Business studies is a studies of the activity of providing goods & services.

Opportunity cost is the next best alternatives forgone.

Factors of production:
Land --> Reward is rent.
Labour --> Reward is wage.
Capital --> Reward is interest.
Entrepreneur --> Reward is profit.

Consumer is a person who purchases or uses a product.
Consumer goods is a goods sold to the general public.

2 types of consumer goods:
Durable consumer goods
Non-durable consumer goods

Consumer services is non-tangible products that are sold to the public.
Capital goods is a physical goods that are used by industry.
Industrialisation is the process by which a country move from primary production to a
manufacturing sector.

Benefits of industrialisation:
Gross Domestic Product (GDP) or total national output in a country will be increases & this will
also raises averages standard of living.
More jobs are being created and unemployment rates reduced.
Profitable firms will pay more taxes to the government & thus increased the tax revenue.
Increasing output of goods can result in lower imports & higher imports.
Vlu is to th ountris output of rw mtrils.

Problems of industrialisation:
Job availability encourage a huge movement of people to the towns.
Imports of rw mtrils r n whih n inrs th ountrys import ost.
Much of the growth of manufacturing industry is due to the expansion of multinational companies.

De-industrialisation is when the secondary sector activity has decline & tertiary sector has increase in
developed economies.

The reasons for de-industrialisation:
Manufacturing businesses in the developed countries face more competition & these rivals tend to
be more efficient.
Rising incomes have led consumers to spend more on services rather than more goods.


3 stages of business activity: (P1 & P2)(*)
Primary sector are those industries involve in agriculture, fishing & extractive industries. E.g. Oil
& gas industry.
Secondary sector are those industries engaged in manufacturing. E.g. Food processing industry.
Tertiary sector engaged in providing services for consumers. E.g. Doctors, teachers, etc.

Public sector is an organisation that are owned and funded by government. Public sector provide
facilities such as hospital, road, defence, etc. They function for the welfare of the population & often
provide essential goods & services at little or no profit. (P1 & P2)(*)

Why some goods & services are provided by the public sector? (P1)
No individual or organisation want or can provide such goods & services. It is because it is too
expensive & also too significant to be left to private business.
The goods & services provided cannot stop a person from consuming it.
People do not pay for their services.
If the private sector provide the goods, it does not benefit them because no profit was earned.
Another reason is to prevent monopoly power & the exploitation of the population through very
high prices for essential goods & services.

Private sector is an organisation operated by firms that are owned by shareholders or private
individuals. They sold goods & services to customers for profit. (P1 & P2)(*)
Business organisation is an industrial enterprise & the people who constitute it.

Types of business organisation: (P1 & P2)(*)
Sole proprietorship
Partnership
Limited company
Co-Operatives
Public corporation

Sole proprietorship is an enterprise that is owned by one person and the owner are liable for all the
debts it may incur. It is suited to small businesses. It is very good for easy strategic decisions but it is
very difficult to raise finance.

Advantages of Sole Proprietorship:
It needs a little capital to start up the business.
Sole trader can make their own decision and the secrets are keep safe.
Sole trader can set up a business alone & receives all the profits from the company.
No payment of corporate taxes required.
Able to choose times & pattern of working.
f It is s on th ownrs intrst or skills.

Disadvantages of Sole Proprietorship:
Additional capital is very difficult to raise.
Sole trader has full responsibility to the business.
Unlimited liability to the sole proprietorship.
Sole proprietorship is not suitable for large business.
Lack of continuity means if the owner dies, the business ends too.
f Long hours necessary to make business pay.

Partnership is an association of one or twenty people as co-owners to carry on a business for the sole
purpose of making purpose.

Advantages of partnership:
Partnership can be easily formed.
Partners can help in decision-making.
Partners bring new skills & shared the ideas to the business.
More partners means more profits are earned.
Easy to expand business.
f Every partner will have the responsibility for all the losses of the company.
Greater privacy & fewer legal formalities.


Disadvantages of partnership:
Unlimited liability to all partners.
Partners must be agree on the amount of authority.
Difficulty in finding partners.
Lack of capital & it is not possible to raise capital from selling shares.
Lack of trust between partners.

2 types of Limited Company: (P1)(*) (Limited Company is in private sector of the economy)
Private Limited Company is an organisations operated by firms that are owned by shareholders or
private individuals but the shares they bought can only be sold privately. Shares are owned privately
& are not traded on the Stock Exchange.

Public Limited Company is an organisations owned by its shareholders but the shares bought can
be sold publicly on the Stock Exchange. Limited liability to all shareholders which means
shareholders are not responsible for all the debts of the company.

A public limited company is a limited liability company that has been "floated" on the Stock
Exchange which means that it can sell shares to anybody. Limited liability means that the
shareholders cannot lose all of their assets, only their original investment. (Answer from CIE)

Other features: Continuity, Separate legal status, etc. (Examiner: Explain what each of such features
meant to shareholders or the business. )

Explain the importance of profit maximisation for a public limited company. (p1)
Profit maximisation is prime objective of a plc, but other objectives might dominate in short run, e.g.
growth, market share, sales maximisation.
Profit enables growth, investment, competing and satisfying employees.
Ultimately plcs have to satisfy shareholders by producing good profits, or they will become unhappy
and sell shares, causing price to drop.
So stock market pressure to keep improving profit drives directors of plcs.

Advantages of Public Limited Company:
Shareholders can sell their shares on the Stock Exchange.
They can advertise their shares.
Continuity.
Separate legal identity.
Limited liability.
f Ease of buying & selling for shareholders. This encourages investment in The Public Ltd.

Disadvantages of Public Limited Company:
Original owner may lose control.
They may face management problems.
It is very expensive to set up.
Risk of takeover due to availability of the shares on the Stock Exchange.
Legal formalities in formation.

Advantages of being a Public L.C compared to a Private L.C:
Access to more share finance & they are able to sell shares to general public.
Greater status (perceived as bigger & more successful than Private L.C.
Higher public profile --> Likely to get more media coverage.
Shareholders can use shares to make takeover bid.
Easier to raise capital. Public L.C have the ability to offer shares.

Disadvantages of being a Public L.C :
Hv to islos mor informtion in ounts. All of th ompny ounts can be inspected by
members of the public and competitors too.
Public L.C are more vulnerable to takeover because it cannot restrict any shareholder to sell their
shares.
May come under pressure to change objectives from new investors.
Not able to deal with their customers at a personal level.

Floatation means the process of a company going public.

