Giáo án The Business Environment ( môi trường kinh doanh )

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fifth edition

The Business Environment
Ian Worthington and Chris Britton

Learn about the latest issues in business: technology
and e-business, corporate responsibility, and sociocultural influences

The Business Environment

Apply theory to practice through diverse cases and
examples, such as Amazon, Toyota and the mobile
phone market

fifth
edition

A vibrant and contemporary introduction to the
business environment, Worthington and Britton
comprehensively examine how external influences affect
the decisions and operations of today’s organisations.
What roles do culture, diversity and ethics play in the dynamic world of business
today? How do unpredictable political and economic conditions affect an

organisation? What are the impacts of globalisation, social and technological change on
business decisions?
Using well-known examples and case studies from the public and private sectors, this fifth
edition of The Business Environment addresses these key questions and many more.
Encouraging students to consider the challenges and opportunities that managers face in the
business environment, it provides a strong basis from which to build an overall understanding of
the context of business.

Key Features

Ian Worthington is a Reader and Chris Britton a Principal
Lecturer in the Department of Strategy and Management at
Leicester Business School, De Montfort University.

The Business Environment
Ian Worthington and Chris Britton

Worthington

and Britton

Study online! Test your knowledge through self-assessment
questions, and find useful weblinks at
www.pearsoned.co.uk/worthington.

fifth edition

ISBN 0-273-70424-9

Additional student support at

www.pearsoned.co.uk/worthington

9 780273 704249
An imprint of

www.pearson-books.com

Additional student support at
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The Business Environment
Visit the The Business Environment, fifth edition, Companion Website at
www.pearsoned.co.uk/worthington to find valuable student learning
material including:
●
●
●

Self-test questions for every chapter
Links to articles and resources on the Internet
Searchable online glossary

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We work with leading authors to develop the
strongest educational materials in business,
bringing cutting-edge thinking and best learning
practice to a global market.
Under a range of well-known imprints, including
Financial Times Prentice Hall, we craft high quality
print and electronic publications which help readers
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studying or at work.
To find out more about the complete range of our
publishing please visit us on the World Wide Web at:
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fifth edition

The Business Environment
Ian Worthington and Chris Britton
Leicester Business School, De Monfort University, Leicester


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Pearson Education Limited
Edinburgh Gate
Harlow
Essex CM20 2JE
United Kingdom
and Associated Companies around the world
Visit us on the World Wide Web at:
www.pearsoned.co.uk

First published in Great Britain in 1994
Second edition 1997
Third edition 2000
Fourth edition 2003

Fifth edition 2006
© Ian Worthington and Chris Britton 1994, 1997, 2000, 2003, 2006
The right of Ian Worthington and Chris Britton to be identified as authors of
this work has been asserted by them in accordance with the Copyright,
Designs, and Patents Act 1988.
All rights reserved. No part of this publication may be reproduced, stored in
a retrieval system, or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise without either the prior
written permission of the Publishers or a licence permitting restricted copying
in the United Kingdom issued by the Copyright Licensing Agency Ltd,
90 Tottenham Court Road, London W1P 0LP.
ISBN-13: 978-0-273-70424-9
ISBN-10: 0-273-70424-9
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library.
Library of Congress Cataloguing-in-Publication Data
A catalogue record for this book is available from the Library of Congress.
10 9 8 7 6 5 4 3 2 1
10 09 08 07 06
Typeset in 9.5/13 pt Stone Serif by 30.
Printed and bound by Mateu Cromo Artes Graficas, Spain.
The publisher’s policy is to use paper manufactured from sustainable forests.


