The Business Environment


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The Business Environment

  1. 1. Business Environment Lecturer: Anthony Williamson Email:
  2. 2. Course Contents <ul><li>Internal & external environments </li></ul><ul><li>Demographics </li></ul><ul><li>Resources </li></ul><ul><li>Organizational structures </li></ul><ul><li>Markets </li></ul><ul><li>Internationalisation </li></ul><ul><li>E-business </li></ul><ul><li>Ethics </li></ul>
  3. 3. Chapter 1 Business Organizations: The External Environment
  4. 4. Figure 1.1 The business organisation as a transformation system
  5. 5. Figure 1.2 The firm in its environment
  6. 6. Figure 1.3 Two levels of environment
  7. 7. Chapter 2 Business Organizations: The Internal Environment
  8. 8. Human Resource Management <ul><li>Recruitment & selection </li></ul><ul><li>Working conditions </li></ul><ul><li>Training & career development </li></ul><ul><li>Job evaluation </li></ul><ul><li>Employee relations </li></ul><ul><li>Manpower planning </li></ul><ul><li>Legal aspects of employment </li></ul>
  9. 9. Figure 2.2 A functional organisation structure
  10. 10. Figure 2.3 A product-based structure
  11. 11. Figure 2.4 A divisional structure
  12. 12. Figure 2.5 A matrix structure in a business school
  13. 13. Chapter 3 The Political Environment
  14. 14. Figure 3.1 Representative democracy
  15. 15. Figure 3.2 Government and its environment
  16. 16. Figure 3.3 The elected government at Westminster
  17. 17. Figure 3.4 The local government system
  18. 18. Chapter 4 The Macroeconomic Environment
  19. 19. Figure 4.1 The market economy
  20. 20. Figure 4.2 Politico-economic systems
  21. 21. Figure 4.3 ‘Real flows’ in the economy
  22. 22. Figure 4.4 Income flows in the economy
  23. 23. Figure 4.5 A simplified model of real flows and income flows
  24. 24. Figure 4.6 The circular flow of income with ‘leakages’
  25. 25. Figure 4.7 The circular flow of income with ‘injections’ added
  26. 26. Figure 4.8 The allocation of UK government spending, 2005/6 Source: Adapted from Budget Statement, 2005
  27. 27. Figure 4.9 Sources of government revenue, 2005/6 Source: Adapted from Budget Statement, 2005
  28. 28. Chapter 5 The demographic, social and cultural context of business
  29. 29. Demographics <ul><li>Population size </li></ul><ul><li>Characteristics </li></ul><ul><li>Social influences </li></ul>
  30. 30. What business function is most concerned with demographics ? <ul><li>Marketing </li></ul><ul><li>Marketing is concerned with adge, gender and geographical distribution </li></ul>
  31. 31. Issue facing many European countries <ul><li>Ageing Population </li></ul><ul><li>Better diet </li></ul><ul><li>Improved healthcare </li></ul><ul><li>Fall in birth rates (smaller families) </li></ul><ul><li>-many countries need migrant workers to fill jobs </li></ul>
  32. 32. Table 5.1 Population size in selected countries, 2003 Source: Various (including Eurostat)
  33. 33. Table 5.3 Percentage of EU populations aged 65 and over for selected EU countries, 1970–2003 Source: Adapted from Eurostat
  34. 34. Social class <ul><li>Population can be segmented based on social class </li></ul>
  35. 35. Table 5.4 The ABC1 system of social grading
  36. 36. <ul><li>Some people can have the same social class but different ‘Lifestyles’ </li></ul>
  37. 37. Other social influences <ul><li>Influence </li></ul><ul><li>Attitudes </li></ul><ul><li>Values </li></ul><ul><li>opinons </li></ul>
