Edexcel GCSE Business Studies Unit 5

All businesses have to follow legislation, but this is not the same as ethical behaviour.

Being ethical may mean making less profit, but it does create good publicity.

Some businesses choose to be ethical because:

high ethical standards = good consumer image = high sales and profits

Pressure group - a group with a common interest/goal who work collectively to further that cause, e.g. a trade union

Pressure groups can embarrass companies and damage the company's image. This could lead to customer boycotts, which damage profits and upset shareholders.

Fairtrade products cost more, and the extra money is given to producers and invested in community projects. While many consumers buy fairtrade products because they want to feel like they're making a difference, in a recession price is more important and fairtrade sales will decrease.

Ethics - a set of moral principles

Ethical - doing things because you think they are morally right

Legislation - laws passed by Parliament

Socially responsible - acting in ways that show care and concern for all members of society

Social enterprise - a business that trades in goods and services but is associated with a social cause

Fairtrade movement - a group that supports standards for importing goods from developing countries and ensures a fair deal for farmers and workers

Environmental issues can have both short-term and long-term effects on a firm.

Being environmentally friendly can improve a company's public image.

Environmental changes affect businesses:

• farmers must adjust crops to changing climates
• wine producers require certain temperatures
• insurers may face more natural disasters

Many manufacturers in Britain struggle to compete with foreign competitors. In Britain, manufacturers have to pay higher wages, higher rent and more for transportation and petrol.

This is why more and more manufacturers are relocating to Eastern Europe and Asia.

Subsidy - paid by the government to home producers to keep prices competetive

Import quota - a limit on the number of imports from foreign countries, which protects home producers

Advantages of import quotas:

• Protects home industry
• Protects home employment

Disadvantages of import quotas:

• Reduces competition
• Gives consumers less choice

Regulations on business ensure that standards are kept and that businesses compete fairly.

The minimum wage is the minimum hourly rate of pay that workers can receive.

Advantages of the minimum wage:

• it encourages employers to train and develop staff's skills instead of relying on cheap labour
• higher pay reduces staff turnover, which saves the business money
• better-paid workers spend their money locally, thereby helping the local economy

Disadvantages of the minimum wage:

• some small firms may not be able to pay it and this could cause redundancies
• costs increase

Advantages of health and safety regulation

• Workplace accidents decrease so productivity would increase and staff turnover would decrease
• The firm gains a good reputation
• It reduces the costs associated with workplace injuries

Disadvantages of health and safety regulation

• Often expensive to implement
• Some staff resent the changes to working practices

Corporation tax - tax paid on a business' profits

VAT - tax on goods and services

Income tax- tax paid by employees on their earnings

Interest rate - the charge for borrowing money and the reward for saving