1. Higher Business Management
Business in Contemporary Society

2. What is a business?
A business is an organisation that exists to satisfy needs and wants for a profit.

3. Needs and wants
Needs – a need is something essential to our lives: food, water, shelter, clothing.
Wants – a want is an additional luxury that makes life pleasurable.

4. Business activity
A business activity is any activity that provides us with goods and services that satisfy human needs and wants.

5. Wealth creation
A country’s wealth is measured by how many goods and services the country can produce.
GDP (gross domestic product) = the number of goods and services produced in a territory over a specific period (usually annually).
The more goods/services sold, the more likelihood of more jobs for the population, and therefore the more tax raised for the government.
This in turn should be invested in services for the nation.
Remember that when a nation is doing well and there is high employment there is usually high inflation due to excess money being spent and people then raising prices!

6. Factors of production
In order to produce goods and services, businesses need to use resources:
land
labour
capital
enterprise.

7. Factors of production
Land – natural resources extracted from Earth. Can be renewable or non-renewable.
Labour – physical and mental effort of people in organisations.
Capital – synthetic resources, such as buildings, machines and tools.
Enterprise – bringing together the other three factors of production.
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8. Business cycle Business provides goods/services Needs and wants
Consumers buy goods/services
Business cycle
Consumers have money to spend from wages
Wealth for companies and employees

9. Goods
Goods are tangible, physical products we can see and touch, such as cars, plasma TVs, MP3 players and iPads.
Goods can be durable or non-durable.

10. Services
Services are things that are done for us. They are intangible.
The police, your hairdresser and travel are examples of services.

11. IPO Input Process Output
Raw materials Workers Finished Natural resources Machinery goods

12. Sectors of industrial activity
Primary sector – Businesses taking natural resources from the land (eg mining, fishing, farming).
Secondary sector – Use resources to make or build their products, eg manufacturing and construction firms. Includes utilities.
Tertiary sector – Businesses that provide services such as banking, tourism and security.

13. De-industrialisation
Economies begin in the primary sector and move through each sector as they grow.
De-industrialisation explains the decline in heavy manufacturing in Scotland (shipbuilding, car manufacture).
The Proclaimers song ‘Letter from America’ mentions some towns that suffered due to de-industrialisation, such as Linwood.

14. Reasons for de-industrialisation
Customer demand may change.
Increased overseas competition may mean jobs go elsewhere to keep costs low for firms.
Legislation may hamper firms.

15. Introduction to the command words
Every question in the examination will contain
a specific command word
Explain
Describe
Discuss
Compare
Identify
Distinguish between
Justify
Outline
Go over with class what each of these terms means. Issue class with the SQA documentation on command words.
Click SQA icon to go to the SQA website.

16. Explain Hint Explain the cause of de-industrialisation in the UK.
De-industrialisation is caused by increased overseas competition. This means that as other countries, eg China, become more competitive jobs are lost in the UK.
Hint
Your answer must have the main theory point and then a detailed
explanation of what that means.

17. Types of ownership Sole trader Partnership Private limited company
Public limited company
Franchise
Co-operative
Charity

18. Sole trader One man/woman business.
Sole trader owns business. Owner and business are the same.
Owner provides own capital (savings and borrowings).
Profits go to the owner (but also responsible for losses).
Owner controls business, all decisions are theirs.

19. Sole trader Positives Easy to set up Can make decisions quickly
Personal attention to business
Profits are not shared
Can cater for local needs
Business affairs kept private
Negatives
Limited capital
Unlimited liability
Commitment (long hours, every day)
New ideas may be limited

20. Partnership A business owned by several people 2–20.
Deed of partnership – contract dealing with share of profits, roles and duties, capital contributed, dispute procedures.
Owned jointly but not always equally.
Partnership is an extension of sole trader.
Capital provided by partners.
Profit goes to partners, not always equally.
All partners entitled to participate in management (unless silent partners).

21. Partnership Positives More capital than sole traders
Excessive hours can be cut down
More ideas may be generated
Specialisation can occur
Negatives
Actions of one partner binds all
More discussion and consultation
Limitation on number of partners
Unlimited liability
Partnership ends if a partner dies

22. Private limited company (Ltd)
Organisation owned by a group of individuals (2+ shareholders).
Memorandum/Articles of Association.
Owned by shareholders (often family) whose main function is to elect board of directors.
Money raised by share issue or borrowing.
Ordinary shares and preference shares.
Profit shared between shareholders or retained by company.

