1-The Business Environment and Business Economics
Transcript of 1-The Business Environment and Business Economics
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The Business Environment
and Business Economics
The Business Environment
and Business Economics
BooksText
Books
1. Microeconomics7theditionbyPindyck,RubinfeldandMehtaPearson
2. EconomicsforBusiness4theditionbySlomanandSutcliffePearson
3. PrinciplesofEconomics4theditionbyN.G.MankiwThomson
TheBusinessEnvironment Whatisbusinesseconomics?
decision
making
in
business
externalinfluencesonthefirm
thebusinessenvironment
internaldecisionsofthefirm
theexternaleffectsofbusinessdecisionmaking
Whatdobusinesseconomistsdo?
description
analysis
recommendations
TheBusinessEnvironmentPolitical/legalfactors
Economic
factors
themicroeconomicenvironment themacroeconomicenvironment
Social/culturalfactorsTechnologicalfactorsPESTanalysis
relationsbetweenthefoursetsoffactors importanceoftheeconomicfactors
PESTELanalysis
IncludesEnvironmentalandLegalfactors
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Q Asfarasapubisconcerned,intermsofaPESTanalysis,anationwidebanonsmokingwouldrepresentachangeinthe
A. Politicalenvironment.
B. Economicenvironment
C. Socialenvironment
D. Technologicalenvironment
E. AandBabove
Q WhichofthefollowingwouldNOTbecountedasaneconomicfactoraffectingafirm?A. Thepricessetbythefirms
competitors.
B. Thecostofrawmaterials.
C. TherateofinterestsetbytheBankofEngland.
D. Arequirementthatthefirmrecognisestradeunions.
E. Achange
in
consumer
tastes.
TheStructureofIndustryImportanceofindustrialstructuretotheperformance
of
firms
Classifyingproduction
primaryproduction(Minerals,Energy,Agriculture)
secondaryproduction(Manufacturing,Construction)
tertiaryproduction(Services)
SharesinGDPandemploymentofthethreesectors
trends
over
time
currentposition
Outputofindustrialsectors(as%ofGDP)Outputofindustrialsectors(as%ofGDP)
1974
54.9%
2.8%
42.3%
2005
Secondary
Primary
Tertiary
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Outputofindustrialsectors(as%ofGDP)Outputofindustrialsectors(as%ofGDP)
1974
54.9%
2.8%
42.3%
73.9%
3.5%
22.6%
2005
Secondary Secondary
Primary Primary
Tertiary Tertiary
19741974
54.7%
3.4%
41.9%
20052005
Secondary
Primary
Tertiary
Employmentbyindustrialsector(%oftotalemployees)Employmentbyindustrialsector(%oftotalemployees)
19741974
54.7%
3.4%
41.9%
82.3%
1.5%
16.3%
20052005
Secondary Secondary
Primary Primary
TertiaryTertiary
Employmentbyindustrialsector(%oftotalemployees)Employmentbyindustrialsector(%oftotalemployees) TheStructureofIndustry
Classifyingfirmsintoindustries
natureofanindustry
industrialsectors
whyclassify
firms
into
industrial
sectors?