  38. 38. Table 5.5 National Statistics Socio-Economic Classifications (NS-SEC) Source: Office of National Statistics
  39. 39. Table 5.8 Methods of segmenting consumer markets
  40. 40. Table 5.9 Projected growth rates between 2000 and 2050, percentages Source: World Population Prospects , United Nations, 2000
  41. 41. Figure 5.1 Projected fertility rates between 1950 and 2050 Source: United Nations, 2000
  42. 42. Figure 5.2 Projected life expectancy between 1950 and 2050 Source: United Nations, 2000
  43. 43. Trends <ul><li>Healthy eating </li></ul><ul><li>Exercise </li></ul>
  44. 44. Reference Groups <ul><li>Primary – family/friends </li></ul><ul><li>Secondary – social clubs/ religious organizations </li></ul><ul><li>‘ Family life cycle’ </li></ul><ul><li>Different needs depending on age and current situation. </li></ul>
  45. 45. What is culture ? <ul><li>Sub cultures </li></ul><ul><li>Cultural diversity </li></ul><ul><li>Multiculturalism </li></ul>
  46. 46. Table 5.10 Expenditure on selected products by age of head of household, UK, 2002, £ per week Source: Adapted from
  47. 47. Chapter 6 The Resource Context
  48. 48. Different kinds of resources <ul><li>Renewable- labour, water, air, solar power </li></ul><ul><li>Non-renewable – minerals, coal, oil </li></ul>
  49. 49. People (human resource) <ul><li>People can be said to be either producers or consumers </li></ul><ul><li>Quantity – population size / age </li></ul><ul><li>Quality – education/ training/ motivation </li></ul>
  50. 50. <ul><li>Workforce- no. of people eligible for work </li></ul><ul><li>Working week – hours/days </li></ul><ul><li>Wages- remunerations (UK min. wage 5.05 p/h) </li></ul>
  51. 51. Trade Unions <ul><li>‘ To protect individually weak members (collectively much stronger)’ </li></ul><ul><li>Craft unions-craft/skill </li></ul><ul><li>Industrial unions-NUM </li></ul><ul><li>General unions-TGWU </li></ul><ul><li>White collar unions-NUT </li></ul>
  52. 52. Powerful unions <ul><li>‘ If the union is very powerful and demands increased wage rates then this couls lead to unemployment’ </li></ul>
  53. 53. Immobility <ul><li>‘ Workers unable to locate to areas where there are jobs’ </li></ul><ul><li>Geographical-don’t want to move from family </li></ul><ul><li>Occupational- don’t have the training/natural ability (e.g. doctors/footballers) </li></ul>
  54. 54. Table 6.3 Average hours worked per week* by gender for selected EU countires, 2003 Source: Eurostat, 2005
  55. 55. Figure 6.1 The market for labour
  56. 56. Figure 6.2 The effect of trade unions on the labour market
  57. 57. Figure 6.3 Occupational structure of UK workforce by gender, 2004 Source: Adapted from Table 4.11, Social Trends , 2005, ONS, UK
  58. 58. Chapter 7 The Legal Environment
  59. 59. UK Law <ul><li>Public – State laws </li></ul><ul><li>Private - Individuals </li></ul>
  60. 60. Tort <ul><li>Duty to others – negligence/ nuisance / defamation / trespass </li></ul>
  61. 61. Common Law <ul><li>Based on traditional behaviour </li></ul><ul><li>English legal system is based on judicial precedence and legislation (rules made by Parliament) </li></ul>
  62. 62. Contract Law <ul><li>Offer </li></ul><ul><li>Invitation to Treat (advertisements etc.) </li></ul><ul><li>Acceptance </li></ul><ul><li>*Offer and Acceptance = Agreement Consideration (profit) </li></ul>