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For Lindsey, Tom and Georgina and for
Rachael, Philip, Nick and Megan, with our love


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Brief contents

Full contents
Contributors
Preface to the first edition
Preface to the second edition
Preface to the third edition

Preface to the fourth edition
Preface to the fifth edition
Guided tour

Part One INTRODUCTION
1 Business organisations: the external environment
2 Business organisations: the internal environment
Part Two CONTEXTS
3 The political environment
4 The macroeconomic environment
5 The demographic, social and cultural context of business
6 The resource context
7 The legal environment

ix
xviii
xix
xx
xxi
xxi
xxii
xxiv
1
3
18
39
41
80
120
145

171

Part Three FIRMS
8 Legal structures
9 Size structure of firms
10 Industrial structure
11 Government and business

197

Part Four MARKETS
12 The market system
13 Market structure
14 International markets and globalisation
15 Governments and markets

313

Part Five ISSUES
16 The technological environment: e-business
17 Corporate responsibility and the environment
18 Monitoring change

429

Glossary
Index

496
513

199
231
262
289

315
341
367
402

431
447
471


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Contents

Contributors

xviii

Preface to the first edition

xix

Preface to the second edition

xx

Preface to the third edition

xxi

Preface to the fourth edition

xxi

Preface to the fifth edition

xxii

Guided tour

xxiv

Part One INTRODUCTION
1 Business organisations: the external environment

3

Ian Worthington
Learning outcomes and key terms

3

Introduction
The business organisation and its environment
The general or contextual environment
Mini case: A healthy business?
The immediate or operational environment
Analysing the business environment
Mini case: Levi Strauss: jean therapy?
Central themes
Synopsis
Summary of key points
Case study: A shock to the system

4
4
7
7
9

10
10
13
14
14
15

Review and discussion questions
Assignments
Further reading

16
16
17

2 Business organisations: the internal environment

18

Ian Worthington and Zena Cumberpatch
Learning outcomes and key terms

18

Introduction
Approaches to organisation and management
Organisation structures
Mini case: Change at Deutsche Bank?
Mini case: Royal Dutch Shell

19
19
23
23
28


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Contents

The virtual organisation
Structural change
Aspects of functional management
Synopsis
Summary of key points
Case study: Structuring global companies

29
30
30
35

35
36

Review and discussion questions
Assignments
Notes and references
Further reading

37
38
38
38

Part Two CONTEXTS
3 The political environment

41

Ian Worthington
Learning outcomes and key terms

41

Introduction
Political systems
Government in democratic states
Mini case: Action on the environment
The three branches or functions of government
Mini case: Supranational lobbying
Checks and balances in democracies

A model of the policy process
Synopsis
Summary of key points
Appendix 3.1: A democratic political system in action:
UK national government
Appendix 3.2: Subnational government: UK local authorities
Appendix 3.3: Supranational government: the European Union
Case study: Left out in the cold

42
44
46
50
52
54
57
58
60
60

Review and discussion questions
Assignments
Notes and references
Further reading

78
78
79
79

4 The macroeconomic environment

60
68
71
77

80

Ian Worthington
Learning outcomes and key terms

80

Introduction
Economic systems
Eastern Europe: economies in transition
Politico-economic synthesis
The macroeconomy

81
82
86
88
90


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Contents

Mini case: Global economic crisis
Government and the macroeconomy: objectives
Mini case: Indicators of success
Government and the macroeconomy: policies
The role of financial institutions
International economic institutions and organisations
Synopsis
Summary of key points
Case study: Toyota UK

96
97
103
104
109
111
114
115
116

Review and discussion questions
Assignments
Notes and references

Further reading

118
118
118
119

5 The demographic, social and cultural context of
business

120

Ian Worthington
Learning outcomes and key terms

120

Introduction
The demographic environment of business
The social context
Mini case: Fit for purpose?
The cultural environment
Mini case: National cultures
Application: market segmentation
Synopsis
Summary of key points
Case study: The effects of an ageing population

121
121

126
131
133
134
136
138
138
138

Review and discussion questions
Assignments
Notes and references
Further reading

143
144
144
144

6 The resource context

145

Chris Britton
Learning outcomes and key terms

145

Introduction
People

Mini case: The minimum wage
Technology
Mini case: Call centres
Natural resources
Synopsis
Summary of key points
Case study: Resource prices

146
146
151
156
158
164
167
167
168

Review and discussion questions
Assignments

169
169

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Contents

Notes and references
Further reading

7 The legal environment

170
170
171

Diane Belfitt and Martin Taylor
Learning outcomes and key terms

171

Introduction
Classification of law
Mini case: Banking on advice
Sources of law
The legal system: the courts
Mini case: Jean-Marc Bosman – a case of foul play?
Business organisations and the law

