Practise explaining business activity, added value and opportunity cost and analysing how entrepreneurial qualities, planning and environmental change affect success or failure.
Analyse one way that a business may be affected by a dynamic business environment.
Analyse one way that a business may be affected by a dynamic business environment.
Indicative content
Responses may include:
AO1 Knowledge and understanding
Effects of a dynamic business environment include:
- increased / decreased demand.
- increased / decreased costs.
- increased / decreased revenue.
- increased / decreased profit.
- increased / decreased competition.
- increased / decreased market share.
- increased uncertainty / instability.
AO2 Application
- changing customer needs for products.
- technology advances / production possibilities.
- government policy e.g. treatment of employees, type of product, ethical behaviour.
- competitor actions e.g. pricing / promotion / product development.
- external environment - inflation, interest rates.
- difficult to forecast future inventory needs.
- must change and adapt.
4
AO3 Analysis
- changing customer needs might affect demand leading to innovation, product development, extension strategies and altering production.
- regular market research needed to adapt to changing demand therefore increasing costs and possibly profit.
- technological changes e.g. availability and speed of the internet can make it easier to find suppliers and sell across the world.
- new policies can change business behaviour which may alter objectives and production methods.
- economic conditions affect spending power and choice of products chosen e.g. needs vs luxuries / cheap vs expensive.
- increase or decrease in competition may alter pricing strategy and therefore profit.
- managers will need to change some of their decisions about inputs, the transformation process or the outputs they produce.
- they might switch production to another country;
become more capital intensive;
sell products to other countries.
- changes may have cost implications for the business and affect revenue and profits.
Accept all valid responses.