  63. 63. Consumer Protection Laws <ul><li>Please read & understand the consumer protection laws; </li></ul><ul><li>Trade Descriptions Act (1968) </li></ul><ul><li>The Consumer Credit Act (1974) </li></ul><ul><li>Sale of Goods Act (1979) </li></ul><ul><li>Consumer Protection Act (1987) </li></ul>
  64. 64. Figure 7.1 The hierarchy of courts
  65. 65. Table 7.1 Law and the business organisation
  66. 66. Chapter 8 Legal Structures
  67. 67. How to classify business organisations <ul><li>Size </li></ul><ul><li>Type of industry </li></ul><ul><li>Sector (public / private) </li></ul><ul><li>Legal status (sole trader/ ltd. Co./ partnership </li></ul>
  68. 68. Private Sector Organisations
  69. 69. Sole Trader <ul><li>Business owned by one individual </li></ul><ul><li>Unlimited personal liability </li></ul>
  70. 70. Partnership <ul><li>‘ Persons carrying on a business in common with a view to making profit </li></ul><ul><li>Partners have unlimited personal liability </li></ul>
  71. 71. Limited Companies <ul><li>Company has a legal identity in its own right </li></ul><ul><li>Property and other assets belong to the company </li></ul><ul><li>Personal assets of shareholders do not belong to the company </li></ul><ul><li>Individual liability equals the amount invested in the company </li></ul><ul><li>Companies must be registered under the Companies Act </li></ul>
  72. 72. 2 kinds of limited company: <ul><li>Public Ltd. Co. </li></ul><ul><li>Private Ltd. Co. </li></ul>
  73. 73. Public Limited Company (PLC) <ul><li>Minimum of 2 shareholders </li></ul><ul><li>At least 2 directors </li></ul><ul><li>50,000 UK pounds share capital </li></ul><ul><li>Offer shares for sale to the general public </li></ul><ul><li>Certificate from the Registrar of Companies </li></ul><ul><li>Memorandum stating it to be a public company </li></ul>
  74. 74. Private Limited Company (Ltd) <ul><li>Shares cannot be offered to the general public </li></ul><ul><li>Therefore usually small or medium sized </li></ul>
  75. 75. Co-operatives <ul><li>Belong to its members </li></ul><ul><li>Profits should benefit members </li></ul><ul><li>Shares not quoted on the Stock Exchange </li></ul>
  76. 76. Workers’ co-operatives <ul><li>Business in which the ownership and control of assets are in the hands of the people working in it. </li></ul><ul><li>At least 7 members required to form a co-operative </li></ul><ul><li>Democracy, open membership, social responsibility, mutual co-operation, trust </li></ul>
  77. 77. Public Sector Organisations
  78. 78. <ul><li>Central government departments (DTI) </li></ul><ul><li>Local authorities (county councils) </li></ul><ul><li>Public corporations & nationalised industries (BBC) </li></ul>
  79. 79. Privatisation <ul><li>1980’s many public corporations were privatised; </li></ul><ul><li>British Coal </li></ul><ul><li>British Rail </li></ul><ul><li>British Telecom </li></ul><ul><li>British Energy </li></ul>
  80. 80. Legal structure: implications <ul><li>The degree of personal liability </li></ul><ul><li>Willingness to share decision-making </li></ul><ul><li>Costs of establishing the business </li></ul><ul><li>Legal requirements </li></ul><ul><li>Taxation </li></ul><ul><li>Commercial needs (access to capital) </li></ul><ul><li>Business continuity </li></ul>
  81. 81. Table 8.1 Organisational stakeholders and their interests
  82. 82. Franchising <ul><li>Buy the right to market a product or service </li></ul><ul><li>Business format franchise e.g. Starbucks, KFC, McDonalds </li></ul>
  83. 83. Why buy a franchise ?
