1. Knowledge Organiser - 3.5 - The Wider World Affecting Business
What is business ethics?
Business ethics is the way businesses treat people or other organisations who are most affected by them.
What is VAT?
Value added tax, or VAT, is the tax you have to pay when you buy goods or services
What’s the trade off between ethics and profits?
A trade off exists when the selection of one choice results in the loss of another. For businesses acting ethically when they are not required to do by law can impact profit in two main ways:
It can raise costs - for example paying higher wages than necessary for overseas workers increases costs.
It can reduce revenues - e.g. a business might lose a contract if it refuse to give a bribe or selling medicines at low process to emerging economies might increases sales, but total revenue is likely to be lower.
Businesses are now becoming more concerned with environmental issues, why do you think this is?
Government legislation
Customers are now interested in how goods are now produced - whether the business uses ethical practises or not
What are the benefits and drawbacks of increasing VAT?
Benefits:
The government will be able to receive additional revenue from tax, which they can then re - invest into other areas
Drawbacks:
Higher VAT leaves businesses with a tough decision to make; do they increase their prices or keep their prices the same and reduce their profit margins?
What things can businesses do to reduce the negative impacts they have on the environment?
Use sustainable resources, recycle more , reduce their wastage and carbon emissions.
What are the benefits for adopting ethical business practises?
Using it as good PR (public relations) - businesses like The Body Shop have use their ethical practises to increase sales by drawing in customers who are attracted by this
You can build a loyal customer base through this USP
Attract ‘ethical’ workers who want to work for a company with high standards which means they wont make ‘questionable’ decisions which could cause the business embarrassment
Increased brand imager and reputation
Stops pressure groups shaming the business in the media
What is corporation tax?
Corporation tax is a tax on business profits and is based on the amount of profit a business has made.
What are the potential repercussions for businesses if they ignore their environmental responsibilities?
They could be prosecuted by the government which would affect their reputation.
Pressure groups could protest which would again harm their brand image
‘Ethical’ customers may be put off and shop elsewhere
What are the benefits and drawbacks of reducing corporation tax?
Benefits:
Cutting the rate of tax will allow businesses to re - invest more of their profits back into their operations, which may encourage growth and boost the economy overall.
Additionally, it may also encourage more overseas businesses to set up in the UK.
Drawbacks:
The government will receive less revenue, which may limit their budget in other areas e.g. Police, NHS
Additionally, there is no guarantee that multi national organisations will use the additional profit to invest further in the UK.
What are the drawbacks for adopting ethical business practises?
It can reduce competitiveness as costs will increase which can lower profits. A business as a result may have to increase its prices therefore driving customers away and reducing demand.
What are the benefits and drawbacks of businesses using Fairtrade products?
Benefits:
Good publicity as they are supporting the Fairtrade cause which can be an ‘added value’ feature.
May boost sales as consumers are becoming more ethically conscious.
Drawbacks:
Higher costs therefore lower margins
Higher transport costs if importing from 3rd world counties
What is a pressure group?
These are organisations which seek to influence and support causes.
What is a direct and indirect tax?
A direct tax is one paid directly to the government, whereas an indirect tax is collected by an intermediary, such as a retail store.
What are some examples of direct and indirect tax?
Direct taxes: Income tax, national insurance, corporation tax, inheritance tax etc.
Indirect tax: VAT, excise duties, air passenger duty etc.

2. Knowledge Organiser - 3.5 - The Wider World Affecting Business
What are the potential opportunities/benefits to UK businesses in India and China?
The emergence of extra billions of ‘middle class’ consumers are a huge export opportunity for businesses
Bigger export markets can help UK businesses exploit economies of scale more thereby making greater profits
Falling costs (i.e. labour and production) for UK businesses
Knowledge Organiser The Wider World Affecting Business
What are the short term effects on the environment of business activities?
Traffic congestion - this may impact delivery times as the roads are more congested. This could therefore potentially impact customer service levels and company brand & reputation.
Air/smell/noise/water pollution - this could negatively impact local residents consequently pressure groups may decide to start a campaign against the business impacting demand, sales and revenue.
What are the main methods of protectionism?
Quota - physical limit on the number of goods/services that can be imported into a country
Tariff - This is a tax on all goods that enter the country from another country
Export subsidy - this is a payment by the government to encourage domestic production by lowering their costs
What are the impacts of taxing imports to British customers?
By taxing imports British customers will have to pay more for foreign products which reduces their demand and increase demand for UK products/services. Types of taxes include tariffs, import duties and customs duties. Quotas on the other hand limit the number of foreign products that can be imported into the country. Therefore, less will be sold. If the UK government subsidises exports then these products will be cheaper for foreigners, demand will rise, benefitting British suppliers/businesses
What are the potential threats/drawbacks to UK businesses of India and China?
Can produce products cheaper than UK which means businesses are much more likely to set up there than here. This can increase unemployment in industries and regions that lose demand to lower - cost competition from overseas
What are the long term effects on the environment of business activities?
Climate change/global warming
Increase costs - government forces laws on businesses to reduce their impact on the environment.
Resource depletion - fishing, fossil fuels- oil
What are the advantages of businesses respecting the environment?
Better reputation for ethics and being environmentally friendly.
Adding value/unique selling point justifying increases in price and consequently higher margins
Creates brand loyalty and therefore repeat purchasing
What are imports and exports?
Imports are goods and services bought from foreign suppliers/companies
Exports are goods and services produced by British suppliers and sold to foreigners.
Advantages and disadvantages of using tariffs for the UK?
Advantages:
Protects it’s own GDP from cheaper alternatives produced elsewhere , thus reducing competition for UK businesses and hopefully increasing demand for them
Disadvantages:
It may have implications for future trade with other countries and could contribute to a slow down in the economy if other countries decide to do the same to UK exports - as UK products abroad will be more expensive.
May limit the choice available to its own consumers
What is protectionism?
Protectionism looks to shield a country’s domestic businesses from the threat of foreign competition. This can be done in two main ways:
Taxing imports through tariffs, import duties or customs duties
Subsidising exports
What are the disadvantages of businesses respecting the environment?
Higher costs therefore making the he business less competitive compared to others
What are the main methods of protectionism?
Quota - physical limit on the number of goods/services that can be imported into a country
How can businesses become more environmentally friendly?
Reduce packaging and water consumption, limit Co2 emissions, make greater use of recycling,