A2 REVISION: BUSINESS AND THE ENVIRONMENT

Question: What should I study in UNIT 1 for my A2 Business Studies exam?

Upon analysis of the past year questions from 2012 to 2015, I have grouped the topics to be studied in five major categories.

• Inflation, economic policies and exchange rate
• Entrepreneurship
• Business growth
• Business ethics, corporate social responsibility (CSR), and stakeholders' interest
• The business environment and the consideration of the different environment condition affecting strategic analysis and strategic decision-making

Question: What should understand in topic of inflation, economic policies, and exchange rate?

It appears that on many occasions, the case study may present a scenario where the government is implementing some economic policies to address the high rate of inflation faced by its country.  This will call for measures to be taken in the form of monetary policies and fiscal policies.  Fiscal policies addresses the tax rate whereas monetary policies deals with the issue of interest rate .  

In order to curb rising inflation, the case study will often state how government will increase the tax rates.  This can have a significant effects to the consumer behaviour of individual and household consumers as increased tax rate will reduce their disposable income.  Businesses which sells luxury and premium product may suffer due to declining sales (however, this may not necessary be true in all cases especially if the product has high income inelasticity in demand).

Furthermore, companies may find their retained earning reduced as they have to pay higher tax to the government.  This can have a significant impact to a companies' decisions to spend for the purpose of growth as they will limited funds internally.

Government can also increase interest rates to control high rate of inflation.  This will result in higher interest payment for any consumers who borrow money to support their spending.  As such, businesses which depends on consumers to take loan to make purchases may see their revenue fall.  Business enterprises will also be wary in seeking debt financing to support any of their strategic ventures.

For exchange rate, students need to assess the effects of the appreciation (strengthening) and depreciation (weakening) of the value of local currency.  Not all industries will have the same experience when a currency value appreciate or depreciate.  Some may suffer.  Some may benefit.  They have to be able to differentiate how the movement of the local currency value may affect the following: (1) tourist industry, (2) education, (3) exporters, (4) importers, and (5) businesses who wish to expand their operation to another country by acquiring or building assets.

Below is a list of the past-year examination questions from 2012 to 2015 with each organised into the specific categories of the above stated topics.

INFLATION, EXCHANGE RATE, AND ECONOMIC POLICIES

1. Analyse the effects on FFF of a depreciation in the exchange rate of country A's currency. [20 marks] (Farah's Fruit Farm Q1, 9707/33/O/N/15)
2. Analyse the likely impact on SC of an increase in direct taxes in country X. [10 marks] (Senbo Construction Q1,9707/33/O/N/14)
3. Analyse how the Government's policies to cut the rate of inflation are likely to affect GC. [10 marks] (Global Construction Q1, 9707/32/M/J/15) 
4. Refer to the data in Appendix B.  Evaluate how the forecast changes in country A's macroeconomic performance might influence PA's future profitability. [16 marks] (Platypus Accessories Q5, 9707/33/M/J/14)
5. Analyse the likely impact on PC's profitability of the economic changes referred to in lines 10-17 [10 marks] (Pop Cool Q1, 9707/33/O/N/13)

ENTREPRENEURSHIP

1. Analyse the strengths of MT during its early years of trading. [10 marks] (Mountain Tour Q1, 9707/32/M/J/13)
2. Analyse Leo's role in the success of LFF in its first year. [10 marks] (Leo's Fantastic Flowers Q1, 9707/33/O/N/12)

BUSINESS GROWTH

1. Analyse the benefits to GCC of being a widely diversified conglomerate. [10 marks] (Global Conglomerate Company Q1, 9707/32/M/J/12)
2. Analyse two possible effects further vertical integration could have on CAL's future success. [10 marks] (Chilled Air Limited 9707/33/M/J/13)

BUSINESS ETHICS, CSR AND STAKEHOLDERS' INTEREST

1. Analyse the benefits of corporate social responsibility (CSR) to BAS. [10 marks] (BAS Q1, 9707/31/O/N/15)
2. Discuss the importance to CCF of corporate social responsibility when aiming to maximise shareholder value. [16 marks] (Chicken Chan Farm Q4, 9707/31/M/J/15)
3. Discuss whether MF should 'always consider the interests of stakeholders as more important than profit'. [14 marks] (Mbella Farm Q5, 9707/32/M/J/5)
4. Discuss the extent to which LF should consider corporate social responsibility in its decision making. [16 marks] (9707/33/M/J/15)
5. Analyse the likely benefits to RSC of operating ethically towards its stakeholders. [10 marks] (Ramos Sugar Corporation Q1,9707/31/M/J/14)
6. Discuss whether GC should be more accountable to its stakeholders by reporting on its CSR activities in its Annual Report. [16 marks] (Global Construction, 9707/32/M/J/14)

THE BUSINESS ENVIRONMENT

1. Analyse the likely impact on JCL of increased competitive rivalry. [10 marks] (Johnson Couriers and Logistics Q1, 9707/32/O/N/13)
2. Analyse the likely impact of CC of increased competitive rivalry. [10 marks] (Cloud Catering Q1, 9707/32/M/J/13)

OTHERS

1. Using Appendix 1, Appendix 2, and other information, recommend to the Board of FFF whether they should choose growth strategy 1 or growth strategy 2. [20 marks] (Farah's Fruit Farm Q6, 9707/33/O/N/15)
2. Evaluate the usefulness of SWOT and PEST techniques to CCF's directors when undertaking strategic analysis before deciding on the future direction of the business. [20 marks] (Chan Chicken Farm Q6, 9707/31/M/J/15)
3. Evaluate whether the data in Appendix D is sufficient to enable LF to develop an effective strategic plan for the business. [20 marks] (LemonFizz Q7, 9707/33/M/J/15)
4. Evaluate the usefulness of the information in Appendix 1 and Appendix 2 to TC's strategic analysis. [20 marks] (Timtang Corporation Q6, 9707/32/O/N/14)