Contract law: the essentials
Agency
Law and the consumer
Codes of practice
Synopsis
Summary of key points
Case study: The sale of goods and the Internet

172
172
173
174
176
178
179
180
183
184
190
190
191
191

Review and discussion questions
Assignments
Notes and references
Further reading

194
194

195
195

Part Three FIRMS
8 Legal structures

199

Ian Worthington
Learning outcomes and key terms

199

Introduction
Private sector organisations in the UK
Mini case: Daimler-Benz under pressure
Public sector business organisations in the UK
Business organisations in mainland Europe
The public sector in mainland Europe
Legal structure: some implications
Mini case: Big Mac gets bigger
Franchising, licensing and joint ventures
Synopsis
Summary of key points
Case study: The entrepreneurial spirit

200
200
206
209

212
216
217
222
222
225
225
226

Review and discussion questions

229


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Contents

Assignments
Notes and references
Further reading

9 Size structure of firms

229
229
230
231

Chris Britton
Learning outcomes and key terms
Introduction
The size structure of UK industry
Organisational growth
Mini case: Mergers in commercial radio
Methods of growth
Finance for growth
Small firms
Mini case: The small-firm sector
Multinationals
Synopsis
Summary of key points
Case study: Executive search

231
232
232
234
235
236
239
245
251
254

255
255
256

Review and discussion questions
Assignments
Notes and references
Further reading

260
260
260
260

10 Industrial structure

262

Chris Britton
Learning outcomes and key terms
Introduction
The structure of industry
Mini case: The life cycle model
Deindustrialisation
Mini case: Productivity
Synopsis
Summary of key points
Case study: Spending on leisure services

262

263
263
274
278
279
282
283
283

Review and discussion questions
Assignments
Notes and references
Further reading
Appendix 10.1: The Standard Industrial Classification (SIC), 2003

286
287
287
287
288

11 Government and business
Ian Worthington
Learning outcomes and key terms
Introduction
Government and business: an overview

289
289
290

290

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Contents

Regional policy
Regional aid within the European Union
Mini case: Attracting foreign inward investment
UK urban policy
Selected urban policy instruments
More recent developments in urban policy
Local government and business in the UK
Business as an influence on government
Mini case: Oiling the wheels?
Synopsis
Summary of key points
Case study: Government and business – friend or foe?

291
294
296
297
299
301
302
303
303
309
310
310

Review and discussion questions
Assignments
Notes and references
Further reading

311
312
312
312

Part Four MARKETS
12 The market system

315

Chris Britton
Learning outcomes and key terms

315

Introduction
The market mechanism
Demand
Supply
Price determination
Mini case: Branston Pickle
Price controls
Mini case: Pollution
Elasticity of demand
Elasticity of supply
The importance of the market to business
Synopsis
Summary of key points
Case study: The Common Agricultural Policy of the European Union

316
316
316
319
322
324
326
328
329
333
334
335

335
335

Review and discussion questions
Assignments
Notes and references
Further reading

338
338
339
339

13 Market structure

341

Chris Britton
Learning outcomes and key terms

341


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Contents

Introduction
Market structures – in theory and practice
Mini case: Price wars in the market for milk
Porter’s five-forces model
Measuring the degree of actual competition in the market
Mini case: Concentration
Synopsis
Summary of key points
Case study: A Porter’s five-force analysis of the market for mobile phones

342
343
348
351
356
358
360
360
361

Review and discussion questions
Assignments
Notes and references
Further reading

364
365

365
366

14 International markets and globalisation

367

Chris Britton
Learning outcomes and key terms

367

Introduction
International trade – why it takes place
Restrictions to international trade
Mini case: The World Trade talks
The European Union (EU)
The balance of payments
The history of the balance of payments in the United Kingdom
Mini case: The current account of the balance of payments
Exchange rates
The single European currency
Exchange rates and business
Globalisation
Synopsis
Summary of key points
Case study: Multinationals and FDI