23. Private limited company
Positives
More capital than partnerships
Limited liability
Owner can retain control
Company does not die if owners die
Negatives
Must be registered with Registrar of Companies
Harder to motivate and control workers
High set-up costs (legal and administrative)
Diseconomies of scale

24. Public limited company (plc)
Organisation owned by a group of individuals; has plc after name.
Certificate of Incorporation approved by Registrar of Companies.
Shareholders – 2+; shares sold on stock exchange; prospectus prepared to attract shareholders.
Capital raised by share issue or borrowing.
Profits shared between shareholders or retained by company.
Board of directors = divorce of ownership and management.

25. Public limited company
Positives
More capital than private limited companies
Employ specialists
Limited liability
Company does not die if owners die
Shares can be issued through stock exchange
Negatives
Formation expensive (legal and administrative costs)
Must publish accounts
May become too large to manage effectively
Decisions more difficult to arrive at
Diseconomies of scale

26. Franchise
A business/individual buys a license to operate a well-known firm.
Owned by franchiser.
Franchisee pays franchiser to get license as well as a royalty.
Franchisees runs business on franchiser’s guidelines.
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27. Franchise Positives Negatives
Franchiser provides a lot of support: training to start business, equipment, materials, advice, brand name
Take over a successful, winning formula
Negatives
Franchisee doesn’t have complete freedom
May not agree with decisions made by franchiser
Royalties paid to franchiser

28. Co-operative Organisation set up to benefit workers or consumers.
Retail – owned by workers and shoppers.
Producer – owned by workers.
Retail – every pound spent receives dividend or voucher.
Producer – money comes from workers, who share profits and share a salary.
Board of directors (who may also be workers).

29. Co-operative Negatives Positives
Difficult to grow and find additional capital 
New workers may not be able to raise capital needed to join co-operative
Positives
Less conflict between workers and managers 
Workers should be more motivated

30. Charity
An organisation formed to raise money for underprivileged people.
Trustees.
Charities raise money through shops, donations and lottery money.
Surplus after costs goes to the ‘needy’.
Board of managers.

31. Charity
Positives
If charity has status of charitable trust it doesn’t pay tax 
Looks after less privileged and the environment
Negatives
Less money may be donated due to introduction of the National Lottery
Relies on voluntary workers, who are usually not paid for work

32. Answer a question
Explain three reasons why an organisation would become a private limited company.
(3 marks) 2009
You have 3 marks to achieve, the command word is explain – remember this means a good expansion for each mark.
You have 6 minutes.

33. Peer marking You are going to swap answers.
Has your partner answered well?
Does the answer make sense?
Is it worth a mark?
Work with the class to assist them in understanding the way that questions are marked. They peer assess and discuss the answer with each other and then award the appropriate marks – teacher gives support.

34. Solution
Owners of a private limited company (Ltd) have limited liability to others, which reduces the risk of personal loss.
A private limited company is a larger organisation and this allows the business to attract finance more easily.
Control of a private limited company is still not lost to complete outsiders, so owners can still make decisions and decide on the direction of the business.
Experience and skills can be gained from shareholders, and can be used to improve the performance of the business.
How did you do?

35. Public sector organisations
Businesses set up by an Act of Parliament.
Government provides capital through the Treasury.
Government appoints chairman and board.
May be natural monopolies.
May be unattractive to private sector due to enormous capital investment.

36. Public corporations Reasons for being set-up:
to avoid wasteful duplication and confusion
to set up and run important non-profitable services
to prevent exploitation of consumers
to protect jobs and key industries.

37. Privatisation
Is ‘the selling off of public corporations to the private sector’.
British Gas, British Telecom and British Steel are examples of nationalised industries that were sold off under the Conservative government of Margaret Thatcher (Prime Minister 1979–1990).

38. Why privatise? Makes industries more competitive and efficient.
Privatisation raises huge monies for government.
The public are more willing to invest on the Stock Exchange than before.

39. Business objectives Survival Growth and development
Profit maximisation
Social responsibility
Providing a service

40. Objectives by business sector
Type of business
Aims/objectives
Private sector
Survival, profit maximisation, increase returns to shareholders
Voluntary sector
Help others, maximise cash collections, offer a service to the community
Public sector
Help people, improve quality of service, cut costs, raise revenue

41. Objectives in exams
Explain internal factors that could be taken into account prior to an organisation setting strategic objectives. (4 marks)
A difficult question – what do you think it means?
Groups should be given time to work out exactly what the question is asking about. Explain that some questions are not straightforward. Although this seems to be a question about objectives, it is more about internal issues.

