UNIT 5

BUSINESS IN THE LOCAL ENVIRONMENT

FACTORS THAT MAY AFFECT BUSINESS

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CREATING JOBS IN THE COMMUNITY

• The business is directly and indirectly responsible for the creation of the job
• It is also responsible for training workers (skills and experience)

FACTORS THAT MAY AFFECT BUSINESS

Demography (Study of Population)

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• Business is affected by the size of population in the local area.
• On the other hand changes in business environment could affect the size of population.

Industrial tradition

•  Saudi Arabia is known by it’s Oil and gas wells, refineries and other processing and distribution plants, and the headquarters of the national oil industry.
• London is a major center of financial businesses.

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Business tends to be sited in particular area in a town.

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Infrastructure(build environment)

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Examples;

• water pipes, pumping stations ,reservoirs, and water treatment work.
• Roads , bridges ,buildings ,schools , houses , telephone networks, mobile coverage.

Size and quality of infrastructure is important and can affect the business.

Local government

• Business have to work with local authorities to get planning permission for new works.
• Local schools provides schooling for future employees.
• Local authority is responsible for enforcing consumer protection laws
• Local police and fire service protect the business property.

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THE ENVIRONMENT

The place you work can affect the environment either positively or negatively to a very large degree.

How eco-friendly your employer is when it comes to using energy to heat and cool the building, to bring products into it, and to remove waste from it has a major impact on your community and the planet.

Private Costs and benefits(company)

Externalities not related to private benefit of the company we call them Socials costs and benefits.

SOCIAL COST(PRIVATE COSTS + NEGATIVE EXTERNALITIES)

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• The plants can cause pollution
• Rush-hour traffic jams in towns and cities are full of people trying to get to work — wasting time and polluting the atmosphere.

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Social Benefits(private benefit+ positive externalities)�Social benefits are the total benefit to society from producing or consuming a good / service.

�Social benefits includes all the private benefits plus any external benefits of production / consumption.

�Example: Cycling to work. If we cycle to work,

the private benefits include:

• Lower cost of cycling rather than driving.
• Health benefits of cycling.
• Ability to avoid congestion, and quicker journey to worker.

The social benefit of �

• Lower congestion for other road users
• Lower pollution levels from a decision to cycle rather than drive
• Better health may lead to lower health care costs.
• Therefore, in this case, the social benefit of cycling may be greater than private benefit.��Social Costs (private cost +negative externalities)�Social cost is the total cost paid for by the society due to the activities of a firm. It is the sum of all the external costs and private costs.