BUSINESS AND MANAGEMENT MODULE 1 BUSINESS ORGANIZATIONS & ENVIRONMENT

Political Opportunities & Threats Governments can choose to intervene in the markets if it wishes US “bail out” of the financial markets in October is a prime example Pros Government intervention can present barriers to growth Cons Leaving businesses to their own fates can stimulate healthy competition Foreign direct investment is attracted if government involvement is minimal

Fiscal Policy Refers to the use of taxation and government spending policies Direct taxation Paid straight from income or profit Indirect taxation Paid on trade in goods and services Progressive taxation Proportion of tax paid increases with income

Fiscal Policy (continued) Deflationary Used when the economy is experiencing high rates of economic growth (needs to be slowed down) Higher taxes; lower spending Expansionary Used to boost the economy Tax cuts and increased public sector spending

Common Taxes Income tax Corporate tax Sales tax Capital gains tax Levy on personal income from wages, interest and dividends Corporate tax Levy on profits of a business Sales tax Taxes on individual expenditures Capital gains tax Tax on surplus made from investments Excise tax Taxes levied on “sin” goods such as tobacco and alcohol Custom duties Taxes paid on foreign imports

Monetary Policy Designed to control the amount of spending and investment in an economy, by altering interest rates Interest rates are the price of borrowed money Higher interest rates makes borrowing money less attractive (higher costs of repayment) Discretionary income is reduced

Impact of Interest Rates Risk Time Administration Expectations

Social & Cultural Opportunities & Threats The attitudes of a society will greatly affect what goods and services are provided in the economy For example, the growing knowledge and support for environmental protection has greatly altered business behavior Demographic changes leading to a more educated public and wider acceptability of visible minorities

Technological Opportunities Technology affects all aspects of business Recruitment E-commerce Published on-line reports Speed of access to information Reducing language and cultural barriers Reducing costs of production

Technological Threats Price transparency Customers can easily compare prices of rival firms Online crime Hackers cost Canadian businesses millions of dollars per year This may drive away consumers and potential on-line sales Higher costs of maintenance Maintenance and training of on-line services; shut down and upgrade costs

Other Technological Ideas… New working practices Working from home Video conferencing Increased productivity Robotics are a much faster and more reliable production alternative Increased stock control Quicker product development New products and markets Job creation Exercise – Nintendo & Apple