  84. 84. Licensing <ul><li>Intellectual property </li></ul><ul><li>E.g. patents, copyrights, trade names </li></ul>
  85. 85. Joint Ventures <ul><li>Business involving more than 1 organisation </li></ul><ul><li>Many foreign co.’s entered China as a JV </li></ul>
  86. 86. Chapter 9 Size Structure of Firms
  87. 87. How to measure the size of an organisation <ul><li>Turnover </li></ul><ul><li>Value of outputs </li></ul><ul><li>Capital employed </li></ul><ul><li>Level of employment </li></ul>
  88. 88. Table 9.1 The ten largest companies in the UK, 2004 Source: Key British Enterprises , 2005
  89. 89. Why do organisations grow ? <ul><li>Managerial objectives (security, higher remuneration) </li></ul><ul><li>Maintain market share in expanding markets </li></ul><ul><li>Economies of scale </li></ul><ul><li>Defensive strategy against competitors </li></ul>
  90. 90. Table 9.2 Size structure of UK industry by employment, 2003 Source: Adapted from Table 1,'UK Industry Summary'!A1
  91. 91. Methods of growth <ul><li>Internal growth </li></ul><ul><li>e.g. expand product lines </li></ul><ul><li>External growth </li></ul><ul><li>e.g. takeovers or mergers </li></ul>
  92. 92. Mergers <ul><li>Horizontal merger </li></ul><ul><li>2 organisations at the same stage in a </li></ul><ul><li>production process </li></ul><ul><li>Vertical merger </li></ul><ul><li>2 organisations at different stages of the </li></ul><ul><li>same production process (backwards or </li></ul><ul><li>(forwards) </li></ul><ul><li>Conglomerate mergers </li></ul><ul><li>2 organisations involved in producing different </li></ul><ul><li>products or services </li></ul>
  93. 93. Finance for growth <ul><li>Internal – profits </li></ul><ul><li>External – banks, capital market (stock exchange), money markets, governments </li></ul>
  94. 94. Types of Stocks & Shares <ul><li>Preference shares </li></ul><ul><li>Ordinary shares </li></ul><ul><li>Debentures </li></ul>
  95. 95. Networking <ul><li>Relationships between organisations and people within them (formal or informal) </li></ul>
  96. 96. Figure 9.5 A typical network
  97. 97. Multinationals <ul><li>Operate in more than 1 country </li></ul><ul><li>Examples ? </li></ul><ul><li>UK </li></ul><ul><li>European </li></ul><ul><li>US </li></ul><ul><li>Chinese </li></ul>
  98. 98. Chapter 10 Industrial Structure
  99. 99. The Standard Industrial Classification <ul><li>Classifies industries into different sectors </li></ul><ul><li>Each general sector is then sub-divided into more specific sectors </li></ul><ul><li>(See Table 10.1 pg. 265) </li></ul>
  100. 100. Figure 10.2 A simplified production process
  101. 101. The Structure of Industry is not static <ul><li>The development of new products (e.g. computer games) </li></ul><ul><li>New patterns of demand (e.g. declining and emerging industries) </li></ul><ul><li>Changes in society (e.g. UK moving away from production based industry to service industries) </li></ul>
  102. 102. Figure 10.3 Percentage shares in employment in the three main sectors of the EU, 1979 and 2004* Source: Adapted from Table 2, Eurostat Yearbook , 2004
  103. 103. Figure 10.4 Employment by sector in the EU as a whole, 1980–2004* Source: Eurostat Yearbook , 2004. © European Communities. Eurostat. Reproduced by permission of the Publishers, the Office for Official Publications of the European Communities
  104. 104. Table 10.4 Percentage employed in different sectors of selected countries, 2004 Source: Eurostat Yearbook , 2004. © European Communities. Eurostat. Reproduced by permission of the Publishers, the Office for Official Publications of the European Communities
  105. 105. Figure 10.5 Index of employment in manufacturing industry in selected countries (1995 = 100) Source: Yearbook of Labour Statistics , 2004, OECD How do you interpret this data?
  106. 106. Table 10.7 Percentage share of total employment of primary, secondary and tertiary sectors (UK), 1969–2004 Source: Adapted from Table 7.5, Annual Abstract of Statistics , 2005, ONS, UK What can we tell from these figures?