Limited liability is an idea in which a business owner is only liable for the original amount of money
invested in the business. Business is not personally responsible for the debts of the company.

Unlimited liability means business owner liable for the amount of money invested in the business.
Owner responsible for the debts.

Is being a Public L.C better than being a Private L.C?
It is depends on:
Objectives - Do the owners want to keep control?
Need for finance.
Ability to sell shares.
Degree of government regulation.
Ability/Willingness to pay costs of preparing & implementing floatation & extra administration
cost.
f Willingness to reveal more information in annual reports.

Reasons to remain a private l.c :
Does not need additional finance through share issue.
Does not want to sell shares to others
Does not want to meet all the regulations governing public l.c.

Co-operatives is an association of people who have the purpose of buying goods at a lower prices,
market goods they produce to its member.

2 types of co-operatives:
Worker co-operatives
Consumer co-operatives


Franchise is an agreement where a business (the franchisor) sells the rights to other businesses (the
franchisees) allowing them to sell products or use of company name.

Benefits to the FRANCHISOR:
The market is increased without expanding the firm.
Using specialist skills of a franchisee.
Risks & uncertainty are shared. E.g.: Laws in other country may be different.
An amount of revenue is generated even if a loss is made by the franchisee.

Advantages to the FRANCHISEE:
Franchisor might advertise & promote the product nationally.
They selling a recognized product so the chances of failure is reduced.
Services such as training may be carried out by the franchisor.

Disadvantage to the FRANCHISEE:
a the franchisee have to pay licence fee & a percentage of revenue costs.
Less independence. Franchisee have to follow every strategies or techniques that the franchisor
used in marketing, producing & selling the product.
Additional cost of taking out a franchise might be prove too much.


Privatisation is when the government-owned companies become privately-managed companies or
controlled by investors in private sectors.

Argument for privatisation:
Firm will operate more efficiently in the private sector.
Ordinary people can become shareholders.
Money can be raised from the sale to improve government services.
Private businesses have access to the private capital markets & this will lead to increased
investment in the industries.

Argument against privatisation:
Prices may be raised.
Provision of socially necessary services.
State-owned companies might force smaller firms out of business.
Breaking up nationalised industries will reduce the opportunity for cost saving through economies
of scale (EOS).
Private monopolies could exploit consumers with higher if privatised.
f The state should take decisions on the needs of society.

3 main types of economic system:
Free market economies is an economy where markets are used to allocate resources through
demand & supply & the price mechanism. There is no government intervention.
Planned economies is an economy system in which the government manages the economy.

Mixed Economy is an economy system where some resources arc owned by both private individuals
& some by the government. Resources are allocated efficiently with market forces at work. If the price
mechanism fails, the government will then intervene to rectify the mechanism failure.

Advantages of the free market economies:
a) Producers will invest more in research & development due to high competition in markets.
b) No government intervention. Prices is determined by the forces of demand & supply.
c) Producers increase their productivity to maximise profits.
d) Higher rate of capital formation.
e) Faster response to market conditions.
f) Profit motive makes firm operate efficiently.
g) Mobility of labour.
h) Consumers have choices.


Disadvantages of the free market economics
a) Income differences.
b) Limited competition between firms.
c) Unequal income distribution. Rich gets richer. Poor gets poorer.
d) Economic instability due to natural disasters.
e) Problem of external costs such as pollution.
f) Encourage monopolies.
Encourage the production of harmful goods.
h Unemployment exists.
i Public goods such as defences would not be produced.

External costs is a production costs borne by other people. E.g. Pollution.

Advantages of the planned economies:
a) Government stabilize the prices so it would not fluctuate.
b) Less unemployment. Government can create job opportunities for new labour.
c) Possible rapid economic growth.
d) Greater income equality.
e) Welfare of the society.
f) Private firms often interested in short-term profits.

Disadvantages of the planned economies:
a) Lack of research & development OR no competition.
b) Lack of choices for consumers OR market forces.
c) Increase in productivity does not lead to an increase in wages.
d) Possible low economic growth.
e) Goods not required by the people are produced such as military equipment.
f) No profit motive.
g) Slow decision making.

Advantages of mixed economies:
a) State provides services for all society.
b) Private sector allowed to earn profits from enterprise.
c) Competition
d) Government will improved in producing certain types of goods & reduce income equality.
c) Dangerous products & pollution are controlled.
f) Consumer choice exists.

Disadvantages of mixed economies:
a) Taxes may be heavy to pay for state goods & services.
b) Excessive controls over business activity can discourage enterprise.
c) State organisations can be less efficient than private sector.


Why market failure in mixed economy?
a) Lack of public goods.
b) The presence of a monopoly.
c) The presence of external costs such as pollution.

Benefits to countries of trading with other nations:
a) Importing goods offered consumers a much wider of choice of goods & services.
b) Importing products creates additional competition for domestic countries & this encourage them to
lower costs & make their goods as of high quality as possible.
c) Countries begin to specialise in those products they are best at making. Specialisation can lead to
economics of scale.
d) Countries can improved political & social links between themselves.

Trading internationally can also have drawbacks. These needs to be considered carefully by the
government.
The potential risks:
a) Loss of outputs & jobs from domestic firms that cannot compete effectively with imported goods.
b) Newly businesses may find it impossible to survive.
c) If the value of imports exceeds the value of exports for few years then this could lead to a loss of
foreign exchange.

d) Importers dump goods below cost price in order to eliminate competition.
e) Cannot compete with imports to country which has a comparative advantage. This will cause job
losses & factory closure.
f) There decline due to imports in domestic industries that produce very important goods.

Free trade means there are no restriction which might limit trade between countries.

The most common trade barriers:
a) Tariffs means taxes imposed on imported goods to make them more expensive.
h) Quotas limits the value of certain imported goods.
c) Voluntary export limits - Exporting countries agrees to limit the quantity of certain goods.


Multinational Corporation is a large firms when a head of office in one country and several branches
operating overseas. It is usually Limited Company.

Advantages of Multinational Corporation:
a) Introduction new production technique and skills to the host country.
b) It might produce better quality products.
c) Wider choice of products.
d) Better political ties between the countries.

Disadvantages of Multinational Corporation:
a) profits earned are returned to the overseas head office.
b) Local worker are paid very low wages.
e) The multinational company operate against the interest of the host country.

Why become a multinational?
a) Avoid import restriction.
b) Lower transport costs & better market information regarding consumer tastes.
c) Lower labour rates due to lower demand for local labour.
d) Cheaper rent & site costs.
e) Access to local natural resources.
f) Tax incentives designed to encourage the industrialisation.

