 4 – What is unemployment?
Cc – Definition of Unemployment
When an individual does not have a job (or is currently out
of a job but seeking employment).
■
Unemployment - The number of people willing
to work but out of work and seeking work
■
Unemployment rate - % of the working
population out of work
Current unemployment rate is 4.8*%
■
■
0.9 percentage points higher than before the
pandemic,
Unemployment
■
■
■
■
If unemployment rises
people have no jobs
This means that they have
low incomes
This also means that they
have little disposable
income – which is what is
left after all the bills have
been paid
No disposable income
means no luxuries
Who are the unemployed and how did they
become “unemployed”?
This is Bob he
was made
redundant
from his last
job.
This is Jamie he has
just finished school
and hasn’t found a
job yet.
This is Gary he
was fired from his
job for being late
too often.
This is Tony he
has quit his
part-time job to
give him more
time to look for a
full time job.
This is Gurpal he was
ill and had to give his
job up. Now he is
better and looking for
work again.
Task 2
There are several reasons an individual might be unemployed:
1. Seasonal unemployment
The demand for some products is seasonal and so workers in this industry
are only needed at certain times of the year.
2. Frictional unemployment
An individual might not like the job they have. So, they might find another job
and be out of work temporarily until the start date of their new contract.
3. Structural unemployment
Explanation:
The demand for certain workers might fall as a country moves from primary
sector (extracting raw materials) to the tertiary sector (providing services).
So, some workers will need to learn new skills to enter these new job roles.
Section 5 - the impact of unemployment
on the business
An increase in unemployment can reduce the number of ____
a business generates because
Exam question
Exam question 2:
Explain one impact on The Waveney House Hotel of fall in unemployment . (3)
Section 6– What is inflation?
Cc – Definition of Inflation
When the price of goods and services increases.
Task 3
Complete the following questions:
16, 17 and 18.
Inflation
■
■
If the UK inflation rate goes up
consumers will feel poorer as
their earned £££ will not go as
far because goods have risen in
price
The bank of England have a
target of 2% inflation, if wage
rises are above inflation then
consumers feel better off and
have more disposable income
85
p
What will be
the cost of
bread with a
2% rise and
with a 18%
rise?
In 1980 the
inflation rate in
the UK reached
18%
Inflation Explained
https://www.youtube.com/watch?v=beAvFHP4wDI
Declan Curry explains inflation
The costs of inflation
■
■
Inflation is a problem, if food keeps going up in price and
wages don’t then soon consumers will feel poorer and not
be able to afford to buy as much
If prices are stable then consumers and business have a
rough idea of how much items cost
CC - Definition of real disposable income
■
The amount of consumer income customers have leftover
to spend on goods and services after inflation has been
considered.
What is the difference between Disposable Income &
Real Disposable Income?
■
■
Disposable income is personal income that remains after
direct taxes and government charges have been paid.
Real disposable income is the post tax and benefit
income available to households after an adjustment
has been made for price changes.
Section 7 – the impact of inflation on the
business
Section 8 – What are Interest Rates?
CC- Definition of interest rate
The cost of borrowing money and the reward for saving money.
CC- Definition of the Bank of England
The central bank of England, they set the interest rate for banks in England.
Interest rates
■
Interest rates are set by the bank of England and will
affect; mortgages, loans, overdrafts and credit cards
■
Businesses will be affected because they may also need
to borrow money to keep going, to expand and to grow
their business
Changes in interest rates
■
■
■
Interest rates are the cost of borrowing money
If consumers can borrow they can buy; clothes, cars,
washing machines, houses, caravans, holidays, and just
about everything else
If the cost of borrowing goes up then consumers decide to
save instead of spend
UK interest rate
■
■
This is the cost of borrowing money.
If the bank of England pushes up interest rates
consumer and business spending will fall.
Watch the video
from the Bank of
England on the
relationship
between interest
rates and the
inflation rates here
Changes to interest rates – effect on business
What is the impact on the cost of
borrowing to business?
