Topics Covered in the Unit - External influences on business activity 

6.1 Government economic objectives and policies

6.1.1 How government control over the economy affects business activity:

  • Government economic objectives, e.g. increasing Gross Domestic Product (GDP)
  • Main stages of the business cycle; growth, boom, recession, slump
  • How changes in taxes and government spending can affect business activity
  • How changes in interest rates can affect business activity
  • How businesses might respond to these changes

6.2 Environmental and ethical issues

6.2.1 Environmental concerns and ethical issues as both opportunities and constraints for businesses:

  • How business activity can impact on the environment, e.g. global warming
  • The concept of externalities; possible external costs and external benefits of business decisions
  • Sustainable development – how business activity can contribute to this
  • How/why business might respond to environmental pressures and opportunities; pressure groups
  • The role of legal controls over business activity affecting the environment, e.g. pollution controls
  • Ethical issues a business might face; conflicts between profits and ethics
  • How business might react and respond to ethical issues, e.g. child labour

6.3 Business and the international economy

6.3.1 The importance of globalisation:

  • The concept of globalisation and the reasons for it
  • Opportunities and threats of globalisation for businesses
  • Why some governments might introduce import tariffs and quotas

6.3.2 Reasons for the importance and growth of multinational companies (MNCs):

  • Benefits to a business of becoming a multinational
  • Potential benefits to a country and/or economy where a MNC is located, e.g. jobs, exports, increased choice, investment
  • Potential drawbacks to a country and/or economy where a MNC is located, e.g. reduced sales of local businesses, repatriation of profits

6.3.3 The impact of exchange rate changes:

  • Depreciation and appreciation of an exchange rate
  • How exchange rate changes can affect businesses as importers and exporters of products, e.g. prices, competitiveness, profitability (exchange rate calculations will not be examined)

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