Problems for multinationals:
a) Communication links with headquarters may be poor.
h) Language & culture differences with local worker & officials could lead to misunderstanding.
c) Coordination with other plants need to ensure that products that might compete on world markets.
d) Low skills employees require investment in training programmes.
Business may have a little or no knowledge about the country. Operate in overseas may be difficult
& extra cost needed to spend on researching the market.


Evaluation of the impact on host countries:
a) Employment opportunities.
b) Local firms are benefit from supplying services & component to the new factory.
c) The investment bring in foreign currency then further foreign exchange can be earned.
d) Tax revenues to the government will be boosted.
e) Management expertise slowly improve when the foreign managers are replaced by local staff.
f) Total output of the economy will be increased & this raise GDP.

Problems of multinational corporations on the host countries:
a) Pollution from plants.
b) profits are sent back to their own country.
c) Extensive depletion of the limited natural resources.
d) Local competing firms squeezed out of business.
e) Exploitation of the local workforce.
f) Some western-based businesses have been accused of imposing western culture on other societies &
this lead to a reduction in cultural identity.

State intervention to assist & to control business activity (*)(p1)
A) WHY
i) To support business activity.
ii) Reduce negative impact.
iii) Businesses have a great beneficial import for society.

B) HOW
i) Government provides subsidies to businesses that agree to organise training programmes for low
skills worker.
ii) Government provides assistance to firms that agree to locate in the less developing areas.
iii) Selling goods abroad is often risky because lack of local knowledge so the government provides an
advice service based on information horn embassies.
iv) Pollution are controlled by the government.
v) Government investigates & prevents mergers that creates monopolies.
vi) States restricts new factory construction in crowded areas. ,
vii) Employer must pay at least minimum wage rate & must not exceed maximum working hours.
viii) Goods should be safe & sales must offer genuine reductions.


Laissez-faire - Allowing business to make its own decisions without government intervention.

5 main objections to this laissez-faire approach. The reasons why other analysts argue for government
intervention in business matters.
a) Without legal controls, some businesses may take advantage of their workforce by paying low
wages.
b) Certain businesses become monopolies & exploit consumers with higher prices & limited choices.
c) To make quick profits, unsuitable goods are sold.
d) Firms prefer to locate in the most profitable area.
e) Production of goods causes some pollution & all activity has an negative impact on the society.

Arguments against government intervention:
a) Government controls add to business costs. E.g. Increasing wages rates, purchases of pollution
control equipment.
b) Businesses in those countries gaining on unfair competitive advantage if other governments have
lower levels of controls.
e) These costs imposed by controls (red tape) acts as a disincentives to small firms to expand new
businesses.

Measuring business size (*)(P1)
A) HOW
i) Size of labour force - A firm employing many staff is likely to be large whereas less staff means
small business. How about the businesses that employ less staff but most of them are highly
automated.

ii) Sales turnover are used to measure but it is less effectives when comparing firms in different
industries which engaged in high-value & low-value production. This measure is needed to calculate
market share.

iii) Capital employed is measure by the total value of long-term finance used in the business. Larger
business enterprise greater value of capital needed for long-term investment. Comparisons between
firms in different industries may give different result.

iv) Market capitalization are for businesses which have shares quoted on the Stock Exchange (Public
Ltd. Company)
Market capitalization = Current share price X Total number of shares issued. As share prices tend to
change every day, this form of comparison is not a very stable one.

v Market share can be a relative measure. If a firm has a high market share it must he among the
leaders in the industry. High market share will not indicate a large firm.

Total sales of business/ Total sales of industry x100

vi) Total floor sales space could also he used to compare retail business.


Small firms are very important to all economies. Benefits of development of small business units.
a) Many jobs are created.
b) Run by entrepreneurs with new ideas for consumer goods & services.
c) Small firms may enjoy lower average costs & this benefit could he passed on to the consumers too.

Government assists small businesses by:
a) Reduce rate of profits tax.
b) Loan guarantee scheme which guarantees the repayment of a percentage of a hank loan should the
business fail.
c) Providing information, advice management support through government departments & agencies.
d) Cities with high unemployment, the government finances the establishment of small workshops
which are rented at reasonable rents.

This aid also designed to help small firm overcome the particular problems:
a) Lack of specialist management expertise when the owner cannot afford to employ specialist.
b) Problem in raising both long & short-term finance.
c) Marketing risks from limited products range.
e) Difficulty in finding suitable & reasonably priced premises.




Intemal growth is an expansion a business. -This growth can he slow.
External growth is merging with or taking over another business. This growth can lead to rapid
expansion.

Types of integration:
a) Horizontal integration is when firms in the same industry & join with the same stage of production.
h) Vertical Integration is when firm merges with another at a different stage of production.
c) Lateral/Conglomerate


Advantages of Horizontal Integration:
a) Eliminates one competitor.
b) Benefit from economies of scale.
c) To reduce competition.

Disadvantage of Horizontal Integration:
a) Rationalisation bring had publicity.
b) Lead to monopoly investigation.

Impact on stakeholders (Horizontal)
a) Consumers have less choice.
b) Workers lose job security as a result of rationalisation.

2 types of Vertical Integration
a) Backwards V.I is when a firm buy over another which is operating at a stage of production towards
the source of raw materials.
h) Forwards V.I is when the films over another operating at a stage of production towards the market.

Advantages of F.V.I
i) Able to controls the promotion of prices and increase efficiency between stages of production.
ii) Secures a secure outlet for firm's products.

Disadvantages of F.V.I
a) Consumers suspects uncompetitive activity & read negatively.
b) Lack of experie!1ce in this sector.

Impact of stakeholders (F.V.I):
a) Workers have greater job security.
b) More job opportunities.
c) Lack of competition in the retail outlet because of the withdrawal of competitor products.

Advantages of B.V.I:
a) Gives control over quality, price & delivery times of supplies.
b) Encourage joint research & development.
c) Business control supplies of material to competitors.


Disadvantages of B.V.I:
a) Lack experience of managing a supplying company.
b) Supplying business become complacent due to having a guaranteed customer.

Impact on stakeholder (B.V.I)
a) More job opportunities.
b) Consumers obtain improved quality & products.
c) Control over supplies to competitors may limit competition C'"" choice for consumers.

Advantages of Conglomerate Integration:
a) Diversifies the business away from its original market.
b) Spread risk & take the business into faster growing market.

