Question 1

How do interest rates affect businesses?

Accepted Answer

Interest rates influence the cost of borrowing and consumer spending. When rates rise, loans become more expensive, so businesses may delay investment, and consumers have less disposable income, reducing demand for non-essential goods. Conversely, low rates encourage borrowing and spending. Businesses with high debt are particularly vulnerable to rate increases.

Question 2

What is the difference between a legal influence and an ethical influence?

Accepted Answer

Legal influences are laws that businesses must follow, such as the National Minimum Wage or the Data Protection Act. Ethical influences are voluntary standards based on moral principles, like using fair trade suppliers or reducing carbon emissions. While breaking a law can lead to fines or prosecution, unethical behaviour may damage reputation and customer trust even if it's legal.

Question 3

How does technology create opportunities for small businesses?

Accepted Answer

Technology levels the playing field for small businesses. For example, e-commerce platforms like Shopify allow them to sell globally without a physical store. Social media provides low-cost marketing to target specific audiences. Cloud-based software reduces IT costs, and automation can streamline operations, helping small firms compete with larger rivals.

Question 4

Why do businesses need to respond to social changes?

Accepted Answer

Social changes, such as growing environmental awareness or shifting demographics, alter consumer preferences and expectations. A business that ignores these trends risks losing customers to competitors that align with new values. For instance, the rise in veganism has led many food companies to offer plant-based options. Adapting to social changes can also enhance brand loyalty and attract new market segments.

Question 5

What is the impact of competition on a business's pricing strategy?

Accepted Answer

In a competitive market, businesses often use competitive pricing to attract customers, setting prices similar to rivals. If a business has a unique product (e.g., Apple), it can charge a premium. High competition may force price wars, reducing profit margins. Businesses may also use non-price competition, like better quality or customer service, to justify higher prices.

Question 6

How can a business prepare for changes in the external environment?

Accepted Answer

Businesses can conduct environmental analysis using tools like PESTLE (Political, Economic, Social, Technological, Legal, Environmental) to identify potential changes. They can build flexibility into their operations, such as maintaining cash reserves for economic downturns, diversifying suppliers to reduce risk, and investing in R&D to stay ahead of technology trends. Regular monitoring and contingency planning are key.

Influences on business

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Related Topics in WJEC GCSE Business

Business activity

Business operations

Finance

Human resources

How to Revise Influences on business — WJEC GCSE Business

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