Section 6
External Influences on Business
Covers the factors outside a business’s control that shape its decisions — the economic environment, environmental and ethical responsibilities, and the impact of globalisation and international trade.
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Section 6 Topics
3 topicsEconomic Growth & GDP
Rising GDP means higher incomes and consumer spending — good for most businesses. A recession (falling GDP) reduces demand.
Inflation
A sustained rise in the general price level. Increases costs for businesses, erodes consumer purchasing power, and creates uncertainty.
Unemployment
High unemployment reduces consumer spending but gives businesses a larger pool of workers, often at lower wages.
Interest Rates
Higher rates increase borrowing costs for businesses and reduce consumer spending on credit. Lower rates encourage investment.
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Environmental Impacts
Business activity causes pollution, resource depletion and waste. Governments use taxes, regulations and subsidies to control these effects.
Corporate Social Responsibility (CSR)
Businesses voluntarily acting in the interest of society and the environment beyond legal requirements. Builds reputation and loyalty.
Ethical Issues
Fair pay, supply chain conditions, honest advertising, avoiding exploitation. Ethical behaviour can attract customers and talented employees.
Profit vs Ethics Trade-Off
Ethical decisions may raise costs in the short term but can improve brand image and long-term profitability through consumer trust.
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Globalisation
The growing integration of economies worldwide. Opens new markets for businesses but also increases competition from overseas firms.
Exchange Rates
A stronger currency makes exports more expensive and imports cheaper. A weaker currency does the opposite — affects competitiveness.
Multinational Companies
Businesses that operate in more than one country. Benefit from lower costs, wider markets and tax advantages — but face political risk.
Trade Barriers & Free Trade
Tariffs, quotas and embargoes restrict imports. Free trade agreements remove these barriers, benefiting businesses that export.
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