Disadvantages of C.I
a) Lack of management experiences.
b) Lack of clear focus that the business is spread across more than one industry.

Impact on stakeholders (C.I )
a) Greater career opportunities.

Stakeholders is an individual with a direct interest in the performance of a business.

The main stakeholders are:
employees
shareholders
suppliers
customers
financiers/Lender
community
government
managers
competitors

Stakeholder & Their Objectives:
Employees - To receive an average wage.
- To ensure good working condition.
- To secure their jobs.

Shareholders - To receive dividends.
- To share in the profitability of the business.

Suppliers - To sell profitably to the business.
- To be paid fully for goods supplied.

Customers - To obtain satisfied value from goods & services.
- To receive high levels of customer service.
- To receive supply of spares from a business.

If firms fail to provide efficiently for the needs of the customers then they will go elsewhere.

Lenders - Fully paid back when repayments are due.
- To receive interest on the loan when due.

Lender or Loan creditor is a person who owed money by a debtor. They demand security for the loans to
ensure that it will be repaid & that interest payment made are agreed with the borrower.
Greater security given of paying back a loan through liquid assets, the loss return will be made from those
assets.

Community - To benefit from the employment the business creates.
- Free from external costs generate from the firm.

Government - Receive tax revenue.
- To direct the operations of the business.
- To control business operation.
- To assist the business.
- Introducing new laws.
- Improving living standards.
- Maintaining competitive conditions.

Government is a political body which has authority over a group of people.


Managers/Directors - To retain control.
- To increase their own power & status.
- To direct the strategy & decision.

Competitors - To compete by all lawful means.
- To compare performance with other business.
- To differentiate its product from other businesses.

Shareholders is the legal owners of the firm. Shareholders include director, managers, employees,
individuals or investors. They receive a share of the profits in the form of dividends. Shares are owned by
financial intermediaries such as insurance companies. Their reward comes from the annual dividend &
increased prices for the shares.

Their reward is dependent on a number of factors:
Interest on loans is paid before tax & before dividends.
T rtors plns rtn prots or utur vlopmnt o t usnss.
The economy in general will be the main driving forces behind the share price changes.

They are protected by law because their position is weak.

The main rights they have are:
To receive annual accounts.
To become a director.
To attend the annual general meeting.

(Workforce):
Poor working conditions, not fairly treated, do not feel insecure & poorly paid then there will be
consequence for business.
This can lead to poor productivity, high absenteeism & labour turnover, negative customer reaction
to poorly paid workers & legal intervention.
Ensure that all o t workrs ojtv r mt. It lso pn on svrl tor:
Profitability of the business.
The culture of the organisation.
Availability of labour supply.
Union power within the firm.
Leadership style.

Strategic analysis is process of reviewing existing plans & identifying new opportunities & risks associated
with them. The 2 main forms are:
SWOT analysis
Ansos mtrx

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities &
Threats that will influence the future of a business.

Internal
Strengths - Attributes of the person/company that are helpful to achieving the objective.
Weaknesses - Attributes of the person/company that are harmful to achieving the objective.

External
Opportunities - External conditions that are helpful to achieving the objective.
Threats - Extrnl ontons tt oul o m to t usnsss prormn.

The Ansoff Matrix (A2)

Ansoff Matrix show the degree of risk associated with the four growth strategies of market penetration,
market development, product development & diversification. The Ansoff matrix presents the product and
market choices available to an organisation.

The Ansoff matrix is used as a model for setting objectives along with other models like Porter matrix,
BCG, DPM matrix and Gap analysis etc.
The Ansoff matrix is also used in marketing audits.
The Ansoff matrix entails four possible product/market combinations: Market penetration, product
development, market development and diversification.


2 main variables in strategic marketing decision were:
the market in which the firm was going to operate.
the products intended for sale.

In market, the managers had 2 options:
remain in the existing market
enter new markets

Managers had 2 options on the product:
selling existing products
developing new products

Matrix Diagram (A2)




Matrix diagram can be summarized as follows:
Matrix diagram can be summarized as follows:
(Product development) - The sale of new developments products in existing markets.
This strategy may require the development of new competencies & requires the business to develop
modified products which can appeal to existing markets.
Note that product developments & not minor changes in an existing product of the firm.
The reasons that justify the use of this strategy include one or more of the following: a) to utilise of excess
prouton pty, ountr ompttv ntry mntn t ompnys rputton s prout
innovator d) exploit new technology, & e) to protect overall market share.

(Market penetration) - The objective of achieving higher market shares in existing markets with existing
products. The business focuses on selling existing products into existing markets. The aim is to
increase sales.

It seeks to achieve 4 main objectives:
. Maintain or increase the market share of current product. This can be achieved by a combination of
competitive pricing strategies, advertising, sales promotion & perhaps more resources dedicated to personal
selling.

. Secure dominance of growth markets.
. Taking customers away from competitors by using penetration pricing. This would require a much more
aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive
for competitors.

. Increase usage by existing customers. Persuade existing customers to buy more of the product. E.g.
Introducing loyalty schemes.

Companies often penetrate markets in one of three ways: by gaining competitors customers, improving the
product quality or level of service, attracting non-users of the products or convincing current customers to
us mor o t ompnys prout wt t us o mrktn ommuntons tools lk vrtsn.

Benefits:
The business is focusing on markets & products it knows well. Therefore, costs are kept minimal as
market research is unnecessary. They likely to have good information on competitors & on customer needs.


(Diversification) - Process of selling different, unrelated goods & services in new markets. Business
markets new products in new markets.

Related diversification may be in the form of backward, forward & horizontal integration.
Backward integration takes place when the company extends its activities towards its inputs such as
suppliers of raw materials in the same business.
Forward integration differs from backward integration, in that the company extends its activities towards
its outputs such as distribution.
Horizontal integration takes place when a company moves into businesses that are related to its existing
activities.
Business has little or no experience in new markets.
Business must have a clear idea about what if expects to gain from the strategy & an honest assessment of
risks.
Diversification is a high-risk strategy as it involves taking a step into a territory where the parameters are
unknown to the company.
But, it can also be the most rewarding, as a fresh perspective on a market can often pay huge dividends &
deliver a huge competitive advantage to a smart & able company.
Costs will also be higher as market research is needed.

(Market extension/Market development) - This is the strategy of selling existing products in new markets.
This strategy often involves the sale of existing products in new international markets.

