EXPLORING BUSINESS
The Effects of the Environment on a Business
MARY BUNCE
,Contents
P4 & M3 - Discuss the internal, external and competitive environment on a given organisation and
assess the effects of the business environment on a given organisation..........................................2
P5 - Select a variety of techniques to undertake a situational analysis of a given organisation........7
D2 - Evaluate the extent to which the business environment affects a given business, using a
variety of situational analysis techniques........................................................................................10
P6 - Explore how the market structure and influences on supply and demand affect the pricing and
output decisions for a given business..............................................................................................11
M4 - Assess how a given business has responded to changes in the market...................................14
D3 - Evaluate how changes in the market have impacted on a given business and how this
business may react to future changes.............................................................................................15
1
, P4 & M3 - Discuss the internal, external and competitive
environment on a given organisation and assess the
effects of the business environment on a given
organisation.
External
Political:
There are many political factors that can provide opportunities and threats for the business
Zara, for example Brexit. Brexit could potentially affect Zara because Britain currently has a
free trade agreement with the EU, however once we leave, businesses may have to pay to
import products, Zara’s headquarters are based in Spain, therefore this means the company
will potentially have to pay to import products to the UK, and to generate a profit, the
business will most likely increase the prices of the products, this will probably be a threat for
Zara because having more expensive products may deter people from shopping at their
store and could influence people to shop at their competitors store. Brexit is currently
causing the currency value to depreciate, this will have a major impact on the business
because it means that the cost of importing products/goods into the country will become
more expensive. This will affect Zara because the business will then have to increase their
product prices to maintain profits, which could potentially lead to a decrease in customers
as higher prices can deter people from spending, especially if they do not believe the quality
matches the price. However, Zara is an international business, so although their profits may
decrease in their UK market, they still have other markets worldwide which are always
creating new profits and opportunities.
Economic:
Economic factors that affect Zara include the Fiscal Policy and the Monetary Policy. The
Fiscal policy is how the Government influence the economy by manipulating Government
spending and taxation. This affects Zara because the Fiscal Policy can dramatically affect
people’s income and spending; higher taxation can mean that people will have less
disposable income, and this means that people will be more conscious as to what they are
spending their money on and will be less likely to spend money on things that are not
necessary. Furthermore, the Monetary Policy is how the Bank of England creates economic
growth and price stability by changing interest rates. The Monetary Policy also affects the
exchange rates and therefore this has an impact on the prices of importing and exporting
goods. This influences Zara because the business is based in Spain; Britain currently has a
deal with EU in which 80% of our imports are tariff free, however, once we leave the EU the
price of importing goods into Britain may become more expensive for the business, which
could affect the businesses profits.
Social:
Social factors that affect Zara include saving and spending. Statistics show that 2017 had the
lowest rate of saving since records were first collected in 1963, with people saving an
average of only 4.9% of their income each year. It is predicted that by 2021, people will be in
debt by 47% of their income. This effects Zara because little to no saving is fuelling
2
The Effects of the Environment on a Business
MARY BUNCE
,Contents
P4 & M3 - Discuss the internal, external and competitive environment on a given organisation and
assess the effects of the business environment on a given organisation..........................................2
P5 - Select a variety of techniques to undertake a situational analysis of a given organisation........7
D2 - Evaluate the extent to which the business environment affects a given business, using a
variety of situational analysis techniques........................................................................................10
P6 - Explore how the market structure and influences on supply and demand affect the pricing and
output decisions for a given business..............................................................................................11
M4 - Assess how a given business has responded to changes in the market...................................14
D3 - Evaluate how changes in the market have impacted on a given business and how this
business may react to future changes.............................................................................................15
1
, P4 & M3 - Discuss the internal, external and competitive
environment on a given organisation and assess the
effects of the business environment on a given
organisation.
External
Political:
There are many political factors that can provide opportunities and threats for the business
Zara, for example Brexit. Brexit could potentially affect Zara because Britain currently has a
free trade agreement with the EU, however once we leave, businesses may have to pay to
import products, Zara’s headquarters are based in Spain, therefore this means the company
will potentially have to pay to import products to the UK, and to generate a profit, the
business will most likely increase the prices of the products, this will probably be a threat for
Zara because having more expensive products may deter people from shopping at their
store and could influence people to shop at their competitors store. Brexit is currently
causing the currency value to depreciate, this will have a major impact on the business
because it means that the cost of importing products/goods into the country will become
more expensive. This will affect Zara because the business will then have to increase their
product prices to maintain profits, which could potentially lead to a decrease in customers
as higher prices can deter people from spending, especially if they do not believe the quality
matches the price. However, Zara is an international business, so although their profits may
decrease in their UK market, they still have other markets worldwide which are always
creating new profits and opportunities.
Economic:
Economic factors that affect Zara include the Fiscal Policy and the Monetary Policy. The
Fiscal policy is how the Government influence the economy by manipulating Government
spending and taxation. This affects Zara because the Fiscal Policy can dramatically affect
people’s income and spending; higher taxation can mean that people will have less
disposable income, and this means that people will be more conscious as to what they are
spending their money on and will be less likely to spend money on things that are not
necessary. Furthermore, the Monetary Policy is how the Bank of England creates economic
growth and price stability by changing interest rates. The Monetary Policy also affects the
exchange rates and therefore this has an impact on the prices of importing and exporting
goods. This influences Zara because the business is based in Spain; Britain currently has a
deal with EU in which 80% of our imports are tariff free, however, once we leave the EU the
price of importing goods into Britain may become more expensive for the business, which
could affect the businesses profits.
Social:
Social factors that affect Zara include saving and spending. Statistics show that 2017 had the
lowest rate of saving since records were first collected in 1963, with people saving an
average of only 4.9% of their income each year. It is predicted that by 2021, people will be in
debt by 47% of their income. This effects Zara because little to no saving is fuelling
2
