AO1 part 2

Question 1

Internal environment

Answer 1

factors from within the environment

Question 2

External environment

Answer 2

those thing over which the business has little to no control over
divided into macro and operating environment

Question 3

operating environment

Answer 3

outside factors which the business directly interacts in the course of conducting its business

Question 4

macro environment

Answer 4

made up of broad factors in the economy and society within which the business operates

Question 5

Managers (driving)

Answer 5

Have the responsibility of operating a profitable and successful business
managers will push for changers that lead to better outcomes and more efficient outcomes and more efficient achievement of business objectives
the type of change will then influence the management skills and styles needed

Question 6

Employees (driving)

Answer 6

employees within and innovative business are likely to recommend changes to the business that may be more effective

Question 7

competitors (driving)

Answer 7

Businesses need to monitor their competition and determine what effect they may be having in the market place
knowledge of such changes enables a business to make modifications to its existing business activities and to plan new ones

Question 8

legislation (driving)

Answer 8

when new legislation is passed, businesses must comply with new laws, meaning that a business might have to undergo change in order to follow new regulations

Question 9

pursuit of profit (driving)

Answer 9

changes may need to be made in order to chase higher profits

Question 10

Reduction of costs (driving)

Answer 10

the higher the costs–> the lower the profit (even if higher costs are passed on consumers may leave the market if price is to high)

Question 11

Globalization (driving)

Answer 11

movements across nations of trade, investment, technology, finance and labour brought about by the removal of barriers

Question 12

technology (driving)

Answer 12

technology continually changes, this means that businesses need to change in order to continue to grow and stay up to date

Question 13

innovation (driving)

Answer 13

a process that occurs when something already established is approved on
coming up with a better way or product will result in the need for change within a business

Question 14

Niche market (driving)

Answer 14

a narrowly selected market segment within a larger market

Question 15

societal attitudes (driving)

Answer 15

businesses tend to be influenced by attitudes and values of society
businesses will tend to change if customers attitudes towards certain products changes

Question 16

Restraining forces

Answer 16

those forces that work against the change

Question 17

managers (restraining)

Answer 17

some decisions by the managers may not be in the best interest of the business, delaying or putting of the change
changes that threaten to eliminate jobs (especially those of the managers) usually face strong resistance

Question 18

employees (restraining)

Answer 18

may resist change if it is not in their favour

changes tend to impact the level and type of staffing (negative changes–> staff dissatisfaction)

Question 19

Time (restraining)

Answer 19

may restraint the ability of the business to change, with some businesses being unable to change completely

Question 20

Organisational inertia (restraining)

Answer 20

refers to the unenthusiastic response from managers to proposed changes

Question 21

legislation (restraining)

Answer 21

restrictions on certain operational practices and procedures

Question 22

financial considerations (restraining)

Answer 22

costs and revenues issues for a business that may arise with a given change change may restrain it

• purchasing new equipment
• redundancy payments
• restraining the workforce
• recognizing plant layout

Question 23

competitive advantage

Answer 23

occurs when a firm , industry or economy has a lower cost price structure than its rivals
in this situation goods and services can be sold more cheaply, undercutting competitors, and expanding domestic and foreign sales
the concept can also be extended to product quality and range and flexibility in adapting new trends in the market

Question 24

Entry of new competitors

Answer 24

in profitable industries, more businesses will be inclined to open up operations, existing businesses will need to survive
some existing businesses may be able to survive if they have barriers in place: economies of scale, patents, sportive government policy, high startup costs
businesses must always be prepared to take on new competitors

Question 25

threat of substitutes

Answer 25

substitutes=similar products
in markets with substitutes available, consumers will tend to consume the good/service in response to price due to strong differences between them
in these markets businesses may fail to establish a customer base

Question 26

bargaining power of suppliers

Answer 26

how easy is it for suppliers to drive up a price of the item they supply to the business
driven by the number of suppliers, uniqueness of product, relative size and strength of the supplier and the cost of switching from suppliers

Question 27

Bargaining power of buyers

Answer 27

businesses need to consider how their buyers or consumers will change due to price
they need to identify how easy it is for buyers to drive prices down
depends on the size of the buyers and how many buyers in the market, all relative to sellers

Question 28

rivalry amongst existing competitors

Answer 28

number and capability of competitors in the market place

homogeneous businesses–> low attractiveness

Question 29

Generic strategies approach

Answer 29

two categories of competitive advantage

Question 30

cost advantage

Answer 30

reducing or alternating the cost of the business

Question 31

differentiation strategy

Answer 31

differentiating their product or service from others in the market

Question 32

product differentiation

Answer 32

use of brand names and advertising to establish differences between substitutional products

Question 33

lower cost strategies

Answer 33

businesses seek to become the business with the lower costs in the industry

• use assets efficently
• lower costs of operating
• control the supply chain

Question 34

differentiation strategies

Answer 34

uniquely desirable product 
good research and development to ensure that consumers know about differentiation 
-make product more desirable 
-extend warranties 
-different brands

Question 35

steps to generic strategies

Answer 35

1) carry out a SWOT analysis
2) use the five force analysis to understand the nature of the industry of the business sector
3) compare the SWOT analysis to the five force analysis
- reduce or manage supplier power
- reduce or manager customer power
- number one for competitive rivalry
- reduce or eliminate the threat of substitutes
- reduce or eliminate the threat of new entry