42. Meaning
What areas of the business would be looked at by management before they make an important decision about the direction of the business?
Hint – size of the business.
Can you expand and get 4 marks?

43. Marking…
Size of the organisation would be considered - smaller firms’ strategic objectives will be of a smaller nature than those of multinational companies.
Company policy on, for example social and ethical responsibility, are the company products & activities following this policy?
Consider shareholders’ points of view.
Consider whether a private or public sector organisation.
Consider internal financial situation.
Consider technological factors.

44. Entrepreneur
A person who takes an idea and through ability and vision turns it into a good or service. He/she combines the four factors of production.
Richard Branson is Britain’s most famous entrepreneur.

45. Scottish entrepreneurs
Sir Tom Hunter
Ann Gloag and Brian Souter
Tom Farmer
Duncan Bannantyne
Michelle Mone
How did they make their money?
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46. Role of an entrepreneur
Identify business opportunities
Franchising
Combine factors of production
Innovation and risk taking

47. Identify business opportunities
Look for a gap in the market
Examples:
McDonald’s home delivery in Clydebank?¹
Virgin Galactic²
MJM³
Story of new Dad who is only 19 and works for McDonald’s. He got business cards made up and he gets people to phone him on his mobile and he makes/collects orders then delivers them. McDonald’s split over it. Some like it, some don’t. Lawyers say he is doing nothing wrong! He saw a gap in the market.
Richard Branson taking people to the upper atmosphere for £110,000 in SpaceShipOne
Michelle Mone took her idea of a Gel Bra (replacing the Push-Up) to Playtex who refused it. She then started her own company, making millions!

48. Entrepreneurs and franchising
In order to minimise risks, many young entrepreneurs have taken to using franchises as a means of starting up a business.
It is important to remember the benefits of the franchising model as it reduces risk.

49. Combining factors of production
The entrepreneur brings together land, labour and capital.
Let’s look at Richard Branson at Virgin:
He would buy or rent the floorspace for factories or shops (land)
He would hire the staff (labour)
He would buy machinery/equipment (capital).

50. Innovation and risk taking
Entrepreneurs do not invent, they innovate.
Henry Ford did not invent the automobile but through different innovations such as the assembly line and mass production he helped popularise car use and make it affordable for customers.
Risks involved are usually to do with uncertainty and money. No-one knows for sure if a new venture will be successful. The entrepreneur could go bust…like John DeLorean.¹
1John DeLorean was the youngest ever VP of General Motors. He left to start his own company, DMC. His low-cost but hi-tech sports car was built in the unemployment blackspot of Belfast. Made with his own and Labour Government money, the first cars were not sold due to a terrible winter in the US and Canada. When things began to improve the Conservative Government refused to pay the extra money needed to make it a success. The car became a white elephant and DMC closed. DeLorean then was arrested in a sting involving the FBI. He was involved in selling drugs to Colombians in order to pay off his debts! Although he was later cleared, he died in March 2005 a broken man. The car became famous in the Back to the Future movies as the Time Machine.

51. Stakeholders
Stakeholders are people with a key interest in a business.
Stakeholders affect businesses by exerting influence over decisions.
Their influence depends on the degree of their involvement or relative interest in a company.

52. The three Is…
When answering questions about stakeholders think of the three Is:
Identify (who are they?)
Interest (why do they want the firm to succeed?)
Influence (how can they affect the firm’s future?)

53. Identifying stakeholders
External
Customers
Banks
Investors
Local government
Suppliers
Donors (for charities)
Taxpayers
Community
Internal
Owners/shareholders
Employees
Management

54. Stakeholder aims/objectives
Owners want high profits, high dividends.
Managers want promotion, bonuses, job security.
Employees want better wages, better working conditions, job security.

55. Stakeholder aims/objectives
Suppliers want regular orders, prompt payment.
Customers want low prices, high quality.
Banks want loans repaid on time.

56. Stakeholder influence
Owners put capital in, vote at AGM (change board of directors).
Managers hire/fire employees, create policy and rules, make decisions.
Employees go on strike, increase/decrease productivity, provide good/bad customer service.

57. Stakeholder influence
Suppliers raise/lower prices, change delivery times, change credit terms.
Customers can choose to buy or not to buy products, affect ‘word of mouth’ and reputation.
Banks grant or deny loans, change interest rates, change repayment details (end date).