There are many possible ways of approaching this strategy, including:
New geographical markets. E.g. Exporting the product to a new country.
Repositioning the product by changing the image, quality or packaging.
New distribution channels. Different pricing policies to attract different customers or create new market
segments.


Management By Objectives (MBO) is a method of coordinating & motivating a workforce by dividing the
ompnys ovrll ol nto sp trts or vson, prtmnt, mnr & possibly employee.

Benefits Of MBO (A2)
MBO system should be agreed & discussed with the managers & staff to achieve targets, objectives &
effectiveness.
Each manager know what they have to do. This will help them priorities their time.
Everyone should be working to the same overall target. This will avoid conflict.
By sttn trts, mnrs r l to montor vryons prormn.

MBO problems (A2)
T pross o vn orport ojtvs n vry tm onsumn.
b Objectives can become outdated very quickly & fixing targets. Unresponsive to changing conditions.
Setting targets do not guarantee success.

Conflict Of Objective E.g. are:
Mnrs nt nrs workrs w rt.
Creditors demand early repayments of debts but the accountant does not want to reduce the bank balance.
Shareholders expect high dividends but managers aims to reinvest the profits.
The government wants to reduce unemployment by making it difficult for businesses to make workers
redundant.
The business open the profitable factory but environmental groups protest.

Most businesses now have strict codes of practice that attempt to satisfy the aims of certain stakeholders.
E.g.:
All debts to be paid within 30 days.
No waste to be produced.
Customer charter for complained.
All employment laws to be put into practice.
Encourage close relationship with the local community.

Resolve the conflict of objectives by considering the interests of shareholders a business might be able to:
Establish closer co-operation with suppliers.
Achieve good publicity from local activities.
Well regarded & be more likely to receive government contracts.
Good industrial relations with the workforce.


A constraint on business activity is a factor that limits the decisions that the business can take.
A firm is prevented from importing some machines because the country has insufficient foreign
exchange to pay for them.
A business manufacturing CDs is forced to close down because the government doubles the rate of
tax.

Economic Objectives Of Governments OR Macroeconomic Objectives
A target rate of economic growth.
A target rate of price inflation.
Long term of balance between the value of goods bought from other countries or sells to others.
Exchange rate stability.
Low levels of unemployment.

Economic growth is an increase in output & real income of an economy. It is usually measured by a change
in national income.

Factors that have the impact on growth rates:
Investment
Education
Technological change
Government policy
Exports
Pollution
Deforestation
Competitive advantage
Climate changes
j Lands - Natural resources
k Labour force/Population

Growth considered desirable by countries. Reasons:
Higher real GDP increases living standards & also increase the quantity of goods & services.
More output lead to increased employment.
More resources devoted to desirable public sector projects such as education.
Poverty can be reduced.
Businesses should experience rising demand for their products.
Higher GDP makes more resources available for government through greater income from taxes.

Factor lead to economic growth:
Increase in demand for the products.
Increase in output resulting from productivity.

Problems arise as growth continues toward BOOM conditions:
Demand-Pull inflation will accelerate, reducing competitiveness & lead higher wage demands.
Labour shortages.
Low unemployment & incomes rises when consumers experience a good factor.
As consumer incomes continue to increase, so the demands will rise especially luxury goods & services.

Economic recession is the two successive declines in quarterly Gross Domestic Product.

Effect of global recession:
Output is falling, thus unemployment increase & goods & services demand decline further as incomes
fall.
Government tax revenue fall lead to less income tax received & sales revenue drop.
Weaker exchange rates.
Adverse balance of trade.
Closure of small companies.

Well-managed firms able to take advantage when recession occurred such as:
Capital assets. Land & property are cheap.
Demand for inferior goods could increase.
The risk of job losses may encourage improved relations between employers & employees to increase to
increase efficiency.
Hard decision. This make the business able to take advantage of economic growth when this starts again.

Business cycle/trade is the regular swings in economic activity varying from boom conditions to recessions.

Inflation is a sustained rise in the average price level.

Deflation is fall in the average price level in an economy./Period of declining economic activity.


Inflation is measured by using Retail Price Index (RPI)/Consumer Price Index (CPI).

How to measured?
Select a base year where there is no natural disaster.
Selection of basket of goods.
Price of good is converted into current year index.
Weightage - Consumer expenditure.
Use the following formula to calculate current year index.




What is the causes of inflation?
A Cost-Push Inflation
Increase in the costs of production with unchanged demand.
Rising imported raw materials costs.
High indirect taxes.
Lower exchange rate.

B) Demand-Pull Inflation
A reduction in taxes.
Economic growth in other countries.
Rising consumer confidence.
Depreciation of the exchange rate.

Impact/Effects Of Inflation:
Cash saving decreases & value of money will be eroded.
High inflation rate reduce the value of money per capita income. Low living standard.
Lead to greater income inequality.
Rising prices attract more producers to increase production.
Cash-flow problems.
It affects the assets held by firms.
Higher rate of interest.
Businesses will lose competitive if inflation is higher than other countries.
Reduce labour costs.
j Cut profit margins.
k Cut back on interest spending.
l Reduce borrowing.
m Reconsider their creditor policy.


Effect Of Deflation:
Consumer delay purchasing hoping that price would fall further.
The firms unwilling to commit funds t further investment as price falls.
Businesses will hold stocks to reduce their working capital needs & also reduce orders for suppliers.
Businesses with long-term liabilities will discourage borrowing to invest.

Unemployment is when the worker is willing to work but is unable to find a suitable job.

Types Of Unemployment, Causes Of Unemployment & Solution To Unemployment
Cyclical unemployment is an unemployed due to lack of aggregate demand bought about the trade cycle.
The aggregate demand consists of consumption, investment, government expenditure & net exports.

Solution:
Government use macroeconomic policies to increase the level of aggregate demand. It lower interest rates
& indirect taxes.
Maintain competitive exchange rates.

Structural/Technical unemployment is an unemployment causes by demand for labour reduced &
switching to machinery.

Solution:
Improve the mobility of labours.
Retrain the workers.

Frictional unemployment is an unemployment when workers are temporarily while moving from one
job to another.

Solutions:
Improve job information.
The government can create a part-time jobs to unemployment workers.

Seasonal unemployment is an unemployment due to the part of the year which experiment marked
seasonal patterns of demand.

Solution:
Find part-time jobs during the season.

Residual unemployment is an unemployment due to people who are disabled or mentally ill.

Solutions:
The government create a special job for them.