368
368

369
370
371
373
377
379
382
389
390
391
397
397
398

Review and discussion questions
Assignments
Notes and references
Further reading

400
401
401
401

15 Governments and markets

402

Ian Worthington
Learning outcomes and key terms

402

Introduction
Privatisation policy
Mini case: Privatising electricity in Poland and Portugal
Competition policy
Mini case: The ice cream war hots up

403
403
409
412
415

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Government and the labour market
Synopsis
Summary of key points
Case study: The end of the block exemption

420
424
425
425

Review and discussion questions
Assignments
Notes and references
Further reading

427
427
427
428

Part Five ISSUES
16 The technological environment: e-business

431

Martyn Kendrick
Learning outcomes and key terms

431

Introduction
Business applications 1: business-to-business (B2B) commerce
Case study: Dell Computers
Business applications 2: business-to-consumer (B2C) commerce
Synopsis
Summary of key points
Case study: Amazon.com

432
434
437
439
442
442
443

Review and discussion questions
Assignments
Notes and references
Further reading

445
445
446
446

17 Corporate responsibility and the environment

447

Dean Patton
Learning outcomes and key terms

447

Introduction
Stakeholder theory
Environmental management: an issue of corporate responsibility
Business response to environmental concerns
Mini case: Environmental performance in the small firms’ sector
The interaction of business and society
Methods of encouraging environmental concern within business
Mini case: Body Shop values report
The benefits to business from the implementation of environmental
policies
Corporate responsibility without intervention?
Synopsis
Summary of key points
Case study: The Braer oil tanker disaster

448
450
451
452
454
454
455
460

Review and discussion questions

469

461
463
464
464
465


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Contents

Assignments
Notes and references
Further reading

469
469
470

18 Monitoring change

471

Ian Worthington
Learning outcomes and key terms

471

Introduction
The need to monitor change
Analysing the business environment: broad approaches
Mini case: Multinational inward investment: a PESTLE analysis
Techniques
Mini case: Scenario forecasting at Shell
Limitations to environmental analysis
Information sources
Synopsis
Summary of key points
Case study: Scanning the environment: East Midlands Electricity Plc

472
473
474
475
477
478
482
482
490
491
491

Review and discussion questions
Assignments
Notes and references
Further reading

494
494
494
494

Glossary
Index

Supporting resources
Visit www.pearsoned.co.uk/worthington to find valuable online resources
Companion Website for students
Self-test questions for every chapter
● Links to articles and resources on the Internet
● Searchable online glossary
●

For instructors
Complete, downloadable Instructor’s Manual
● Suggested answers to case study questions
● PowerPoint slides that can be downloaded and used as OHTs
● Testbank of question material
●

Also: The Companion Website provides the following features:

Search tool to help locate specific items of content
● E-mail results and profile tools to send results of quizzes to instructors
● Online help and support to assist with website usage and troubleshooting
●

For more information please contact your local Pearson Education sales representative or visit www.pearsoned.co.uk/worthington

496
513

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Contributors

Authors
Ian Worthington, BA (Hons), PhD, is a Reader in Corporate Social Responsibility in
the Department of Strategy and Management, Leicester Business School, De
Montfort University, where he specialises in business environment and greening
business. He has published both in Britain and the USA and is co-author of a recent
book on economics.
Chris Britton, BA (Hons), MSc, is Principal Lecturer in the Department of Strategy

and Management, Leicester Business School, De Montfort University. Her teaching
and research interests lie in the field of industrial economics and labour markets,
where she has contributed to several publications, including co-authorship of a
book on executive recruitment for The Economist. With Ian Worthington and Andy
Rees she has recently completed a book on Business Economics.