58. Command word practice Describe
Give a thorough description of whatever you are being specifically asked about.
It is vital that you describe the correct point not just the theory point.

59. Exam question
Describe how five different stakeholders could influence an organisation. (5 marks)
In this question you have to describe not the stakeholder but their influence on the business.
Class could answer the question individually.
Each group could prepare an answer covering all five stakeholders.
Split the class into five groups and each group is given a different stakeholder.
Important to point out what it is they have to describe and how they should do it.

60. One to get you started...
The bank is a stakeholder and they could influence the business by granting a loan – this would mean the business could carry out their chosen objective to expand.
The influence – carrying out the objective is clear in this answer.

61. Now it’s your turn
Describe how five different stakeholders could influence an organisation. (5 marks)
You have 10 minutes.

62. Peer-assessment solution
Manager – makes decisions on the future plans of the organisation.
Worker – can produce a quality product or service by working hard.
shareholder/owners – purchase more shares.
Customer – buys the product or service.
Local community – petition the organisation to make a change to environmental policies.
Government – alters legislation.
Bank – approves a loan.
Suppliers – alter the price of supplies.

63. Methods of growth Merger Takeover De-merger Divestment
Horizontal integration
Vertical integration
Diversification

64. Methods of growth
Merger – an agreement to bring two firms under one board of directors.
Takeover – when a firm buys over 50% of another firm’s share capital.
De-merger – when a firm is split into two parts.
Divestment – selling off parts of the business that no longer fit the long-term strategy.
Merger – a example of a successful merger is Sky buying BSB back in the early 1990s to become BSkyB; another example is AOL and Time Warner coming together.
Takeover – HSBC wanted into the UK market and bought over Midland Bank in 1999.
De-merger – ICI minus Zeneca, Racal Instruments minus Vodafone.
Divestment – reasons for this could be that the part sold off is no longer profitable or the firm wants to concentrate on its core activities (its strengths). Stagecoach has just sold its Coach USA taxi operations in Texas to Texas Taxis for £17m. This follows on from selling other parts of Coach USA for £93m to offset losses of some £524m

65. Horizontal integration
Occurs when a firm takes over or merges with another firm at the same stage of the production chain.
For example, if Ford Motor Company merged with or bought out Toyota – both are car manufacturers at the same stage of the production chain.
An example of horizontal integration is GlaxoWelcome joining with SmithKleinBeecham. These are two pharmaceutical companies of similar size but the reason for joining was to compete on the world stage.

66. Vertical integration Rubber plantation Car showroom
Vertical integration occurs when two firms that operate in the same industry but at different stages of production join together.
For example, the Ford Motor Company used to buy rubber plantations to control making tyres. This taking control of suppliers is called backward integration.
Forward integration happened when Ford bought into the distribution market and took over car showrooms.
This often happens as a result of a merger or take-over.
Car showroom

67. Diversification
Diversification is when businesses reduce risk by expanding the number of goods/services they provide.
Virgin and General Electric are examples of diversified firms.
Diversification – General Electric, the world’s richest company, has become a diversification specialist, with acquisitions and mergers including aircraft engines, medical systems, power systems, plastics, commercial and consumer finance, and transport. They even own NBC, America’s oldest broadcasting network.
Virgin – started out in music as a record label then moved into Virgin airlines, rail, cinema, cinema, insurance, finance, mobile phones
Another example is Philip Morris, maker of Marlboro cigarettes, who now are heavily involved in the chocolate market because of western governments’ active campaigns against tobacco.
Pros – improves prospects for long term survival
Enable a firm in a saturated market to seek growth
Provides new outlets for a firm’s skills and resources
Cons – diseconomies of scale (factors causing higher cost per unit when scale of output is greater – two main costs are communication costs and coordination costs) or failure to understand the new market place
Core business (activities central to corporate strategy) may be weakened

68. Multinational What is a multinational?
A company with HQ in one country but with bases, manufacturing or assembly plants in others.
Most multinationals are basically a federation of multiple national companies loosely connected across borders and managed largely by expatriates sent out from the centre.
By using expatriates they miss out on learning about the culture of the local people and perhaps even alienate the market. Many multinationals may not even sell goods in the country they are in.