Hidden unemployment is an unemployment when people are removed from the sectors. (Agricultural
sectors)
International unemployment is an unemployment due to the fall in demand for local produced goods.
Voluntary unemployment is an unemployment when people choose to remain unemployed.

Problem Of Unemployment:
A) To The Country Or The Government
Collect less income tax & Value Added Tax (VAT).
It may lead to social problems. E.g.: Crime.
More money to pay out on benefits.
Less money to spend on education & health.
The country become less competitive.
Waste of resources/Allocative inefficient.
Standard of living goes down.

B) To The Business
Reduce efficiency of businesses.
Demand for goods & services are reduced.
Tax change for paying unemployment benefits will fall on businesses.

C) To Individual
Loss of income.
Lack of self esteem.
Reduced spending power.
Loss of skills.

D) To Other Workers
Pay extra tax.
Loss of job security.
Have to accepts pay cuts to keep their jobs.

Balance Of Payments (BOP) s ror o ountrys ntrntonl trnstons for a given of time period
usually a year.

Components Of BOP:
Capital account
Current account
Balancing item
Official financing

Deficit On Its BOP could result:
ll n t vlu o ts urrnys xn rt.
a ln n t ountrys rsrvs o orn urrny.
foreign investors unwilling to invest.

Exchange rate is the rate at which one currency can be exchange for another.

Factors in the demand for & supply of a currency:
A) Demand for the currency
Foreign tourists spend money.
Foreign investors.
Foreign buyers of domestic goods & services.

B) Supply Of The Currency
Domestic investors abroad.
Domestic population traveling abroad.
Domestic businesses buying foreign imports.

Exchange rate fluctuations when demand for a currency exceeds supply its value will rise. This is also called
appreciation.

Appreciation is when the value of the currency rises against that of another currency, then it is said to have
APPRECIATED.

The domestic firms that gain from an appreciation o t ountrys urrny r:
Importers of foreign raw materials, for whom the domestic currency cost of these imports will be falling.
This increases their competitiveness.
Importers of foreign manufactured goods able to imports the product more cheaply.

The domestic firms that LOSE from an appreciation of the Pound () are:
Fall in demand from overseas goods & services because of the higher cost of products in terms of the
foreign currency. Businesses locate overseas to avoid the higher exchange rate.
As appreciation makes imports cheaper, it will make domestic producer less competitive.

Depreciation is when one unit of currency buys fewer units of other currencies.

The domestic businesses that GAIN from a depreciation of sterling are:
They can reduce their prices in overseas market.
Businesses that sell goods & services to the domestic market, it will make local producers less competitive
because of there are competitors from other country. Consumer switch to imported goods.

The domestic businesses that LOSE from a depreciation are:
Manufacturers who depend on imported suppliers of material will suffer rise of cost & reduce
competitiveness.
Retailers that purchase foreign suppliers may suffer rises of price & forced to find local suppliers.

Factors determine the international success:
Product design & innovation.
Quality of construction & reliability.
Effective promotion & extensive distribution.
Investment in trained staff & modern technology.
After sales service.

Macroeconomic policies is a policies that are designed to impact on the whole economy. It influences the
level of total or aggregate demand in the economy.

. Exchange rate policy is a government policy to allow its exchange rate to float freely in consultation
with its trading partners.

. Fiscal policy is a government that whereby government alter their purchases of goods & services &
taxes./A government policy to manage the level of aggregate demand in the economy by changing
government spending or taxation.
When government revenue is more than government expenditure.
Chancellor announces an overall change in total tax revenues or total government expenditures plans will
there be a macroeconomic effect that will be noticed by all businesses.

2 major scenarios that the Chancellor likely to makes changes.
A When the economy is in recession & unemployment is rising.
This is the result of aggregate demand for domestic goods falling below the output of industry.
To increase aggregate demand. There are 2 ways:
Increases in government expenditure plans.
Reduce taxes to encourage increased spending by the consumers 7 firms.

B When economy is booming



Booming economy is likely to lead to both higher inflation & a large account deficit.
It results from excess aggregate demand.
Solution is to reduce government expenditure levels & increase taxes.
Government find it easier to cut back on investment spending than on current expenditure such as
social security benefits.

Monetary policy is a policy implemented by a central bank to control credit & money supply in the
economy. This policy help to control the level of spending in the economy.

Functions Of Monetary Policy:
Increasing cash ratio to reduce money supply.
Selling bonds to the public in he open market.
Fixing new regulations for hire purchases to raise the down payment. This make credit more expensive.

Impact Of Higher Rates:
Businesses will experiences increases in interest payment.
Businesses will reduce borrowing to further investment.
Expensive consumer goods & demand for property will fall.
Higher domestic exchange rates lead to an appreciation of the currency exchange rate.

Government need to be aware policies that could have negative effect: (Fiscal Policy) & (Monetary Policy)
Higher rates of income tax imposed to workers & managers.
High rates of corporation tax will discourage new investments & this will reduces the competitiveness of
businesses.
High rates of interest will make the borrowing cost higher than foreign rivals.

Speculators is a person who risks losses for the possibility of considerable gains.

Exchange rate policy - Claimed drawbacks to floating rates.
Frequent appreciation & depreciation of a currency against others.
Fluctuating priced of imported raw materials.
Fluctuations in export prices & overseas competitiveness, which lead to unstable levels to demand.
Uncertainty over profits to be earned from trading abroad.

Different exchange rates adds to the cost of firms trading overseas in 3 ways:
Different price lists printed & frequently updated.
Take out the risk of dealing in different currencies.
Currencies converted into the domestic currency.

Difficult to make cost comparisons when firms are planning to purchase goods from abroad.
Currency continues to float, foreign investment could be lost to common currency.
Business strategy may have to adapt to the country remaining outside the common currency.

Exchange rate policy - Claimed advantages of floating rates for not joining a common currency
Reasons:
Central bank could keep its status as the interest-setting authority by not joining the common currency.
Replacing the currency with a common currency lead to common tax policies.
Allow exchange rate to find its own level & will not use economic policies to keep it at one level.
Conversion costs could be substantial in terms of dual pricing.

Labour market is the supply of labour & demand of labour which together determine wage rates.

Factors that determine the demand for labour:
The demand for the finished product.
Improved technology.
The readiness with which producers increase their capital intensity.

Factors that determine the supply for labour:
The size of the population.
Working age group.
Wage rate being offered.
Availability of suitable labour.
Level of unemployment.
People choose not to work.

