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Summary Business and the Economic Environment P5 and M3

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P5 and M3

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PEARSON (PEARSON)

P5 - Describe the impact of international factors on a selected business. M3 - Assess the impact of changes in the global and European business environment on a selected business.

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business and the economic environment p5 and m3

Study Level
BTEC
Examinator
PEARSON (PEARSON)
Subject
Business and the Economic Environment
Unit
P5 and M3

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Business and the Economic Environment P1,P2, P3, P4, P5, M1, M2, M3, D1

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1. Summary - Business and the economic environment - p1 and d1
2. Summary - Business and the economic environment - p2 and m1
3. Summary - Business and the economic environment - p3
4. Summary - Business and the economic environment p4 and m2
5. Summary - Business and the economic environment p5 and m3
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Business and the Economic Environment P5 M3 Aaron Carswell

P5 -Describe the impact of international factors on a selected business

M3 - Assess the impact of changes in the global and European business environment on a selected
business

European Factors

What is the EU and what is the role?

The UK is in the European Union which is one of the biggest agreements they are in. The European
Union is a unique economic and political partnership between European countries. The EU began in
1950 with the signing of the ECSC Treaty in 1951. France and Germany were the first members but
membership today is 28 member states with other potential entrants wanting to join.

Countries in the EU

 Treaty of Rome 1957 – 6 member countries - France , Germany, Italy, Belgium, The
Netherlands and Luxembourg

 1973 - UK, Denmark, Ireland

 1981 – Greece

 1986 – Portugal and Spain

 1995 – Austria, Finland and Sweden

 2004 - Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia
and Slovenia

 2007 – Bulgaria and Romania

 2013 – Croatia

 Future countries – Turkey

The EU is a unique economic and political partnership between 28 European countries. It was
created in the aftermath of the Second World War. The first steps of the EU were to foster economic
cooperation which adapted the idea being that countries that trade with one another become
economically interdependent and so more likely to avoid conflict. The EU has developed into a huge
single market with the euro as its common currency.

The EU has delivered half a century of peace, stability, and prosperity, helped raise living standards,
and launched a single European currency.Thanks to the abolition of border controls between EU
countries, people can travel freely throughout most of the continent. And it's also become much
easier to live and work abroad in Europe.The EU is based on the rule of law which means that
everything that it does is founded on treaties, voluntarily and democratically agreed by all member
countries. These binding agreements set out the EU's goals in its many areas of activity.

The European Union assumes an imperative part in universal issues through strategy, exchange,
improvement help and working with worldwide associations. The EU keeps up open relations with
almost all nations in the world. It has vital associations with key worldwide players and is drawn in
with rising powers the world over and has consented to two-sided association arrangements with

, Business and the Economic Environment P5 M3 Aaron Carswell

various states in its region. The Union is spoken to by various EU Delegations which have a
comparable capacity to those of an international safe haven.

The fundamental reason for the European Union is to permit free development of individuals,
products and administrations all over part states. This implies that the entire nation inside of the EU
can bargain organisations with each other without needing to pay additional obligations for doing as
such. This has a constructive effect on Tesco in light of the fact that they can utilise individuals from
other nation inside of the EU because of the way that individuals can come into the UK without a
visa. Tesco can likewise exchange with suppliers inside of the EU nations and not needing to pay
additional assessments. This helps their business to spare expenses and therefore the expenses
spared can be utilised towards as a part of paying their representatives' wages or even rewards.

Performance of the EU and the Euro

The performance of a lot of EU countries has greatly reduced in the last number of years and they
have built up huge deficits. These countries have included Portugal, Italy, Greece and Spain and
more recently Ireland and Netherlands. This poor performance has had a big impact on the
exchange rate of the euro which affects importing and exporting. This has required countries to
undertake austerity measures in order to reduce their deficits e.g. Greece, Ireland.

A decrease in the exchange rate will make exports cheaper and exporting firms will benefit and an
increase in the exchange rate makes exports more expensive and reduces the competitiveness of
exporting firms.

This affects Tesco if the euro exchange rate decreases; they will be able to bring in goods from other
countries at a cheaper price therefore saving money. However if it increases, exporting will become
dearer therefore Tesco may lose money.

European Policies

Common Agricultural Policy - When the EEC was formed in 1957, over 20% of its working population
was in agriculture and each of the original six had their own form of agricultural protective policy.
The CAP, which began in 1962, sought to establish fair trade in agriculture through a single policy. Its
purpose was to encourage the production of safe and high quality food throughout the EU:
- support the upholding of thriving rural communities
- give farmers incentives to take good care of the environment

The CAP aims to make sure that there is sustainable agricultural production in the EU from and
economic, social and environmental point of view.

Farmers had quotas for their milk supply so that the supply of milk on to the market was controlled.
In recent years the CAP has undergone significant reform. There has been a gradual erosion of the
link between agricultural support and production. The latest reform, in 2005, was the single farm
payment was introduced which was independent of production and linked payments to food safety,
animal welfare and the maintenance of environmental standards. Further reforms were introduced
in April 2015 where a farmer had to prove that they were actively farming to qualify. In April 2015,
milk quotas were lifted allowing farmers to produce as much milk as they could

The above paragraph shows us that the Common Agricultural Policy is a controversial policy
regarding the European Union’s policies. This paragraph shows us that there was a huge cost
regarding the proportion of the EU budget. Tesco will be affected by this because they sell food and

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