Contributors
Diane Belfitt, BA (Hons), Diploma in Welfare Law, has taught law at a number of
institutions, including Leicester Polytechnic, Leicester University and Charles
Keene College in Leicester. She has examined for a number of Examination Boards.
Zena Cumberpatch, BA (Hons), MSc, is Senior Lecturer at Nene College,
Northampton. Her main research interests include teaching and learning strategies
and gender issues; she has given conference papers on these topics.
Martyn Kendrick, BA (Hons), FCII, Chartered Insurance Practitioner, is Principal
Lecturer and Deputy Head in the Department of Strategy and Management,
Leicester Business School, De Montfort University. His main teaching and research
interests lie in the fields of business ethics, corporate responsibility and E-Business.
Dean Patton, BA (Hons), PhD, PGCE, is a Senior Research Fellow in the School of
Management at Southampton University. His teaching and research interests centre
on small firms and environmental policies within business. He has published in
both these areas.
Martin Taylor, LLB, LLM, FRAS I, LTM, is a Senior Lecturer in the School of Law at
De Montfort University, Leicester, where he teaches business and commercial law
on a range of undergraduate and postgraduate courses. His research interests
include online trading, consumer protection, and light pollution and nuisance. He
is a legal advisor on the latter to the Campaign for Dark Skies and the British
Astronomical Association.


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Preface to the first edition

Interest in business studies has never been greater; witness, for example, the spectacular growth in the number of business schools in British universities and
institutes of higher education over the last ten years and the rapidly increasing
number of courses at degree and sub-degree level in which business is an important, and frequently dominant, element. Accompanying this growth in
institutional provision has been an equally impressive growth in the number of
books and journals devoted to the various aspects of business – including texts on
management principles and practice, organisation theory, strategic management,
marketing, human resource management, business economics, accounting and
finance, and so on. While such contributions have invariably been welcomed and
have augmented our knowledge of the business world, the overwhelming preoccupation of scholars with the internal aspects of organisational life has tended to
mean that the external influences on business activity have received little attention. This book is an attempt to redress the balance.
It should be stated at the outset that our central aim is to provide a study of business, rather than a study for business – a text for students rather than practitioners,
although hopefully the latter will find much of the material useful and informative.
In embarking on this study, we recognise that our perspective has been conditioned
by years of teaching students on business studies courses in a variety of institutions,
as well as our own interests and specialisms, and consequently the choice of subject
matter and the ordering of material will not suit all tutors teaching on Business
Environment courses. We have, however, attempted to discuss all the mainstream
areas found on degree and HND-level courses in the large number of institutions
with which we are familiar, as well as exploring some newer topics which are beginning to receive prominence in a growing number of business schools (e.g. corporate
responsibility). In addition, whilst adopting a UK perspective, we have also drawn a
substantial amount of our material from European and international sources –

something often promised but not always delivered!
Each chapter in the book follows a common format, which includes objectives, a
case study, review questions and assignments, and a guide to further reading. A
comprehensive review of data and information sources is included in Chapter 16
(now Chapter 18) and we would strongly encourage students to make regular use of
these sources, particularly the quality newspapers and journals which contain a
wealth of information and analysis on the changing business environment.
In carrying out this study, we have received considerable help from numerous
organisations to whom we extend our thanks. These have included the Department
of Trade and Industry, the Department of the Environment, the Cabinet Office, the
Monopolies and Mergers Commission, the European Commission, the European
Information Centre (Leicester City Council), Business in the Community, and the
Confederation of British Industry.
Our gratitude also goes to the students and staff of Leicester Business School who
have unwittingly helped us to gather information and to formulate our ideas over


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Preface

more years than we would care to mention. In particular we would like to acknowledge the considerable help and encouragement given to us by Gary Cook, Andy

Rees, Professor Derrick Ball, Professor John Coyne and the staff of De Montfort
University Library. To Janice Cox, who typed the majority of the script under
demanding circumstances, goes our special thanks and admiration – she never once
complained and always met the deadlines.
We would also like to acknowledge the considerable help, support and encouragement given to us by Dr Penelope Woolf of Pitman Publishing who has retained
faith in us throughout the project. To her go our special thanks.
Our greatest debt, however, is owed to our families who have paid the highest
price in terms of lost time, boring conversations, tetchiness and a general lack of
consideration. Despite all this they have remained encouraging, supportive and
loving. It is to them that we rightly dedicate this book.

Preface to the second edition

Reactions to the first edition were very favourable and we were encouraged by this
fact. In the new edition, we have updated the facts and figures from the original
book, and added some new information and a number of new case studies which
have contemporary relevance. Each chapter now contains additional case material
in the form of mini cases which are used to highlight specific aspects of the text. As
ever we remain grateful to our colleagues and to our students for their continuing
support and encouragement, and to the large number of organisations that have
kindly provided us with material. We would also like to thank Beth Barber of
Pitman Publishing for her support and guidance.


