Page 328 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 6 External influences on business activity

Revision checklist Exam practice questions

● Businesses have a huge impact on the 1 Juan Cruz runs a small shrimp farm in the Philippines. The
environment and the community. seafood industry has come under a lot of international pressure
from environmentalists about the effect of this industry

● The effect that a business has on unrelated
parties is called an externality. on environmental degradation and destruction of marine
biodiversity. It has also been linked to human rights abuses,
● Depending on the nature of the externality, it
such as child labour and unfair payments and working
may generate a social cost or benefit for the
environment and community. conditions. The government has been trying to prevent
overfi shing and promote sustainable development.
● A social cost-benefit analysis and
assessment of stakeholders’ interests need a What is meant by ‘sustainable development’? [2]
to be done when considering a business
decision. b What is meant by an ‘externality’? [2]
● Businesses should have environmentally c Identify and explain one positive and one negative
friendly and ethical business practices externality caused by this business. [4]
in order to avoid opposition by pressure
groups. d Identify and explain two effects that Juan Cruz’s
business may have on its environment. [6]
● Governments place legal controls to
minimise the impact of business activity on e Recommend two ways the government can control the
the environment. effect of a business activity on the environment. Why
would these methods be effective? Justify your answer. [6]

2 Khan Garments is a retail company that sells luxury cotton
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garments. It buys its stock from suppliers based in different
countries. The economies of these countries are in a growth
stage and there is plenty of labour. This means labour costs
are very low and working conditions are often poor.
The cheap production costs enable Khan Garments to
have a high profi t margin. Although Khan Garments pays
competitive wage rates to its own employees, the owner
is aware that his suppliers may not be following ethical
business practices. With increasing awareness of ethical
issues and the presence of pressure groups, the owner is
thinking about changing his suppliers.
a What is meant by a ‘pressure group’? [2]

b Identify two unethical business practices that may be
followed by the suppliers of Khan Garments. [2]

c Identify and explain two advantages to the owner of
Khan Garments of running his business ethically. [4]
d Explain two problems pressure groups could cause
for Khan Garments. [6]
e The owner of Kahn Garments is aware of the unethical
business practices followed by his suppliers, but if
he sources his products from different suppliers then
his costs may go up. Should he change his supplier?
Justify your answer. [6]

Total available marks 40