Solutions to skill shortages:
A) Offer higher wages to attract more skilled staff.
Advantages:
Relatively quick.
Bring more new ideas & experience.

Disadvantages:
More expensive than training own workers.
New staff acquire training into the business.
Other staff may demand a pay rise.

B) Train own staff
Advantages:
No induction training.
Other staff will not expect higher wages.

Disadvantages:
Time consuming.
Training may be expensive.
Company do not have skills or resources to train staff.
Newly trained staff may be attracted by higher wages offered.

There will be a Market Failure when there is a national shortage of skilled workers.
Government intervene in the labour market usually to prevent exploitation of workers. The impact that
government intervention can have on the labour market.

A) Minimum Wage Legislation
Arguments against the minimum wage include:
Lead to inflation.
Leads to higher wage.
Reduce the competitiveness.
Fall in unemployment.
Low levels of inflation.
Increase standard of living.

B) EU working time directive
Workers will not work more than 48 hours in one week.
Increase leisure time.

Market failure is the situation where a market does not efficiently allocate resources to achieve the greatest
possible good.

A) Market failure 1: External Cost (Pollution from manufacturing process)
Affected stakeholder group & their solution:
Consumer - They are forced to buy environmentally damaging goods.
Government & local authorities will be forced to take the issue seriously by pressure groups.
Workers concerned about their own health 7 job security if bad publicity leads to a decline in sales.

B) Market failure 2: Labour training
Affected stakeholder group & their solution:
Consumer - Scarcity of qualified staff may reduce consumer service lead to higher prices.
Government - Lack of skilled staff will limit the international competitiveness of industry. Government pay
for more training courses.
Shareholders - Potential profits will be lost.

C) Market failure 3 - Monopoly producers (keep higher prices)
Affected stakeholder group & their solution:
Consumer - Lack of choices, restricted supplies & high prices. Consumer can use Internet to choose from a
wider range of suppliers.
Government - High prices & lack of competitiveness. Government use competition policies. Investigate &
act against monopoly practices.

Income elasticity of demand is



Income elasticity classified for 3 classes of goods.
A Normal goods - The income elasticity is positive & between 0 & 1.
This means that when consumer incomes rise, the demand for these goods may also increase but by a
smaller proportion . E.g.: Basic foods.

B Luxury goods - The income elasticity is positive & greater than 1.
When consumer incomes rise, the demand will rise by an even greater proportion because consumers may
already be sufficient quantities of normal goods.

C Inferior goods - The income elasticity is negative.
Demand for these products will decline following an increase in consumer incomes but will rise when
consumer incomes are reduced. E.g.: Second-hand goods, poorer cuts of meat.
Thus, the producers may actually gain during a recession & experience a decline in sales when the
economy is growing.

Areas affected by technological change are:
A) Communication
A rapidly increasing number that are linked into & using the Internet.
There are increasing problems & computer stress.

B) Product technology
It determines the nature & speed of production flow on the line, quality of the product.

C) Costs of production
It is complex & very expensive.

D) Human resources & technology
It has led to:
redundancies as technology has changed methods & replaced people.
increase employment those with computer-related skills.
some deskilling. E.g. Craft skills have been replaced in areas such as printing.
multi-skilling.
an increase in small businesses resulting from redundancies.
a shortage of skilled engineers & programmers.
an increasing acceptance of change as its speed & impact have accelerated.

E) Market & Technology
Effects On The Market are:
changing nature of products. E.g.: Computerized toys.
online shopping.
the price. E.g.: Plasma TV is getting more cheaper as new firms enter the market.
availability to compete. It is difficult for low-technology firms to compete.
the pattern of demand. new entertainment industry take up their time 7 their disposable income. The
younger consumer are more apparent this is.
distribution of finished products. The availability of getting the products. Reduced prices, reduce damage
in transit.
for some people, technology has led to higher disposable incomes.
changed the way people paid. E.g.: Pay using credit card.
create more leisure time.
j health & medicines have changed.

Negative effects of technological change:
The need for data protection. Legislation change.
The need for computer use protection - It is offence to hack into computer or introduce a virus.
Unemployment results mainly from occupational & immobility & lowlevels of economic activity.
Unreliable systems can lead to poor customer service & bad reputation for the business.
Human to human relations has been reduced.
Managers must be computer literate. The management of change itself is a problem, where the culture of
the organisation is based on centralised authority.
Technological literacy is still a problem. This is overcome by training.
Markets become more competitive as the pace of change increases & assets become obsolescent & need
to be changed long before they have ceased to operate efficiently.

Legal constraints on business activity:
The law & employment practices.
The law & consumer rights.
The law & business competition.

A) The Law & Employment Practices
Government pass laws to control:
recruitment, employment contracts & termination of employment.
health & safety at work.
minimum wages.
trade union rights.

Unfair dismissal can be claimed if the employment contract is ended because of:
pregnancy.
refusal to work on holy day.
refusal to work on overtime.
being a member of trade union.
incorrect dismissal procedure being followed.
equip with safety equipment.
provide adequate toilet facilities.
provide protection from dangerous machinery.
give adequate breaks & maintain workplace temperatures.

The positive & negative impact on business of legal constraints on employment & health & safety. These
constraints will add to business costs.

These costs will include:
employing more staff to avoid long hours for existing workers.
protective clothing & equipment.
higher costs from giving paid holidays, pension & paid leave for sickness.
higher wage costs if the minimum wage is not being paid.
suprvsory osts rrn rms rrutmnt, slton & promoton. mult-nationals that operate in
countries with a few legal constraints will enjoy lower production costs.

Real benefits to be gained by businesses that exceed that minimum standards laid down by law.
Workers feel more secure, more satisfied & motivated workers. Workers will likely to work hard to help
business achieve its goal.
Reduce risks of accidents & time off work.
There is no heavy fines or expensive court cases.
Businesses can attract best employees & also receive good publicity.
The culture of the business might be to treat workers as partners in the business, equal in status.

B) The Law & Consumer Rights
Reasons why government take legal actions to protect consumers of goods & services from unfair business
activity:
An individual consumer cannot make good decisions when the power of advertising so influential.
It is difficult for consumer to understand how the products are made.
Consumers have to paying off debts for many years at high interest rates if not studied carefully.
Consumers need protection from producers which adopt different quality products.
Firms take advantages of consumers by reducing qualities, service, guarantee periods so in order to offer a
lower prices.

