This section examines the relationships between organisations and their external environment. Candidates should understand the opportunities and threats created by changes in the contemporary business environment. The importance of acquiring and managing information and of communicating effectively should be considered throughout. Specification section The Relationship between Businesses and the Political and Legal Environment Contents assessing the effects of: – government intervention in the economy – government economic policies – political decisions affecting trade and access to markets – the impact of legislation relating to businesses evaluating responses of businesses to a changing political and legal environment. AmplificationConsideration might be given to the provision of products by the government, government regulation and legislation and other forms of intervention such as tax and subsidy. Monetary, fiscal policy and supply side policies should also be considered. Political decisions should include issues such as: the enlargement of the European Union and moves towards greater freedom of trade. Legislation affecting businesses should include: employment law, consumer protection, environmental protection and health and safety legislation on businesses. A broad understanding of scope and impact is all that is required. BUSS 4: Assessing Changes in the Business Environment

Government intervention in the economy  Public spending  Raising tax revenue  Owning & controlling resources e.g. NHS  Passing laws

Should the government intervene in an economy? YESNO In groups, read the following 3 articles in the news and discuss the following: Similarities of each story Why the government should intervene Why the government shouldn’t intervene

Economic policies – 4 main macroeconomic objectives: Economic growth: increase in the total value of all goods & services produced within the economy (↑GDP) Low inflation: 2% is deemed the best rate – stable prices give confidence & predictability Low unemployment: if most people are working, we are using all our resources so maximising potential – working people tend to buy more goods & services to increase GDP Balanced trade (current account): imports = exports is ideal – we have a big imbalance (our exports are much lower than our imports)

Economic policies: 3 types Fiscal policy: gov’t use taxation and gov’t spending to impact the total demand in the economy Monetary policy: changes in the interest rate to impact the economy (usually targeting inflation) Supply side policies: policies aimed at helping firms to expand production, lower production costs, become more efficient / productive / competitive

What are the impacts of the following on a business? Evaluate. Low rate of income tax Lower corporation tax Higher fuel duty Higher alcohol duty Increased spending Increased government budget deficit Fiscal policies

What are the impacts of the following on a business? Evaluate. Low interest rates Monetary policies

Supply side policies Allow increased immigration Reduce tax rates such as corporation and income Expand university courses Encourage multinational investment into the UK Encourage new business start ups What are the impacts of the following on a business? Evaluate.