  107. 107. Figure 10.6 Percentage share of total employment of the secondary and tertiary sectors of the UK economy Source: Adapted from Table 7.5, Annual Abstract of Statistics , various editions, ONS, UK
  108. 108. The Life Cycle Model <ul><li>Can be applied to products, industries, sectors, markets </li></ul>
  109. 109. Figure 10.8 A life cycle
  110. 110. Table 10.9 Implications of the different stages of the life cycle
  111. 111. <ul><li>A product or industry may not go through all of the stages </li></ul><ul><li>Length of each stage will vary according to product or industry </li></ul><ul><li>An industry or product saturated in the one geographical location may be able to extend its life by expanding into other countries </li></ul>
  112. 112. Causes of Changes in Industrial Structure <ul><li>Demand factors – changes in patterns of demand (fashion / tastes) </li></ul><ul><li>Supply factors – changes in supply conditions (e.g. increased price of oil leads to development in new technologies) </li></ul>
  113. 113. Figure 10.9 Expenditure on selected goods in the UK, 1983–2003 Source: Adapted from Table 6.15, Annual Abstract of Statistics , 2004, ONS, UK
  114. 114. Figure 10.10 Expenditure on services in the UK, 1983–2003 Source: Adapted from Table 6.15, Annual Abstract of Statistics , 2004, ONS, UK
  115. 115. Deindustrialisation <ul><li>Decline in manufacturing </li></ul>
  116. 116. Table 10.10 Output per person employed, selected countries, 2002 (UK = 100) Source: Adapted from Table 1,
  117. 117. Table 10.11 Comparative output per hour worked, selected countries, 2002 Source: Adapted from Table 2 ,
  118. 118. Chapter 11 Government & Business
  119. 119. <ul><li>If left entirely to their own devices markets can act in a way that is not always economically or socially desirable - ‘Market Failure’ </li></ul>
  120. 120. Main concerns include; <ul><li>Public goods – defence, social services </li></ul><ul><li>Merit goods – libraries, education </li></ul><ul><li>Externalities – pollution </li></ul><ul><li>Danger of monopolies </li></ul><ul><li>Under-utilisation of economic resources </li></ul><ul><li>Output determined and distributed on the ability to pay </li></ul>
  121. 121. How can governments respond to these problems? <ul><li>Public ownership </li></ul><ul><li>Legislation </li></ul><ul><li>Fiscal regulation </li></ul>
  122. 122. Regional Policy <ul><li>Many countries have a regional policy </li></ul><ul><li>Designed to help areas with economic or social problems </li></ul>
  123. 123. UK Urban ‘problem’ <ul><li>Large scale unemployment </li></ul><ul><li>Loss of industry </li></ul><ul><li>Riots during the 1980’s in several large cities </li></ul>
  124. 124. The Urban Programme <ul><li>Combat the economic, social and environmental problems of urban areas </li></ul><ul><li>1. Bring land and buildings into effective use </li></ul><ul><li>2. Encourage development of industry and commerce </li></ul><ul><li>3. Provide housing and other social facilities </li></ul>
  125. 125. Chapter 12 The Market System
  126. 126. ‘ The market system is an economy in which all the basic economic choices are made through the market.’ <ul><li>The market is a place where buyers & sellers of a product are brought together </li></ul><ul><li>There are many different kinds of market involving different buyers and sellers </li></ul><ul><li>A free market system is one in which the basic economic choices are made through the market </li></ul>
  127. 127. The Market Mechanism <ul><li>The way in which buyers and sellers are brought together </li></ul>
  128. 128. Demand <ul><li>The quantity of a good or service that households are willing and able to purchase at a particular price (effective demand) </li></ul>
  129. 129. Demand depends on; <ul><li>Price of the good </li></ul><ul><li>Prices of other goods (substitutes or compliments) </li></ul><ul><li>Disposable income </li></ul><ul><li>Tastes </li></ul>
  130. 130. Table 12.1 The demand for ‘Real Brew’ draught beer
  131. 131. Figure 12.1 A demand curve for ‘Real Brew’ draught beer
  132. 132. Figure 12.2 Shifting demand curves
  133. 133. Supply <ul><li>The quantity that firms are willing and able to supply to the market at a particular price (effective supply) </li></ul>
