Business Studies
External influences — Topic 6
- 1.
A group of people living near a new factory, concerned about noise and traffic, is an example of which stakeholder group? A Shareholders B The local community C Suppliers D Competitors
[1 mark] · no calculatorMarking points
- Selects B: the local community, a stakeholder group affected by a business's operations without being directly part of it.
Examiner tip: Stakeholders are any group affected by, or able to affect, a business's activities, not just those who own or work for it.
- 2.
Explain one way in which the interests of a company's shareholders might conflict with the interests of its employees.
[2 marks] · no calculatorMarking points
- States that shareholders generally want higher profit and dividends, while employees generally want higher wages and better working conditions.
- Explains that higher wages are a cost that reduces profit, so one group's gain can come at the other's expense.
Examiner tip: Stakeholder conflict arises because groups affected by a business often want different, sometimes opposing, outcomes from the same limited resources.
- 3.
A government raises indirect tax on sugary drinks. Explain the likely effect of this on a business that produces sugary drinks.
[2 marks] · no calculatorMarking points
- States that the tax raises the business's costs, or the price customers must pay if the business passes the tax on.
- Explains a likely consequence, such as lower demand for the product, reduced profit margins, or pressure to reformulate the product to reduce sugar.
Examiner tip: An indirect tax raises the cost of producing or selling a good, and its effect on the business depends on how much of that cost can be passed on in price.
- 4.
Explain one likely effect on a labour-intensive clothing manufacturer if the government significantly raises the national minimum wage.
[2 marks] · no calculatorMarking points
- States that the manufacturer's labour costs rise significantly, since it employs many workers relative to its output.
- Explains a likely response, such as raising prices, reducing staff numbers, or investing in automation to reduce reliance on labour.
Examiner tip: A labour-intensive business is affected by minimum-wage changes more than a capital-intensive one, because wages are a larger share of its total costs.
- 5.
Explain one reason why a business might choose to act ethically (for example, by paying fair prices to suppliers) even if this reduces its short-term profit.
[2 marks] · no calculatorMarking points
- Identifies a benefit such as building a stronger brand reputation and customer loyalty, or attracting ethically-conscious customers and investors.
- Explains that this reputational benefit can support higher sales or a premium price over the longer term, offsetting the short-term cost.
Examiner tip: Ethical behaviour often trades a short-term cost for a longer-term reputational and commercial benefit.
- 6.
A car manufacturer in Country X buys steel produced in Country Y. From Country X's perspective, this steel is: A An export B A tariff C An import D A subsidy
[1 mark] · no calculatorMarking points
- Selects C: an import, a good bought from another country and brought into the buyer's own country.
Examiner tip: An import is a good coming into a country from abroad; an export is a good the country sells to the rest of the world.
- 7.
Explain one benefit to a small domestic business of being able to export its products to other countries.
[2 marks] · no calculatorMarking points
- States that exporting gives access to a much larger number of potential customers than the domestic market alone.
- Explains that this can increase total sales and revenue, and reduce dependence on demand conditions in the home market alone.
Examiner tip: International trade widens the market available to a business well beyond its home country's customer base.
- 8.
A domestic shoe manufacturer faces increasing competition from cheaper imported shoes after the government removes a tariff on imports. Analyse two ways this could affect the domestic manufacturer.
[3 marks] · no calculatorMarking points
- Explains that cheaper imports may take market share from the domestic manufacturer if its own prices are not competitive.
- Explains a resulting consequence such as falling revenue and profit, or pressure to cut costs or improve quality to compete.
- Analyses a further effect, such as the manufacturer needing to focus on differentiation or a niche market where imports compete less directly.
Examiner tip: Removing a tariff makes imports relatively cheaper, so domestic firms without a cost or quality advantage are most exposed to losing sales.
- 9.
Discuss whether a growing domestic business should expand by selling into overseas markets, given that this exposes it to new competition and costs, as well as new customers.
[4 marks] · no calculatorMarking points
- Explains a benefit, such as access to a much larger customer base and reduced dependence on the domestic market alone.
- Explains a cost or risk, such as the expense of researching a new market, adapting products, or unfamiliar regulations and stronger local competitors.
- States a further relevant factor, such as the business's existing capacity, finance, or experience with international trade.
- Reaches a judgement depending on the business's resources, the attractiveness of the overseas market, and its tolerance for risk.
Examiner tip: International expansion trades the security of a familiar domestic market for a larger, but riskier and more costly, opportunity.