■ A fall in interest rates means that the cost
of servicing debt falls which may lead to
an increase in profits (costs less to borrow
so less to pay back)
■ If interest rates rise then the cost of
borrowing will rise and this will mean that
the cost of supplies for a business may
increase
CC - If the interest rate falls then the cost of borrowing will fall and
this means that a business’ costs might fall.
Explanation:
The central bank of England might lower the rate of interest
that banks must charge businesses for borrowing money i.e.
taking out loans.
CC - If the interest rate rises then the cost of borrowing will rise and
.
this
means that a business’ costs might rise.
Explanation:
The central bank of England might increase the rate of interest
that banks must charge businesses for borrowing money i.e.
taking out loans.
CC- The interest rate can also influence the number
of products customers buy from the business. This is
because:
An increase in the interest rate means that (cross out the
wrong option):
1. The interest on loans increases/decreases
2. Households have more/less income.
3. Consumers/customers buy more/less products.
4. So, a business’ sales increase/decrease.
CC- The interest rate can also influence the number
of products customers buy from the business. This is
because:
1. An increase in the interest rate means that (cross out the
wrong option):
2. The interest on loans increases/ decreases
3. Households have more/ less income.
4. Consumers/customers buy more/ less products.
5. So, a business’ sales increase/ decrease.
Exam question
Exam question 3:
The Bank of England decided to increase the interest rate from 0.5% to 0.75%
Explain one of an increase in the rate of interest on The Waveney House Hotel.
(3)
1. Increase in costs
2. Business needs to repay more interest on loans.
3. Making it harder for the business to break-even
OR
1. Fall in consumer incomes
2. Consumers with loans paying back more interest
and
3. So, purchasing fewer goods from the business.
CC – Definition of a tax
Imposed by the government on income, profit and on the price of
goods and services.
CC – Definition of income tax
■
Imposed by the government on income.
Tax - VAT
■
■
If a business earns over
£83,000 a year it must register
for VAT
This means they must charge
VAT on their goods and then
pay that to the government
VAT video
Another
video on the
HMRC here
CC - Scenario 1: The rate of tax on consumer incomes increases
(cross out the wrong option)
1. If the rate of income tax increases from
20% to 40% then the consumers will have
more/less income.
2. This means that they will have more/ less
money to spend on goods and services.
3. This will increase/ decrease a business’
sales.
4. Therefore, they will generate more/ less
revenue.
CC - Scenario 2: The rate of tax on consumer incomes
decreases (cross out the wrong option).
1. If the rate of tax decreases from 40% to 20% then the
consumers will have more/less income.
2. This means that they will have more/less money to
spend on goods and services.
3. This will increase/decrease a business’ sales.
4. Therefore, they will generate more/less revenue.
CC – Definition of corporation tax
■
Corporation Tax is a tax that limited companies and some
other organisations like clubs and societies must pay to
HMRC on their profits.
Government taxation – corporation tax
Corporation tax of 20% on
profits must be paid by any
UK limited company
■ Tax is a cost of the
business and so will have
an impact on profit
CC - Scenario 3: The rate of tax on a business’ profits
increases (cross out the wrong option)
1. If the rate of corporation tax increases from 10% to
20% then the business will have more/ less profit.
2. This means that they will have more/ less money to
spend on their business.
3. This will allow/ prevent the business to expand.
(from expanding)
4. Therefore, they can generate more/ less revenue in
the future.
CC - Scenario 4: The rate of tax on a business’ profits
decreases (cross out the wrong option)
1. If the rate of corporation tax decreases from 20% to 10%
then the business will have more/less profit.
2. This means that they will have more/less money to spend
on their business.
3. This will allow/prevent the business to expand.
4. Therefore, they can generate more/less revenue in the
future.
Section 12 – what is an exchange rate?
CC- Definition of the exchange rate
The value of one currency relative to the value of another
currency i.e. how much of one currency you can buy with
another currency.
CC- Definition of an import
A good or service that is purchased in one country by
customers from another country
CC- Definition of an export
A good or service that is sold in one country to customers in
another country.
