business

Government spending:One of the roles of most governments is to provide a range of public services.This might include:health care,education,defence,care for the elderly,child protection,policing,refuse collection,judical system and transport networks.Taxation:The money raised from taxation is used by a government to help fund its spending on public services.Businesses and individuals pay taxes.Indirect taxes means they are levied on spending.Value Added Tax (VAT) paid when buying g&s.Direct tax:charged on income,income tax,corporation tax.Fiscal policy:using changes in taxation and government expenditure to manage the economy.How can governments affect business activity?Infrastructure provision:In most countries,the government is responsible for developing and maintaining the nation’s key infrastructure.This includes building schools,hospitals,roads,bridges,dams,railway systems,power generators and goverment offices.These projects can cause millions or billions of dollars.Legislation:One of the roles of the government is to provide a legal framework in which businesses can operate and ensure that vulnerable groups are protected.Areas of legislation important:CONSUMER PROTECTION:Consumers want to buy good quality products at a fair price and receive good customer service,don not want to buy goods that may be dangerous or overpriced.Some firms may:increase prices higher than they would be in a competitive market,price fixing,restrict consumer choice by market sharing,raising barriers to entry by spending huge amounts of money on advertising,which smaller companies could not match,f.e.SALE OF FOODS ACT 1979:This states that products sold by businesses must be of an appropiate quality and fit for the purpose.Food safety act 1990:This law means that food should be fit for human consumption and comply with safety standards.COMPETITION POLICY:Encourage the growth of small firms:If more small firms are encouraged to join markets there will be more competition.with more small firms the market is less likely to be dominated by one very large firm.Lower barriers to entry:If barriers to entry are lowered or removed then more firms will join a market.this will make it more competitive.Introduce anti-competitive legislation:Many countries have laws that help to encourage competition.some countries have special bodies or agencies that are responsible for managing all policy relating to competition and consumer protection.ENVIRONMENTAL LEGISLATION:Business activity can have a negative impact on the environment.F.e.water pollution may be caused by businesses dumping waste into rivers,streams,canals,lakes and the seaAir pollution may be caused by releasing waste or gases into the air.One approach used by many governments is to pass new laws to minimise the damage done by businesses to the environment.If businesses fail to comply with environmental laws they may be fined or forced to close until the problem is solved.TRADE POLICY:Protectionism means the use of trade barriers to protect domestic producers, can be used to;protect jobs if foreign competitors threaten the survival of domestic producers,protect infant industries(new industries that are yet to get established),prevent dumping(where foreign producers sell goods in another country often below cost),raise revenue tariffs. Governemnts can use trade barriers to restrict trade:Tariffs:a tax on imports, which makes them more expensive.Quota:physical limit on the quantity of imports allowd into a country.Subsidy:financial support given to a domestic producer to help compete with overseas firms.Administrative barriers:the use of strict health.Administrative barriers:the use of strict health and safety or environmental regulations and specifications to make importing more awkward

Multinationals contribute about 10 per cent to world GDP and about66 per cent to global exports.How have multinationals developed?Economies of scale:Multinationals enjoy lower costs,this is because the can exploit economies of scale.Marketing:Some multinationals rely on marketing.Such as Starbucks and McDonald’s.They have protected their brand with patents,use of heavy advertising and innovate to attract customers.Technical and financial security:Most multinationals have developed advanced technologies and built a large bank of knowledge. BENEFITS of becoming a multinational:Larger customer base:Multinationals can boost their sales revenues by selling to global markets.Help to increase profits and win market share from competitors.LOWER COSTS:Many multinationals will reduce transport costs this is because they are likely to set up factores in new countries so that the distance from the production site to the market is reduced.HIGHER PROFILE:Multinationals will enjoy a higher profile in the market.Companies with strong brand names are recognisable.Avoiding trade barriers:One of the benefits of becoming a multinational is that the trade barriers can be avoided.Lower taxes:Multinationals can reduce the amount of tax they pay on their profits by basing their head offices in countries where taxes are lower.BENEFITS of multinationals to a country/economy:Increase in income and employment-Multinationals create new jobs in developing countries.Increase in tax revenue-The profits made by multinationals are taxed by the host nation.Increase in exports-The output produced by a multinational in a particualr country is recorded as output for that country.Transfer of technology-Multinations provide foreign suppliers with technical help,training and other information.Improvement in the quality of human capital-Governments try to spend more on education to improve the countries human capital to attract multinationals.Enterprise development-Multinationals may have provided the skills and motivation needed for enterprise.Possible drawbacks of multinationals to a country:Environmental damage:Multinationals may cause environmental damage.This is because they use products as coal,oil and coal mining.Exploitation of less developed countries-Some multinationals may encourage developing countries to rely on producing primary products.Multi…pay lower wages.Taxes paid to the host nation are often minimal.The little put back into the country would reduce the amount of profit made by the multi…Repatriation of profits-where a multinational returns the profits from an overseas venture to the country where it is based,typically from a developing country to a developed country.Lack of accountability-Some argue that because multinationals are so large and powerful they lack of accountability.TEMA 11:International trade:allows countries to obtain goods that cannot be produced domestically,allows countries to obtain goods that can be bought more cheaply from overseas,helps to imrove consumer choice,provides opportunities for countries to sell off surplus(amount of something that is more than what is needed or used)commodities.Exports:goods and services sold overseas.Imports:goods and serives bought from overseas.Visible trade-trade in physical goods.Invisible trade-trade in services.Balance of trade(or visible trade)-difference between visible exports and visible imports.Transactions-business deals or actions,such as buying or selling something.Exchange rate-value of one currency in terms of another.Interest-price of borrowed money(and the reward to savers).Monetary policy-using changes in interest rates and the money supply to manage the econmy.