  134. 134. The quantity supplied depends on; <ul><li>The price of the good </li></ul><ul><li>The prices of other goods </li></ul><ul><li>The prices of the resources used to produce the good </li></ul><ul><li>Technology </li></ul><ul><li>Expectations </li></ul><ul><li>Number of suppliers </li></ul>
  135. 135. Table 12.2 The supply of ‘Real Brew’ draught beer
  136. 136. Figure 12.3 The supply of ‘Real Brew’ draught beer
  137. 137. Figure 12.4 Shifting supply curves
  138. 138. The equilibrium price <ul><li>The amount which consumers wish to buy is the same as the amount that producers wish to sell </li></ul><ul><li>Point where the demand and supply curves cross (equilibrium price & equilibrium quantity) </li></ul>
  139. 139. <ul><li>Excess supply = buyers market </li></ul><ul><li>Excess demand = sellers market </li></ul>
  140. 140. Table 12.3 The supply and demand for ‘Real Brew’ draught beer
  141. 141. Figure 12.5 The market for ‘Real Brew’ draught beer
  142. 142. Figure 12.6 A shift in the demand curve
  143. 143. Figure 12.7 A shift in the supply curve
  144. 144. Figure 12.8a The normal working of the market
  145. 145. Figure 12.8b A reduction in supply
  146. 146. Figure 12.8c Increases in demand
  147. 147. Price controls <ul><li>Occasionally governments decide that a particular equilibrium price is politically, socially or economically unacceptable </li></ul><ul><li>Impose their own prices; </li></ul><ul><li>Price ceiling </li></ul><ul><li>Price floor </li></ul>
  148. 148. Figure 12.9 Imposition of a price ceiling
  149. 149. Figure 12.10 Imposition of a price floor
  150. 150. Figure 12.11 The effect of taxation on the market
  151. 151. Elasticity of demand <ul><li>Measures responsiveness of demand and supply to price changes </li></ul>
  152. 152. Measuring Price Elasticity <ul><li>EP = %change QD </li></ul><ul><li>% change P </li></ul><ul><li>If > 1 elastic (responsive to price changes) </li></ul><ul><li>If < 1 inelastic (not very responsive to price changes) </li></ul>
  153. 153. Figure 12.12 Responsiveness of demand to a price change
  154. 154. Table 12.4 Elasticity and total revenue
  155. 155. Other Elasticity's <ul><li>Income elasticity of demand </li></ul><ul><li>Cross-price elasticity of demand </li></ul>
  156. 156. Table 12.5 Income elasticity and total expenditure
  157. 157. Figure 12.13 Responsiveness of supply to a price change
  158. 158. The Importance of the Market <ul><li>The nature of the good they produce </li></ul><ul><li>The way in which it is viewed by consumers </li></ul><ul><li>The factors that affect demand </li></ul><ul><li>Any changes in the future that will affect the market </li></ul><ul><li>Any likely government intervention in the market </li></ul>
  159. 159. Chapter 13 Market Structure
  160. 160. Market Structure <ul><li>Market structure refers to the amount of competition that exists in a market between producers. </li></ul><ul><li>Perfect competition Monopoly </li></ul>
  161. 161. Table 13.1 Structure–conduct–performance model
  162. 162. Perfect competition <ul><li>So many sellers and buyers that not one of them can influence price </li></ul><ul><li>The good sold is homogeneous (identical) </li></ul><ul><li>Perfect knowledge exists (prices and costs) </li></ul><ul><li>Perfect mobility exists </li></ul><ul><li>No barriers to entry or exit </li></ul>
  163. 163. Figure 13.1 Market structures
  164. 164. Table 13.2 Implications of perfect competition for conduct and performance of firms in an industry
  165. 165. Monopoly <ul><li>No competition </li></ul><ul><li>One single producer </li></ul><ul><li>Can also be a group of producers acting together to control supply (OPEC) </li></ul>
  166. 166. Table 13.3 Implications of monopoly for the conduct and performance of firms in an industry
  167. 167. Comparisons of Monopoly & Perfect Competition <ul><li>Prices higher under a monopoly </li></ul><ul><li>Monopolies usually offer less choice </li></ul>
  168. 168. Oligopoly <ul><li>‘ A small number of producers supply a product’ </li></ul><ul><li>There is interdependence between the firms </li></ul><ul><li>Lack of price competition in the market </li></ul><ul><li>Non-price competition (branding / advertising) </li></ul>
  169. 169. Table 13.4 Implications of oligopoly for conduct and performance of firms in an industry