69. Why become a multinational?
Companies may become multinationals to:
increase market share
secure cheaper premises and labour
avoid tax or trade barriers
take advantage of government grants.
Increase market share – companies may find they are at saturation point in the domestic market and need a new outlet. They may start by exporting to other countries but eventually they will want to take production overseas. Coca Cola started this way, following US soldiers around the world after World War I.
Secure cheaper premises and labour – the costs of land and labour will be cheaper in developing countries. Sweatshops in the Far East are an example of cheap labour, whereas production plants opening in the old Soviet Bloc nations like Poland, Bulgaria etc are examples of cheap factories.
Avoid tax or trade barriers – different nations have different levels of corporation tax and may have different barriers to entry. The Japanese only allow a small percentage of foreign cars to be sold in Japan to protect their own industry.
Government grants – many US companies were attracted to the UK in the 1980s because the government gave them money to open up operations here.

70. Multinational Positives Provide jobs and income
Improve level of expertise of local workers
Economies of scale
Negatives
Jobs may only be low-level skills
Profits go back to home country
Cut corners
May exert political muscle
Jobs – boost to local economy and more workers to tax.
Expertise – in some cases the skills of the workforce are improved, some may use IT or other skills now deemed basic by the West.
Economies of scale – cost per unit can be lowered through specialisation; with a large workforce work can be divided up and people can do their limited job expertly.
Technical economies – gained with automated equipment, but only when the fixed costs of machines can be spread out over outputs.
Purchasing economies – buying in bulk obtains supplies and materials at a cheaper cost per unit.
Jobs – may be only assembly line work.
Profits – not kept in country.
Cut corners – social responsibility goes out the window (not so worried about exploiting workforce or environment) – who is going to complain? Workers can work below minimum wage and for longer hours. Relaxed health and safety laws, and little if any environmental laws (Bhopal gas disaster hundreds killed – Union Carbide).
Political muscle – may threaten to pull out if don’t get deals on workforce (wages), overheads (land, rent and rates) or pollution deals.

71. Social responsibility
‘Social responsibility is about how companies manage their business processes to produce an overall positive impact on society’ – Campaign for Social Responsibility
Major concerns:
high fossil fuel emissions
global warming
exploitation/safety of workers.

72. Social responsibility
Positives
Customer perceives company in good light
Encourages brand loyalty
Negatives
inancial cost
May reduce competitiveness in certain markets (though the reverse can also be true)
Costs may be passed to customers

73. At last an easy question!
Describe three different methods of growth. (3 marks)
You have 6 minutes.

74. Did you get it?
Vertical integration – organisations at different stages in the same industry combine together.
Horizontal integration – organisations at the same stage of production combine together.
Backward vertical integration – when a business takes over a supplier.
Forward vertical integration – when a business takes over a customer.
Diversification – organisations in completely different industries combine together.

75. A systems view of business
Any system is made up of four key parts:
inputs
processes
outputs
Feedback.

76. Internal pressures
New personnel in the organisation (settling in time, training etc, especially in senior positions!)
New technology being used (training, errors, set-up and maintenance costs)
Change in firm’s financial position (loss of contracts, customers, market share etc)

77. External pressures: PESTEC analysis
Political factors
Economic factors
Social factors
Technological factors
and:
Competitive factors
Environmental factors

78. Political factors Tax Government legislation Environmental regulations
Trade restrictions
Political stability

79. Political factors (contd.)
Tax - corporation tax, VAT.
Laws - Hasawa (1974), minimum wage etc.
Environment - Kyoto Agreement, carbon footprint issues.
Trade – tariffs and trade embargos.
Stability - changes in government (from Labour to Conservative or Republican to Democrat) or even more severe with revolutions or coups (can affect tax rates and investment if governments have different political views).

80. Economic factors Economic growth Interest rates Exchange rates
Inflation
Unemployment

81. Economic factors (contd.)
Economic growth – are new jobs being created and is spending increasing?
Interest rates – high interest rates affect borrowing from banks – this will affect not only companies but also consumers and suppliers, therefore spending may be less if interest rates are high.
Exchange rates – if there is a favourable return between dollar and pound, for example, then it would be cheaper for US firms to settle in the UK than in, say, Europe (euro).
Inflation rate – is inflation high and crippling new businesses or is it stable?
Unemployment – if high then inflation will be low and vice versa; cheap workforce could be available if there is high unemployment.

