1 Introduction to Business Management

Table of Contents

1. Topic pack - introduction
2. 1.1 Nature of business activity - notes
3. 1.1 Nature of business activity - questions
4. 1.2 Types of organisation - notes
5. 1.2 Types of organisation - questions
6. 1.3 Organisational objectives - notes
7. 1.3 Organisational objectives - questions
8. 1.4 Stakeholders - notes
9. 1.4 Stakeholders - questions
10. 1.5 External environment - notes
    1. External environment
    2. Introduction - PEST/STEP analysis
    3. The legal and political environment - introduction
    4. The legal environment
    5. Political stability and instability
    6. The social and cultural environment - introduction
    7. Social responsibility
    8. Demographic trends
    9. The technological environment - introduction
    10. The Internet and the World Wide Web (www).
    11. E-commerce
    12. Technological change
    13. The ecological environment
    14. The economic environment - introduction
    15. Economic growth
    16. The Business Cycle
    17. Inflation
    18. Exchange rates
    19. Unemployment
    20. Interest rates
    21. Government fiscal policy
11. 1.5 External environment - questions
12. 1.5 External environment - simulations and activities
13. 1.6 Organisational planning tools - notes
14. 1.6 Growth and evolution - notes
15. 1.7 Growth and evolution - questions
16. 1.7 Growth and evolution - simulations and activities
17. 1.6 Change (HL only) - notes
18. 1.9 Globalisation - notes
19. 1.9 Globalisation - questions
20. Print View

The Economy and Economic growth

AO2 You need to be able to: Demonstrate application and analysis of knowledge and understanding Command Terms: These terms require students to use their knowledge and skills to break down ideas into simpler parts and to see how the parts relate: Analyse, Apply, Comment, Demonstrate, Distinguish, Explain, Interpret, Suggest

AO3 You need to be able to: Demonstrate synthesis and evaluation. Command terms these terms require you to rearrange component ideas into a new whole and make judgments based on evidence or a set of criteria. Compare,  Compare and contrast, Contrast, Discuss, Evaluate, Examine, Justify, Recommend, To what extent

AO4 You need to be able to Demonstrate a variety of appropriate skills. Command Terms These terms require you to demonstrate the selection and use of subject-specific skills and techniques: Annotate, Calculate, Complete, Construct, Determine, Draw, Identify, Label, Plot, Prepare

Warning - since The Economy covers a huge, wide ranging amount of information we can only touch on a few considerations. You should keep in touch through newspapers, websites and activities that are business related.

We have already seen that businesses do not operate in a vacuum. They are affected by a range of external factors; with one of the key external factors being the economy. With increasingly global markets, even local firms will now be affected by both the national and international economy. Inflation, unemployment, exchange rates, interest rates and economic growth are all issues that will affect all aspects of business activity.

Changes in government economic policy can have wide-ranging effects on the demand for business products and therefore marketing approaches. Government policy may affect the cost of business inputs - labour, raw materials and capital. As a result, any business that does not keep a careful eye on the external economic environment is vulnerable to reduced sales and profits.

Economic growth is normally good news for business. We normally measure it via the real GDP figure - i.e. the Gross Domestic Product adjusted for inflation.

Gross Domestic Product is a measure of the total amount of goods and services produced in an economy over a period produced by the residents of a country. 

Comparisons of country GDP can be found on the CIA World Factbook or viewed in the window below:

Businesses usually experience benefits from economic growth because:

• It delivers new opportunities.
• There is greater certainty in markets.
• Incomes are increasing (businesses with income elastic products will benefit the most in this situation)
• Demand is increasing
• The size of all markets is increasing

However, there are potential negative consequences of economic growth. These may include:

• Damage to the environment
• Depletion of resources
• Rising prices (inflation)
• Increasing size and monopoly power of firms creating unfair competition
• Increasing inequalities between rich and poor

The BRIC countries

The 'BRIC countries' - Brazil, Russia, India and China - are both the fastest growing and largest emerging market economies. They account for almost three billion people, or just under half of the total population of the world. In recent times, the BRIC have also contributed to the majority of world GDP growth.

According to various projections, it is only a matter of time before China becomes the biggest economy in the world probably between 2030 and 2050. Goldman Sachs believes that by 2050 the BRIC countries will be the most important economies, relegating the US to fifth place - do you agree?