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Summary Business Studies 9609 "6 Business and its environment Notes"
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- CIE
Notes A-level Business studies of point 6 "business and its environment " from the 2023 syllabus.
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BUSINESS & ITSENVIRONMENT
6.1 External In uences on business activity.
6.1.1 Political & legal
The Advantages & Disadvantages of privatization in any given situation.
Privatization → Privatization is a when a state owned and controlled business is sold to
investors in the private sector. Also known as “contracting out” Eg: If for example Correos
would have been bought by investors like DHL.
Arguments for Privatization Arguments against Privatization
Decision making in state bodies can be Easier to achieve coherent and coordinated
bureaucratic and slow policies which bene t the whole country
Responsibility and success lies on managers Prevents private monopolies (domination of a
and workers which leads to motivation. market of one brand)
Pro t motives, leads usually to greater ef ciency Breaking up nationalized industries into, several
and motivation (Taylor) competing units, will reduce the opportunities
for cost saving through Econ. Scale
The selling a business to private investors will be With the state taking decisions on industries,
a source of nance for the government, which they can base their decisions on the needs for
can be spent on other state projects. the society, this can mean keeping open
unpro table and illiquid businesses.
The Advantages & Disadvantages of nationalization in any given situation.
Nationalization → Nationalization is when a private owned and controlled business is sold to
the public sector, to become state owned.
Arguments for Nationalization Arguments against Nationalization
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, Prevents private companies forming monopolies Less pro t motive, less incentive to operate
exploiting consumers ef ciently.
Economies of scale can be achieved by Government may intervene too much into
merging all private businesses in an industry into business decision for political reasons, causing
one nationalized corporation. inef ciencies.
Pro ts are reinvested into society, if pro ts are Cost of private businesses may be very very
made they don’t go to owners, they go to the high
betterment of the society
Positive externalities, some sectors such as It removes the ability of he industry to raise
cars have externalities such as pollution and nance from private sources like the stock
congestion, if public owned more attention will exchange.
be made to reduce pollution and congestion
Some non-pro table businesses if essential can
be continued to run if public.
How government might use the law to seek to control: employment
practices, conditions of work, wage levels, marketing behavior,
competition, location decisions, particular goods and services.
In most countries the governments introduce laws that control business decisions and
activities.
Employment practices:
Employment law varies from country to country, but most countries have laws to protect the
workers and prevent exploitation, also ensuring fairness in the work environment. Some laws
nearly all countries have are:
● Protection of health and safety of employees
● Minimum Wage or payment levels
● Contracts of employment, unfair dismissal and redundancy arrangements
● Prevention of Discrimination against speci c groups of people. Eg: sex, gender, race,
disabilities, etc…
● Parenting rights. Eg: paternity, maternity, etc…
● Harassment or bullying in workplace
● Memberships of trade unions.
Unemployment → this is when willing and able workers who are unable to nd employment.
This is seen as a waste of human resources. Unemployed are those who are actively looking
for work. The causes of unemployment can be divided in three ways.
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, ○ Cyclical Unemployment → unemployment caused by low demands for goods
and services. Cyclical as it happens with uctuations in the economy. This
mostly happens during recessions. The government will try to keep in ation low,
and maintain health levels of exports.
○ Structure unemployment → unemployment caused by the decline in important
industries leading to signi cant job losses in one sector industry. Factories form
man to machines. Usually occurs when economy is in a boom (tertiary is more
active). Workers unable to nd another work as they have no transferable skills.
Government will have to provide education and training for those unemployed.
○ Frictional unemployment → unemployment resulting from workers losing their
job and taking a lot of time to nd an alternative job. Mostly when economy is in
a boom as people have more disposable income, and it will be easier to nd a
job than in times of recession. Government will ensure that info
Cost of unemployment:
● To the country:
○ Producing less goods and services for consumption
○ Serious unemployment may lead to social problems, crime
○ Cost of supporting unemployed which come from public tax
● To the business:
○ Reduces demand for goods and services
○ Frictional unemployment reduces e ciency of businesses
○ Part of tax charge for paying unemployment will fall on businesses
Impact on business of changes in employment and health and safety laws:
On one hand, there are constraints that add to business costs:
• Supervisory costs
• Higher wage costs
• Higher costs of increase in Hollidays, pensions and paid leave for sickness, paternity and
maternity
• Protective clothing and equipment costs
On the other hand, there are bene ts to be gained by businesses that meet standards:
• Employees feel secure, may lead to motivation
• Reduction in risk of accidents
• Avoidance of expensive court cases and nes
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, • Good publicity will be gained if the business culture is positive
Marketing behavior & consumer rights:
Governments will limit and take legal action to protect consumers of unfair or unscrupulous
business activity and marketing behavior such as:
● Individuals are “weak” against businesses with large marketing and promotion budgets.
● Advertising which can be misleading and in uential
● Products become more scienti c and technological, it is di cult for consumers to know
if the claims been made are accurate.
● Selling techniques are very pressurized and increasingly di cult for some customers to
resist.
● Globalized marketplace, consumers need protection on products that hav di erent
standards than those in their home country
● Markets more competitive lead to businesses trying to take advantage on customers by
reducing quality, service and guarantee periods.
Governments have set some laws to protect the consumers form issues like the ones above,
these laws are:
● Sale of goods act → All goods and services must: be safe and have no defects, be
suitable for the purpose they are intended, perform in the way describe.
● Trade descriptions act → no misleading descriptions for the goods being sold ( plastic
chair can’t be claimed to be leather.
● Consumer protection act → rms that provide dangerous or e ective products are liable
for the cot of any damage caused. It is illegal to quote misleading prices
These laws set will cause an impact on business decisions, if this laws are not met, the
business will su er costs form:
● Redesigning products to meet consumer health and safety laws.
● Redesigning ads to meet consumer health and safety laws.
● Improving quality-control standards and the accuracy of weights and measures.
Improving the consumer protection may have the following bene ts for the business as well:
● Reduced risk of consumer injury from using a product and resulting bad publicity
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