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External Influences: The external environment


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Nationalisation
The purchase by the government of a private sector business e.g. the government nationalised the bank Northern Rock
Privatisation
The sale of a government owned business to the private sector e.g. British Airways was government owned until it was sold in the 1980s and became a PLC
Inflation
A general increase in the price level. It is seen as bad for firms due to menu costs, instability etc.
Unemployment
The number of people without a job. It can affect consumer spending but also lead to lower wages.
Exchange rates
The price of one currency in terms of another i.e. how many dollars you get for a pound.
Imports
Good purchased from firms in other countries
Exports
Goods sold to people in other countries
Benchmarking
Modelling your business or production methods on the industry leader
Just-in-time
An approach to production where stocks are only delivered just when they are needed, minimising costly storage
CAD
Computer Aided Design
CAM
Computer Aided Engineering
Corporation Tax
Taxes on profits
Income Tax
Taxes on workers
VAT
A sales tax you pay every time you buy most goods (20% in the UK)
Economic growth
An increase in the value of all goods and services produced in an economy in a year.
Recession
When the economy reduced in size for two successive 3 monthly periods (quarters)
Boom
When the economy is growing very rapidly
Consumer spending
Spending in shops etc.
Investment
Spending by firms on machinery etc. used to make more goods
Stakeholders
Anyone or any group with an interest in a firm e.g. employees, managers but also suppliers, local government, pressure groups etc.
Pressure groups
Groups which exist to promote certain causes e.g. Greenpeace
Trade unions
Bodies which exist to fight for higher pay and better working conditions for their members.
Industrial Action
Action e.g. strikes, work-to-rule, go slow etc. which unions can use to try and force an agreement with employers
The European Union
The main destination of UK exports. It consists of 20+ countries including the UK, some of whom have a common currency, the Euro
Business ethics
Considerations of right and wrong in business e.g. should firms 'outsource' production to countries where health and safety is poor to reduce costs.