Laws are introduced to protect consumer.
Impact of consumer protection laws on business.
It can be expensive when redesigning products & advertisements to give clears information.
Require a change of strategy & culture in the organisation.
Improving quality control standards to reduce he danger of legal action.
Reduce risk of court action by treating consumer fairly.
Real & long lasting profit gain if a business is not only meet the minimum standards of protection laid
down by a law.

C) The Law & Business Competition
Free & fair competition between businesses has benefits for consumers. E.g. are:
Wider of choices of goods & services.
Low prices.
Businesses will compete by improving the quality, style, performance of the product.
Competition within one country will have external benefits & these firms much more able to compete
efficiently with foreign firms & this also strengthen the domestic economy.
Government encourage competition between by passing laws which:
control monopolies & make it possible to prevent mergers.
limit or outlaw uncompetitive practices between firms.

Monopoly is control of supply of a product or service to a particular market.
Monopolist is a person who have the power to control a price.

Monopolies develop? How?
By invention of new products & processes that are then legally patented to give the originator the
monopoly of production.
By meaning merging or taking over other firms.
By legal protection.
The privatisation of state monopolies.
T xstn o rrrs to ntry nto n nustry su s u osts o uln lts. Ts rrrs
will prevent or the start up new competitors.

Consumers affected by monopolies? How?
Benefits:
Lower prices if a large-scale production by a monopolist reduces average costs of production.
Increase expenditure on new products as the monopolist will be able to protect their position.

Drawbacks:
Higher prices when there is no competition.
Limited choice of products.
Less investment in new products.
no incentive to lower costs & improve efficiency.

Uncompetitive or restrictive practices
Refusal to supply a retailer.
Full line forcing - Producer forces a retailer to stock the whole range of products from the manufacturer.
If retailer refuses then even the popular items will not be supplied.
Market sharing agreement - Agree to share new business between the firms so that they do not compete
with each other to drive prices down.
Firm tries to stop new competitors by changing very low prices. This is called predatory pricing.

Social influences on business activity. The changes include:
an ageing population.
changing role of women - Not just to look after children but to seek employment.
early retirement is leading to more leisure time for a high-income pensioners.
rising diverse rates.
job insecurity.

How do changes impact on business strategy & decision?
An ageing population. Average age of the population is rising.
Changing patterns of demand as greater numbers of aged consumers demand different types of goods than
teenagers.
Age structure of the workforce may change. Younger employee are more adaptable & easier to train in
new technology whereas older workers show more loyalty & will have years of experience which could
improve customer service.

Changing Patterns Of Employment are one of the social constraints on the activities of business.
A The main features of changing patterns in most countries are:
Industries labour is being replaced by capital. Output can rise due to increasing productivity yet total
employment often fall.
Transfer of labour from old industries to the new hi-tech industries.
An increase in part-time employment.
An increase in student employment on a part-time basis.
Flexible hours.
Increase the working age to reduce burden on the health service, pensions & the care industries.
More women seek full-time employment.
More people work more than 48 hours a week.

Effects of the changes in the pattern of employment on business.
Part-time workers can offer a firm much greater flexibility by being available at peak times. Help to keep
down overhead expenses.
Temporary staff may not contribute any new ideas.
Firms can benefit from a wider choice of staff & improved motivation amongst women workers.
Increase costs of maternity leave & of providing staff.

Environment Constraints On Business Activity
Ethnics are the moral guidelines that determine decision making.
Most decisions have an ethical or moral dimension.
An ethical code is a formal business document that lays down the rules that managers & other employees
should adopt when faced with a decision or a dilemmas.
T mpt usnsss oprton s on t nvronmnt s vry mportnt spt o ts tl poston.
The environment can be greatly affected by business activity

Arguments FOR adopting business strategies which are environmentally sound:
Businesses that reduce pollution by using latest recycled or green equipment can have real marketing &
promotional advantage.
Companies that damage the environment can suffer adverse consumer reaction. This adverse reaction
caused by extensive pressure group activity.
Law-polluting production will reduce the chances of businesses breaking laws. They can avoid bad
publicity & court fines.
Businesses that switch to an environmentally friendly strategy often report an improvement in the number
& quality of applications they receive from potential employees.
Long-term financial benefits. E.g.: Generating electricity by using solar panels would gain substantial cost
savings if the cost of energy generated by oil & gas increases. There is also no external costs.

Argument AGAINST adopting business strategies which are environmentally sound:
Marketing advantage from keeping costs as low as possible. Society benefit from cheaper goods
produced.
Profits will be reduced if the latest methods of production is purchased.
Many countries legal protection of the environment is weak. As a result, be little risk of legal action or
heavy fines against business activity.
Developing countries it is argued that economic development is more important than protecting the
environment.

Pressure groups is an organisations with a common interest who put pressure on businesses & government
to change policies so that the objective is reached.

The pressure groups want changes to be made in 3 areas:
government to change their policies & to pass laws supporting the aims of the group.
businesses to change policies.
consumers to change their purchasing habits.

Pressure groups try to achieve these goals in a number of ways:
by using media coverage.
influencing consumer behavior such as by boycotting the particular product.
put arguments to government members or minister.

Environmental audits is an investigate process to determine if an existing facility is in compliance with
applicable environmental laws & regulations.
An environmental audit would check the pollution levels, wastage levels & recycling rates of the business
& compare them with previous years.
These audits are entirely voluntary.

Ethical Issues
The environment - The law prevents businesses from polluting or destroying the environment. Business
must decide whether to adopt even more stringent measures to protect the environment.
Animal rights - Some companies such as Cosmetics Manufacturer might use animals to test products.
They can destroy habitats & endanger animals.
Workers in the Third World - Some companies have been criticised for exploiting workers & reduce costs
of the workers.
Corruption - E.g.: Bribes might be used to persuade customers to sign contracts.
New technologies
Product availability - If a poor family cannot afford an expensive cars, most would not see this as an
ethical issues. But, if an Aids sufferer in South Africa cannot affords drug for treatment.
Trading issues - Some countries have been condemned internationally for the policies pursued by their
government.

Ets s out morlty & on Wt Is Rt & not Wt Is Wron./T vlus & ls
which influence how individuals, groups & societies behave.

Acting ethically when not required to do so by the law can have a negative impact on profit in two ways.
It can raise costs. E.g.: Paying higher wages than is necessary to Third World worker could lead to
increase in costs.
It can reduce revenues. A business might lose a contract if it refuses to give a bride.

In the other hand, it can produce benefits:
Companies can increase their sales by having a strong ethical stance.
Reduce the chance of breaking the law or see a fall in sales.