82. Social factors Demographics Lifestyles Structure of the labour market
Trends and fashions
Attitudes
Education levels
Ethnic markets

83. Social factors (contd.)
Demographics – change in the nature of the population (the grey pound – old folk on the increase, SAGA Holidays etc).
Lifestyles – by sport, hobby etc.
Structure of labour market – increase in women in labour force; decline in manual labour jobs; increase in service sector jobs; increase in part-time, temporary employment.
Trends and fashions – changes in taste (denims trendy or not?).
Attitudes – change in people’s opinions.
Education – Guardian reader different from the Sun (tabloid vs broadsheet?).
Ethnic – different cultures and regional trends (pork, cows etc sacred or forbidden by certain religious groups).

84. Technological factors
ICT
Research and development (R&D) activity
Automation
E-commerce

85. Technological factors (contd.)
ICT – changes in software, hardware and telecommunications can impact on how a business performs locally, nationally and globally.
R&D activity – investment and spending are factors in a firm staying competitive and innovative.
Automation – the introduction of machines has set-up costs and human costs.
E-commerce – buying and selling online has revolutionised 21st century retailing.

86. Environmental factors
Global warming
Recycling
Pollution and industrial waste
Organic foods

87. Environmental factors (contd.)
Global warming – the impact of humans may have caused significant long-term damage to the Earth; firms must look to reduce their carbon footprint
Recycling – saving the planet’s resources and re-using items are considered good, ethical business practice.
Pollution and industrial waste – disposing of waste has to be conducted safely and not impact on the local environment or negative publicity will occur.
Organic foods – people are moving towards more natural foods.

88. Competitive factors Product differentiation Price wars Profit margins
Imitators

89. Competitive factors (contd.)
Product differentiation – a firm’s product has to stand out from the rest.
Price wars – firms may become embroiled in costly price competition.
Profit margins – competitors impact on profits as firms have to compete and match in terms of price, market research and advertising.
Imitators – patent protection is needed to reduce the impact of copycats.

90. The European Union
The European Union was formed in 1992 by the Maastrict Treaty.
It has 25 member states.
It is a single market.
The euro is the currency adopted by most of the member states.
Major institutions: EU Parliament (Brussels), European Central Bank (Frankfurt).

91. EU legislation
Converting from Imperial measurements to metric (1994 Units of Measurements Legislation); Steven Thorburn, the metric martyr.
Mobile phone firms have been warned they face EU legislation after failing to cut ‘unjustifiably high’ charges for calls made and received when abroad.
These regulations led to the prosecution this year of the first of the so-called metric martyrs, Steven Thoburn, whose sale of bananas by imperial weight so excited officials in Sunderland. Less well known is the fact that these same regulations permit imperial measurements to be shown on goods, provided they are less prominent than the metric, until 2009; also, that they state that "Nothing in these regulations shall apply in relation to the use of the mile, yard, foot or inch for road traffic signs, distance and speed measurement". Local authorities who put up metric distance signs are therefore liable to prosecution and BBC correspondents who report distances in metres and kilometres are wrong.

92. The environment and green issues
As the environment becomes more important as a result of global warming and ozone depletion, firms have to act accordingly (as part of being socially responsible).
What is the Kyoto Agreement?¹
Friends of the Earth and Greenpeace are environmental pressure groups.
1. The Kyoto Protocol is an international agreement setting targets for industrialised countries to cut their greenhouse gas emissions.
These gases are considered at least partly responsible for global warming - the rise in global temperature which may have catastrophic consequences for life on Earth.
The protocol was established in 1997, based on principles set out in a framework agreement signed in 1992.
What are the targets?
Industrialised countries have committed to cut their combined emissions to 5% below 1990 levels by 2008–2012.
Each country that signed the protocol agreed to its own specific target. EU countries are expected to cut their present emissions by 8% and Japan by 5%. Some countries with low emissions were permitted to increase them.

93. Final test
Explain how external factors may affect an organisation. (6 marks)
Read the question carefully. Make sure you know what it is asking about specifically.
Any questions? 10 minutes to answer.

94. Peer assessment
Political – legislation and regulations will affect an organisation in that it will need to comply with the laws of the country it operates in.
Economic – factors such as inflation, recession/boom periods and interest rates will affect organisations in a number of ways.
Social – changes in trends and fashions mean that organisations must continually carry out market research to see what products will sell or what new products are desired.
Technological – as technology changes organisations must keep up to date and this will involve a large financial cost.
Environmental – organisations now need to attempt to be socially responsible and environmentally friendly both to comply with legislation and satisfy consumer groups.
Competitive – organisations must continually monitor their competitors’ prices and alter theirs accordingly.