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)