CC
Hint: To remember the exchange rate think
• What impact will a change in exchange rates have on the cost of
supplies? It depends if they were purchased from abroad. If our
pound increased against another currency this will make imported
supplies cheaper e.g. cheese from France:
• Strong
• Pound
• Imports
• Cheaper
• Exports
• Dearer
Task 6 - Q23
A)
B)
C)
D)
E)
F)
G)
H)
UK
Countries in Europe that have adopted the Euro
China
US
Japan
Russia
All countries (virtual currency)
Norway
Q24. How many Euros can £100 get you?
■
1Euro = £0.85
Q25. Do you think a business wants their currency to
be strong i.e. 1 pound gets you 2 Euros? Why?
Yes, they can buy more raw materials from abroad.
No, foreign customers will find it more expensive to
purchase the business’s products
Section 13 -The impact of a change in the
value of the pound (£) on the business
Exchange rates
■
■
■
The exchange rate is the price
of one currency in exchange for
another
You may have “changed” your
money up for a holiday abroad,
and you will have been charged
commission to do so
Currencies can change in value
and this is due to the demand
and supply of a currency
Look up how much £1 is
worth in other
currencies, keep track of
it for a term and see how
it fluctuates
here
Find out why a strong
pound is good news for
holidaymakers
here
CC - Scenario 1: An increase in the value of the pound against another
currency.
Previously, it cost a business £800 to buy $1200 of products from US.
The exchange rate was £1.00 = $1.50
It costs the business £600 to buy $1200 worth of products.
The exchange rate now is £1.00 = $2.00
So,
1. An increase in the value of the pound means that
businesses can buy more/less foreign goods.
1. This means that the business’ costs will fall/rise.
So,
1. An increase in the value of the pound means that
businesses can buy more/less foreign goods.
2. This means that the business’ costs will fall/ rise.
CC - Scenario 2: A decrease in the value of the dollar against another currency
Previously, it cost a business £600 to buy $1200 worth of products.
The exchange rate was £1.00 = $2.00
It now costs a business in another country £800 to buy $1200 of goods.
The exchange rate now is £1.00 = $1.50
So,
1. A fall (decrease) in the value of the pound means that
businesses can buy more/less foreign goods.
2. This means that the business’ costs will fall/rise.
So,
1. A fall (decrease) in the value of the pound means that
businesses can buy more/less foreign goods.
2. This means that the business’ costs will fall/rise.
Exam question 4 The Brexit referendum (the vote to leave the European
Union) created a lot of uncertainty in the economy. The
value of the pound (£) fell against the Euro. Many
businesses buy their raw materials from Europe.
Explain one impact of a fall in the value of the pound (£) on
The Waveney House Hotel. (3)
P - Rise
costs.
in
E - The pound is now worth less relative to other
currencies. So, business will need to pay more to import
goods or raw materials needed to make their goods.
E - This means that the business will need to sell more
products to break-even
OR
the business might need to raise prices to ensure that they
can break-even.
Answer: April
1 pound gets the business 1.2 euros.
Plenary
Luxury
Inferior
Car
Bus
McDonalds
Restaurant meal
Rent
Mortgage
Plenary
Luxury
Inferior
Car
Bus
Restaurant meal
McDonalds
Mortgage
Rent
1.5.5 External influences
The importance of external influences on business:
● possible responses by the business to changes in: technology, legislation,
the economic climate.
Internal Influence
As a new businesses grow over time, they must adapt to
changes within the business:
1.
2.
3.
Developing new products
Recruiting new employees
Motivating existing employees
Within control of the business.
External Influences
However, they also need to adapt to changes outside of the
business. Such as:
1. The economic climate
2. Legislation
3. Competition
4. Technology
5. Society (stakeholders)
Outside of control of the business
Section 3 – Is the external
threat an opportunity or a
threat to the survival of the
business?
Influence
It is important for businesses to respond to changes.
1. Do not respond to changes ahead of competitors
2. Competitors might have the finance needed
3. Could get a bad reputation. Sales fall
Opportunities
1.
2.
3.
Respond to change ahead of competitors
Competitors might not have the finance needed
Could get a good reputation. Sales rise