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    6 External influences on business activity


    • Scenario Pack

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      Hello, my family is the founder of the Fizzi Nation empire. We are a large manufacturing business that produces soft drinks. Our Headquarters are in the UK and we have factories in other parts of the world. This means we employ many people in the locations they have factories in. External influences are factors that can influence our business but are outside our control. For example, the governments in each country we operate in have specific economic policies and these have a big impact on businesses like ours. We would like to appoint you to help identify how a range of external factors might affect us, and how we should respond and plan for them. Your task is to help us decide how to respond to the effects of a range of given scenarios, which are outside our control.

      The government have increased the rate of corporation tax. This means less profit after tax for us, so less money to put back into our business for growth. This means our current and potential shareholders might be discouraged from further investment with us. What should we do?

      One of the countries we operate in has gone into recession and their economy is shrinking. Unemployment is rising and consumer demand is falling meaning so are our profits. What should we do?

      Pressure groups for the environment are putting pressure on governments to pass laws which means businesses like ours have to reduce the amount of waste we create and recycle more of our packaging. Not all of our packaging can be recycled. What should we do?

      The government increased VAT (Value Added Tax). This has meant that the price of our drinks has gone up which could lead to lower sales. What should we do?

      There is increasing stakeholder conflict between profits and ethics in a number of countries where large businesses like ours are operating. This could harm us in the long term. The issues which have been raised include pollution, labour and fair trade What should we do?

      Interest rates have been increased to help manage inflation. This has meant borrowing has become more expensive for our expansion plans. Consumers have less disposable income as loans on houses increase. Please help us with our decision making, what should we do?

      Tariffs have increased making it more expensive for us to import the ingredients we need. It also means we pay an increase in tariffs on the soft drinks that we export to other countries. This could reduce our sales, as drinks manufacturers in the host country might become more attractive, and our production costs become more expensive and our price increases. What should we do?

      A number of countries have added a levy to soft drinks with lots of sugar in them to discourage unhealthy eating. This is affecting beverage manufacturers like us as this additional tax increases the cost of making some of our soft drinks. What should we do?

      A new soft drink’s manufacturer has entered the market due to globalisation opportunities What should we do?

      There is a shortage of sugar beet due to changing weather patterns. This has increased the price of sugar, one of our essential ingredients What should we do?


    • Quiz

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    • Test Maker is an online service that makes it easy for you to create high-quality, customised test papers for your learners using Cambridge questions.

      Test Maker is currently available for Cambridge IGCSE Business Studies 0450, but although the grading differs for Cambridge IGCSE (9-1) syllabuses, the questions are valid for equivalent Cambridge IGCSE (9-1) and O Level syllabuses.

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    • Topic questions

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