helpsinanalysingtrends
identifyingspecificneeds
helpstounderstandrelationshipsbetweenfirms
Standardindustrialclassification(SIC)
natureofthesystemofclassification
sections,subsections
divisions,groups
and
classes
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80
100
120
140
160
180
200
220
240
260
1980 1985 1990 1995 2000 2005
GDPbyindustry(1980=
100)
E
C
A/B
UKGDPbyindustry(1980=100)
80
100
120
140
160
180
200
220
240
260
1980 1985 1990 1995 2000 2005
GDPbyindustry(1980=
100)
E
C
A/B
D
F
UKGDPbyindustry(1980=100)
80
100
120
140
160
180
200
220
240
260
1980 1985 1990 1995 2000 2005
GDPbyindustry(198
0=100)
I
G/H
E
J-Q
C
A/B
D
F
UKGDPbyindustry(1980=100)
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
1980 1985 1990 1995 2000 2005
E
mploymentbyindustry
(1980=100)
UKEmploymentbyindustry(1980=100)
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10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
1980 1985 1990 1995 2000 2005
Employmentbyindustry(1980=100)
E
C
A/B
UKEmploymentbyindustry(1980=100)
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
1980 1985 1990 1995 2000 2005
Employmentbyindustry(1980=100)
E
C
A/B
D
F
UKEmploymentbyindustry(1980=100)
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
1980 1985 1990 1995 2000 2005
E
mploymentbyindustry
(1980=100)
I
G/H
E
J-O
F
C
A/B
D
UKEmploymentbyindustry(1980=100)Q Whichsectorhasseenthefastestrateofgrowthinoutputinrecentyears?A. Primary
B. Secondary
C. Tertiary
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TheStructureofIndustryChangesinthestructureofUKeconomy
expandingand
contracting
sections
byoutput
byemployment
Analysingindustrialstructure
TheStructureofIndustryChangesinthestructureofUKeconomy
expandingand
contracting
sections
byoutput
byemployment
Analysingindustrialstructure
changesinindustrialconcentration
TheStructureofIndustryChangesinthestructureofUKeconomy
expandingandcontractingsections
byoutput
byemployment
Analysingindustrialstructure
changesinindustrialconcentration
the
distribution
of
SMEs
in
the
economy
Number of businesses, employment and turnover by indus trial sector (2004)Number of businesses, employment and turnover by indus trial sector (2004)
S ec to r S ize o f en te rp ri se Nu m ber o f en te rp ri ses(and % of sector)
Employment(% of sector)
Turnover(% of sector)
Al l SM Esa
4 276 865 (99.8) 58.5 52.0
Large f i rmsb
5 980 (0.2) 41.5 48.0
A, B SM Es 169 580 (100 ) 100 .0 100 .0
Large f irm s 20 (0.0) 0.0 0.0
D SMEs 330 190 (99.4) 54.0 35.5
Large f irm s 1 855 (0.8) 46.0 64.5
F SMEs 862 310 (100) 82.9 66.1
Large f irm s 305 (0.0) 17.1 33.9
G SMEs 569 895 (99.8) 48.1 49.8
Large f irm s 1 045 (0.2) 51.9 50.2
H SMEs 136 965 (99.8) 55.4 59.6
Large f irm s 310 (0.2) 44.6 40.4
I SMEs 263 850 (99.8) 40.8 40.1
Large f irm s 450 (0.2) 59.2 59.9
J SMEs 69 430 (99.6) 21.0 na
Large f irm s 300 (0.4) 79.0 na
K SMEs 1 011 810 (99.9) 68.1 68.9
Large f irm s 1 100 (0.1) 21.9 20.1
N SMEs 239 935 (99.9) 79.7 86.8
Large f irm s 165 (0.1) 20.3 13.2
O SMEs 476 025 (99.9) 74.1 62.2
Large f irm s 265 (0.1) 25.9 37.8
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Q InwhichsectoristherethehighestratiooflargefirmstoSMEs?A. Primary
B. Secondary
C. Tertiary
TheDeterminantsofBusinessPerformance
Structure
conduct
performance
relationshipbetweenbusinessstructureandbusinessconduct(behaviour)
competitivemarketsandcompetitivebehaviour
limitedcompetitionandcollusion
relationshipbetweenbusinessconductandbusiness
performance
indicatorsformeasuringperformance
profitability,marketshare,growth,etc.
Q TheStructureConductPerformanceparadigmimpliesthatbusinessperformanceisstronglyaffectedbythe
A. aimsofthefirm.
B. competenceofmanagement.
C. internalorganisationofthefirm.
D. degreeofcompetitionthefirmfaces.
E. technologythefirmuses.
TheDeterminantsofBusinessPerformanceInternalaimsandorganisation
profitmaximisationastheprimegoal
othergoals
distinctionbetweenownersandmanagers
importanceofmanagersownobjectives
satisficing
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TheDeterminantsofBusinessPerformance
Other
factors
affecting
performance
internalstructure
information
competenceofmanagement
qualityoftheworkforce
systems informationsystems
motivation
technicalsystems
distributionsystems
financialsystems