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Preface

Preface to the third edition

While retaining the successful format of previous editions, we have taken the
opportunity to make a number of changes in the third edition, most notably in
Chapters 3 and 17. Chapter 3 now provides a more generic view of the political
environment, which is useful for cross-national comparisons; Chapter 17 looks in
more detail at the concept of corporate social responsibility. In addition, facts, figures and tables from the previous edition have been updated and there is some new
information and a number of new case studies and mini cases reflecting recent
developments in the business environment.
We continue to be grateful to our colleagues and students for their encouragement
and support and would like to thank in particular Jo Webb, Bharat, Rebecca Coleman,
Michael Edwards and Nikos Karaoularis of De Montfort University Library for their
help and advice with part of Chapter 16. Special thanks, too, must go to Magda
Robson and Sadie McClelland at Pearson Education for all their help and support; we
are very grateful and have enjoyed working with them on the project.

Preface to the fourth edition

In writing the fourth edition of the book we have been guided by the very helpful
observations of our reviewers and by our own feelings on how we could build upon
the well-received format of previous editions. Apart from updating the facts and figures to reflect recent developments, we have added a new chapter on technology
(Chapter 16), additional material in a number of other chapters and a variety of
new, topical case studies and mini cases, many of which have an international
focus. Added to this all chapters now include key terms, a summary of key learning
points and numerous weblinks which students can use to research an organisation
or issue in more detail. A complete glossary of terms and their definitions can be

found at the end of the book.
As in the past a number of individuals have contributed significantly to this project, particularly Jo Webb and Carol Keddie of De Montfort University Library and
the team at Pearson Education who guided us through the process of assembling

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this edition. To them, and to our colleagues and students who have encouraged
and supported us over the years, we would like to give our special thanks.

Preface to the fifth edition

We are delighted by the continuing success of the book and by the many kind comments we have received from the staff and students who use it. Given such a response
we have retained many of the features of previous editions as well as the general
format of the book, but have added some new material and have updated the facts
and figures since the last edition. The fifth edition now contains a new chapter on
the demographic, social and cultural context of business (Chapter 5) and the section
on globalisation has been expanded considerably. We have also made a number of

other changes to meet the very helpful comments of our reviewers.
We remain indebted to all those who have helped us over the years to develop
our understanding of the subject matter. We would like to thank the team at
Pearson Education for their continued support and advice and our colleagues at the
University, particularly Gareth Glover and Jo Webb in the library. All the help and
support we have experienced is very much appreciated.
Ian Worthington
Chris Britton
November 2005
In some instances we have been unable to trace the owners of copyright material,
and we would appreciate any information that would enable us to do so.


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Guided tour of the book

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6

Chapter 6 · The resource context

and there are more men working in skilled trades than women. Women are clearly
concentrated in clerical/selling-type occupations.
There has been a fundamental change in the nature of working life throughout
the 1980s and on into the 1990s, and this has to do with the notion of ‘flexibility’.
There has been an increase in the incidence of part-time working, for both men
and women, and an increased use of temporary contract and flexible working patterns. In 2005, 7.3 million people worked part time in the UK; this represents about
a fifth of the workforce. Approximately 3.6 million people were self-employed. It
was estimated that by 2003, 45 per cent of all employees were working part time
(see Mini case: Call centres).

The resource context
Chris Britton

Technology
Businesses carry out a variety of activities, but their main activity is to produce
goods and services to be sold on the market. In the production process inputs
are turned into outputs. Key inputs into the production process are people,
technology and natural resources.

