The Dynamic Nature of Business (AQA GCSE Business)
Revision Note
Written by: Lisa Eades
Reviewed by: Steve Vorster
Businesses & Change
The external environment in which businesses operate is constantly changing
Changes in technology, consumer needs, wants and expectations, as well as the economic and legal climate, can all have an impact on demand for products and the way a business operates
New business ideas emerge as entrepreneurs recognise opportunities created by changes in the market
Change can also mean that demand for the products a business sells falls
Successful businesses can identify opportunities, plan for changes that could have a negative effect, and develop innovative solutions that meet the changing needs of customers
Diagram: Aspects of the Dynamic Business Environment
Demand and business operations are affected by technological developments, changes in the economy and legal framework, environmental expectations of consumers and obsolescence
Changes in technology
Advances in technology can create new opportunities for businesses to develop innovative products and services
E.g. The emergence of smartphones and social media platforms created new opportunities for businesses to reach customers through mobile apps and digital marketing
Changes in the environmental expectations of consumers
Consumer demand for environmentally responsible products has changed over time, with more and more people making green buying choices
This has created opportunities for businesses to develop new products that are less damaging to the natural world
E.g. The growing demand for plant-based food products has led to the emergence of new businesses in the food industry, such as Impossible Foods
Products and services becoming obsolete
Products and services can become outdated due to changes in technology or changes in consumer demand
This can create opportunities for businesses to develop new products and services that meet the needs of consumers in new and innovative ways
E.g. The decline of physical media like CDs and DVDs created opportunities for businesses like Netflix and Spotify to develop digital streaming services
Changes in the economic situation
Factors such as changing interest rates, inflation, the level of unemployment and economic growth (or contraction) can affect demand for a businesses products
E.g. a business selling products that consumers normally purchase using credit, such as electrical consumer durables, is likely to face a fall in demand when interest rates rise
Changes in law
The introduction or amendment of laws and regulations can change consumer behaviour and require businesses to make changes to their operations
E.g. the introduction of legislation banning smoking in indoor spaces in 2007 meant that many hospitality businesses in the UK invested in outdoor spaces to accommodate smokers
Examiner Tips and Tricks
External factors are considered in greater depth later in the course. At this stage, understanding that entrepreneurs face external challenges over which they have no control is an important factor in the level of risk they face in starting up a business.
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