  170. 170. Table 13.7 Implications of monopolistic competition for the conduct and performance of firms in an industry
  171. 171. Table 13.8 Implications of theory for behaviour of firms
  172. 172. Porter’s Five Forces <ul><li>Current competition </li></ul><ul><li>Potential competition (threat of new entry) </li></ul><ul><li>Threat of substitute products </li></ul><ul><li>Power of buyers </li></ul><ul><li>Power of suppliers </li></ul>
  173. 173. Chapter 14 International Markets & Globalisation
  174. 174. <ul><li>International trade takes place because resources are unevenly distributed throughout the world. </li></ul><ul><li>Some countries are better at producing certain goods than others. </li></ul><ul><li>Some countries cannot produce certain goods </li></ul>
  175. 175. Example of specialization
  176. 176. Table 14.1 Production of video cameras and wheat
  177. 177. Table 14.2 Production of video cameras and wheat
  178. 178. Table 14.3 Production of video cameras and wheat
  179. 179. Restrictions to International trade <ul><li>Quotas </li></ul><ul><li>Tariffs </li></ul><ul><li>Exchange controls (limit amount of currency) </li></ul><ul><li>Subsidies (payments to domestic producers) </li></ul><ul><li>Qualitative controls </li></ul>
  180. 180. Balance of payments <ul><li>A record of a country’s international trade usually over a 1 year period </li></ul>
  181. 181. Table 14.4 UK balance of payments, 2004 (£m) Source: Adapted from
  182. 182. Table 14.6 UK’s imports and exports of goods by destination/source (%) Source: Adapted from Tables 19.5, 19.6, Annual Abstract of Statistics, various, ONS, UK
  183. 183. Table 14.7 Pattern of trade by type of good (%) Source: Adapted from Tables 19.4, 19.3, Annual Abstract of Statistics, various, ONS, UK
  184. 184. Exchange rates <ul><li>‘ The price of a currency in terms of other currencies’ </li></ul>
  185. 185. 2 types of exchange rate; <ul><li>Floating exchange rate </li></ul><ul><li>Fixed exchange rate </li></ul>
  186. 186. Floating exchange rate <ul><li>Determined within a free market </li></ul><ul><li>No government intervention </li></ul><ul><li>Exchange rate is free to fluctuate according to market conditions </li></ul><ul><li>Exchange rate is determined by supply and demand </li></ul>
  187. 187. Demand and supply is determined by <ul><li>Changes in the balance of payments </li></ul><ul><li>Changes in investment flows </li></ul><ul><li>Speculation in the foreign exchange markets </li></ul>
  188. 188. Figure 14.3 The determination of the exchange rate of £ for $
  189. 189. Figure 14.4 The effect of changes in the balance of payments on the exchange rate
  190. 190. Figure 14.5 The effect of changes in the investment flows on the exchange rate
  191. 191. Figure 14.6 The effect of depreciation
  192. 192. Figure 14.8 The effect of changes in the balance of payments on a fixed exchange rate
  193. 193. Figure 14.10 Exchange rate of the euro with sterling Source: Adapted from
  194. 194. Fixed exchange rate <ul><li>Fixed & maintained by government </li></ul><ul><li>Less uncertainty about the future </li></ul>
  195. 195. Globalisation <ul><li>‘ Integration of markets & production on a worldwide scale’ </li></ul>
  196. 196. Advantages <ul><li>Increased globalization leads to increased specialization </li></ul><ul><li>Countries open to international trade have experienced much faster growth </li></ul><ul><li>Barriers to trade encourage inefficient and uncompetitive industries </li></ul><ul><li>All companies can benefit not only MNC’s </li></ul>
  197. 197. Disadvantages <ul><li>Benefits not shared equally throughout the world </li></ul><ul><li>Undermines the power of nation states </li></ul><ul><li>WTO and IMF are not democratically elected </li></ul><ul><li>Policies only aimed at trade </li></ul>
  198. 198. Table 14.10 The world’s ten largest non-financial MNEs, ranked by foreign assets, 2002 Source: World Investment Report, UNCTAD, 2004
  199. 199. Chapter 15 <ul><li>Government & Markets </li></ul>
  200. 200. Privatisation policy <ul><li>‘ The transfer of assets or economic activity from the public sector to the private sector’ </li></ul>