Learning
outcomes

Having read this chapter you should be able to:
●

illustrate the importance of people, technology and natural resources to
business

●

explain what determines the quality of labour in the economy

●

demonstrate the effect of technological change on business

●

outline the main issues affecting natural resources

Technology is defined as ‘the sum of knowledge of the means and methods of producing goods and services’ (Penguin Dictionary of Economics). It is increasingly
science based, encompassing things like chemistry, physics and electronics, and
refers to the organisation of production as well as the actual techniques of production itself. Technological change leads to the introduction of new products,
changes in the methods and organisation of production, changes in the quality of
resources and products, new ways of distributing the product and new ways of storing and disseminating information. Technology has a very big impact upon the
world of business in all of these areas and has an important effect on the level and
type of investment that takes place in an economy and therefore the rate of economic growth (for a fuller discussion of technology, see Chapter 16).

Technological change
Key terms

Minimum wage
Natural resources
Negademand

Net investment
Non-renewable resources
NVQs
Occupational immobility
Occupational structure
Participation rate
People
Process innovation
Product innovation
Renewable resources
Replacement investment
Research and development

Capital
Computer-aided design
(CAD)
Derived demand
Educated workforce
Factor of production
Fixed capital
Geographical immobility
Gross investment
Immobility of labour
Information technology
Infrastructure
Innovation
Investment
Land

Resources

Social capital
Stock
Technological change
Technological
unemployment
Technology
Trade union
Wage rate
Wages
Workforce
Working capital
Working week

Learning Outcomes highlight core coverage
in terms of expected learning outcomes after
completing each chapter, to help students
focus their learning and evaluate their progress.

150

There have been massive changes in technology in the past ten years. This section
will consider a few of these and assess their impact upon business and the economy.

Information technology
Developments in information technology have had the effect of transforming existing business activities as well as creating entirely new ones, involving the collection,
handling, analysis and transmission of information. There has been a massive
increase in the demand for information, and, on the supply side, continued advances
in the miniaturisation of components. These will continue even when the
capabilities of the silicon chip have been exhausted, with the development of superconductors and optronics. There are also the advances in the computing area such as
the development of new languages and artificial intelligence.

Advances in information technology have many impacts upon business. They
are creating new products and making old products more profitable to produce

Key Terms are drawn out at the start of every
chapter and are emboldened the first time
they appear in the text to enable students to
locate information quickly. A full Glossary
appears at the end of the book.

Chapter 6 · The resource context

2 Industrial unions. They have members doing different jobs but in the same industry. Industrial unions are more common in other countries but some UK unions
come close to this type; for example, the National Union of Miners.
3 General unions. They contain members doing different jobs in different industries, like the Transport and General Workers Union.
4 White collar unions. They represent the non-manual workers like teachers, social
workers, and so forth. An example is UNISON.
web
link

For information on trade unions in the UK see www.tuc.org.uk

One of the main aims for all types of union has been to counteract, and protect their
members from, the power of the employer. As far as wages are concerned, this has
been achieved through collective bargaining. Over the years a situation has been
reached where hardly any wage contracts are negotiated individually. Rather, they are
collectively negotiated by trade unions and employers. Although there does seem to
be a trend away from collective bargaining, coinciding with the anti-trade union legislation of the 1980s and decline in the membership and power of the trade unions,
the majority of wage increases are still negotiated by trade unions.
It is argued that the activities of trade unions through collective bargaining have
served to increase the wage rate above its equilibrium level and thus cause unemployment. Figure 6.2 demonstrates this effect. Assume that the market clearing

wage rate is £W and the quantity of labour being used is L. Assume now that a
trade union enters the market that has the power to enforce a wage increase to
£W1. At this wage rate the market does not clear, the demand for labour is L1 while
the supply of labour is L2. There is therefore excess supply of labour, or unemployment. In this way trade unions are blamed for keeping wages at too high a level so
that the market cannot clear.
Figure 6.2 can be used to illustrate the argument of those who oppose the setting
of a minimum wage (see Mini case: The minimum wage). Although this argument
seems plausible enough, it is not quite as simple as it seems. There are other market

Figure 6.2

Links to relevant web pages are highlighted
throughout the text and repeated on the website
www.pearsoned.co.uk/worthington to help direct
students’ research.

The effect of trade unions on the labour market

Excess
supply
Wage rate (£)

BUEN_A01.QXD

Supply

W1
W

Demand

L1

L

L2

Quantity of labour

Colourful figures and diagrams are
used to illustrate concepts and provide
memorable learning aids.