Analysing the strategic position of a business: external factors and strategic options
Political & Legal Change
- Encouraging enterprise / entrepreneurs
- Regulations of markets
- The country’s infrastructure
- Issues relating to the environment
- International trade
Competition policy:
- Wider consumer choice in markets
- Effective price competition between suppliers
- Deal with anti-competitive behaviour which might have a negative effect on customers
Price fixing is prohibited - not competitive
- Agreed prices with competitors
- Share markets or limit production to raise prices
Abuse of dominant position - businesses with significant market shares are prohibited to
unfairly exploit their strong market positions (a market share of >50% is considered to be
dominant)
Social legislation intended for fair employment for workers:
- National minimum wage / national living wage
- No workforce discrimination (of age / race / gender etc. )
Economic Changes
Corporation tax:
- This is a form on direct taxation, which is a tax on the trading profits made by a business
over the course of their financial year as well as any profit from investments and
disposal of assets
Value added tax:
- This is a form of indirect taxation, collected by businesses for the government. It is a tax
placed on the sale of goods and services in the UK – it is a type of ‘consumption tax’
, Analysing the strategic position of a business: external factors and strategic options
Exchange rate is the price of one country’s currency when expressed in terms of another.
The price in the value of a currency is called appreciation, a decrease is called a depreciation.
Appreciation in £ = increase in exports = decrease in imports (more can be bought globally)
Depreciation in £ = decrease in exports (more expensive globally) = increase in imports (cheap)
Exchange rates can cause uncertainty for businesses:
- Uncertainty over revenue
- Uncertainty regarding quantities likely to be sold
- Uncertainty regarding competitors responses
Depends on price elasticity of demand.
Inflation is the persistent rise in the price level, fall in the value of money.
Deflation is the fall of price level, increase in the value of money.
Fiscal policy is the use of government expenditure and taxation as a means of controlling the
level of activity within the economy.
1. Expansionary fiscal policy is cutting taxation and/or increasing government expenditure
on services such as health or education.
2. Contractionary fiscal policy is the reduction of government expenditure or increasing
taxation. This helps to reduce the government's budget deficit or to increase the surplus.
Monetary policy involves adjusting the amount of money in circulation and hence the level of
spending and economic activity.
- Altering interest rates
- Controlling the money supply
- Manipulating the exchange rates
- The use of quantitative easing and forward guidance - central banks use money they
have created to buy assets, the businesses who receive this money will become more
liquid and secure, it is hoped that this money is then spent on resources which will
improve their services and production, boosting the economy.
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