  201. 201. <ul><li>‘ The Conservative government under Thatcher (1979-1990) believed that the free market was a superior method of allocating economic resources and that large scale state involvement in business hampered economic progress’ </li></ul>
  202. 202. Arguments for privatisation <ul><li>Improve efficiency & general performance </li></ul><ul><li>Increased competition </li></ul><ul><li>Broader customer choice </li></ul><ul><li>Improved performance of management & workers </li></ul><ul><li>Employees offered shares to give them a vested interest in the organisation </li></ul>
  203. 203. Criticisms of privatisation <ul><li>Disposing of important national assets for short term financial gain </li></ul><ul><li>Overseas buyers could control important parts of the UK’s industry </li></ul><ul><li>Commercial goals allowed to displace broader economic goals (closure of unprofitable services) </li></ul>
  204. 204. Competition Policy <ul><li>‘ Concerned with regulating market behaviour and controlling potential abuses of market power by firms’ – use legislation e.g. Monopolies and Mergers commission and the Competition Act (1998) </li></ul><ul><li>See pg.’s 419-420 for examples </li></ul>
  205. 205. Government & the labour market <ul><li>Conservative government sought to curb trade union powers through legislation; </li></ul><ul><li>The employment act (1980, 1982, 1990) </li></ul><ul><li>The trade union act (1984) </li></ul><ul><li>Trade union & labour relations Act (1992) </li></ul><ul><li>The trade union reform & employment rights act (1993) </li></ul>
  206. 206. Chapter 16 The Technological Environment: e-business
  207. 207. E-business <ul><li>‘ E-business generally means doing business over the Internet’ </li></ul><ul><li>‘ The exchange of products, services or information, whether paid or unpaid, across electronic networks, at any stage within the value system’ </li></ul>
  208. 208. E-commerce <ul><li>‘ Process of electronic transactions involved in the exchange of products, services and information between buyer & seller’ </li></ul>
  209. 209. Figure 16.1 The value system
  210. 210. Table 16.1 Broad spectrum of e-business applications Source: Adapted from OECD, 2000
  211. 211. Mini Case – Dell Computers <ul><li>Read the mini case, and in small groups discuss the questions </li></ul>
  212. 212. Look at Case Study; <ul><li>HOMEWORK </li></ul>
  213. 213. Chapter 17 <ul><li>Corporate responsibility & the environment </li></ul>
  214. 214. Corporate Social Responsibility <ul><li>‘ A corporation should be held accountable for any of its actions that affect people, their communities and the environment’ </li></ul>
  215. 215. How should business interact with the environment <ul><li>Have to balance business needs and environmental concerns </li></ul>
  216. 216. Stakeholder theory <ul><li>Stakeholders are all groups affected by a corporations decisions, policies & operations </li></ul><ul><li>Traditionally shareholders, customers & employees </li></ul><ul><li>Nowadays its argued that stakeholders should include society and the environment </li></ul>
  217. 217. Environmental Management <ul><li>Reconcile economic growth with greater environmental protection </li></ul><ul><li>The environment is now on the political agenda </li></ul>
  218. 218. Business responses to environmental concerns <ul><li>Social obligation (re-active strategy) </li></ul><ul><li>Social responsibility (goes beyond legal requirements) </li></ul><ul><li>Social responsiveness (pro-active strategy) </li></ul>
  219. 219. Methods of encouraging environmental concern within businesses <ul><li>Overnment intervention </li></ul><ul><li>Market mechanisms </li></ul><ul><li>External pressures (Greenpeace) </li></ul><ul><li>Self-regulation </li></ul>
  220. 220. Benefits to business <ul><li>Efficiency of factor inputs </li></ul><ul><li>Improved market image (e.g. The Bodyshop) </li></ul><ul><li>Providing new market niches (organic foods) </li></ul><ul><li>Proactive legislation compliance </li></ul>
  221. 221. Chapter 18 Monitoring Change
  222. 222. Analysing the business environment <ul><li>SWOT </li></ul><ul><li>PESTLE </li></ul><ul><li>Porters five forces </li></ul>
  223. 223. Figure 18.1 The strategic management process
  224. 224. Table 18.1 Locating a car plant: a PESTLE approach
  225. 225. Figure 18.2 A simple cross-impact matrix
  226. 226. Figure 18.3 A SWOT matrix