THE BUSINESS
ENVIRONMENT
LO3 - Know the impact of the economic
environment on businesses
Learning Outcome (LO)
The learner will:
1
2
Know the range of
different businesses
and their ownership
Understand how
businesses are
organised to achieve
their purpose
Pass - The assessment criteria are
the pass requirements for this unit.
The learner can:
P1
Describe the type of business,
purpose and ownership of two
contrasting businesses
P2
Describe the different
stakeholders who influence
the purpose of two
contrasting businesses
P3
Describe how two businesses
are organised
P4
Explain how their style of
organisation helps them to
fulfil their purposes
3
Know the impact of
the economic
environment on
businesses
P5
Describe the influence of two
contrasting economic
environments on business
activities within a selected
organisation
4
Know how political,
legal and social
factors impact on
business
P6
Describe how political, legal
and social factors are
impacting upon the business
activities of the selected
organisations and their
stakeholders
Scenario
Criteria
Tasks
1
2
3
4
5
Merit - For merit the
evidence must show that, in
addition to the pass criteria,
the learner is able to:
Distinction - For distinction
the evidence must show that, in
addition to the pass and merit
criteria, the learner is able to:
M1
Analyse the type of
business, purpose
and ownership of two
contrasting
businesses
D1
Evaluate the effect of a
selected business
changing its ownership
status
M2
Analyse the impact of
changes in demand
and supply on a
selected business
D2
Evaluate to what extent a
selected business is
likely to be affected by
changes in the economic
environment
Assessment





P5 - Learners could write a report for the management team of an
organisation. They should describe the influence of two contrasting
economic environments upon business activities within the selected
organisation.
M2 - Learners will need to go on to consider changes in demand and
supply on the business, and analyse the impact of those changes.
D2 - Learners will need to evaluate the extent to which a business is
likely to be affected by changes in the economic environment.
In earlier learning outcomes, learners were required to focus on two
businesses. In learning outcome 3 they just need to be concerned with
one. Learners need to understand that any business does not exist in
isolation but is affected by a range of possible economic factors.
They could undertake a group task where the key economic variables
that can affect a business are identified and researched. Learners should
then use the data that they have obtained and look for changes in the
behaviour of businesses using examples from newspapers or news
websites. Each group could then be asked to present their findings

Scenario
Criteria
Tasks
1
2
3
4
5
Assessment
Focusing on ONE of the businesses selected during LO2, you need to provide evidence for
the following 5 tasks within this case study:
1.
Economic Environments
2.
Business Demands
3.
Supply for the Business
4.
Comparing Economic Environments
5.
Evaluate Economic Environments
Impact on business
of from
changes
Focusing on one of the businesses
selected
theintwo selected during ao2
Importance of Stability
the economic environment
Growth, Recession, Ripple Effect
Levels of Inflation
Availability and Cost of Credit
Labour
Changes in Government Policy
Task 1 (P5.1) – Focusing on a business, describe the influence of two contrasting economic
environments that impact a business, based on:
Scenario
Criteria
Tasks

Ownership of Business

Business Operations - Functionality of Businesses Activities

Movement of Capital
1
2
3
4
5
Assessment
The demands placed on a business influence (dictate) the performance
of the business by acting on the needs of the customers: - Click on the
links below for additional information
◦ Influenced by affordability
◦ Competitive Pressures – such as emerging markets from abroad or
new entrants to markets (e.g. Supermarkets selling electronics or
clothing)
◦ Availability of Substitutes
◦ Level of Gross Domestic Product (GDP)
◦ Needs and Aspirations of Consumers
Task 2 - P5.2 – Based on the two contrasting economic environments
selected describe the influence of customer demand for the
product/service – focusing on:
Affordability
Scenario
Criteria
Tasks
Competitive
Pressures
1
2
3
Substitutes
4
5
Assessment
GDP
Needs / Aspirations of
the Customer
Supplying a service/products to the consumers from the business
plays a big part in business supply chain - Click on the links below
for additional information
◦ Influenced by availability of Raw Materials and Labour
◦ Logistics
◦ Competition for Raw Materials – such as the cost of electricity,
sometimes related to oil/gas etc
◦ Ability to Produce a Profit
◦ Government Support – such as limitations on taxation,
importing and exporting of products/services
◦ But these wax and wane with the economy. Elasticity of supply is
how companies react to the change in conditions.
Task 3 (P5.3) – Based on the two contrasting economic
environments selected describe the influence of supplying the
product/service to the business and customers – focusing on: Logistics
Scenario
Availability of Raw
Materials and Labour
Criteria
Tasks
1
2
3
Competition of Raw
Materials and Labour
4
5
Assessment
Profitability
Government
Support
Task 4 - M2.1 – Based on the TWO contrasting economic
environments selected analyse and compare the impact of changes
in demand and supply on a selected business.
Development of Internal Structures
Functional Areas
◦ Consider the market they are in, what they exist for and the
size of the business
 Consider the structure - Tall, wide, small, big departments ...
 Strategic plans for the future to achieve the aims of the
business
◦ Inter Dependencies of the departments
 Consider the departments your organisation has, why they
exist and what they perform – how are they affected by the
departments that exist ()
 Changes in the Supply Chains of Operations
Scenario
Criteria
Tasks
1
2
3
4
5
Assessment

Business Activities – How the business operates (dealing with suppliers

Business Strategy – business changed and impact it has on the business

Internal Structures – organisation structure
/ customers)
◦ has it forced your company to downsize, change its ethos, change its
plans or way of dealing (like going purely online)
operations
◦ Would they  hire more or less? / retrain or lay people off?
◦ Would they find a different way of doing things like training staff to do
multiple jobs or cut our one section of their company altogether?



Functional Activities – department function / link together (how would
the change)
Stakeholders – change in the focus and/or management of the business
Task 5 - D2.1 – Evaluate to what extent a selected business is
likely to be affected by changes in the economic environment
Business
Activities
Scenario
Criteria
Business
Strategy
Tasks
1
2
3
Internal
Structures
4
5
Assessment
Functional
Activities
Stakeholders
Assessment Outcome – P5
Task 1 - P5.1 – Focusing on a business, describe the influence of two
contrasting economic environments that impact a business, based on:
Ownership of Business
Business Operations (Functionality
of the Business Activities)
Movement of Capital
Task 2 - P5.2 – Based on the two contrasting economic environments
selected describe the influence of customer demand for the product/service
– focusing on:
Competitive
Pressures
Affordability
Substitutes
GDP
Needs / Aspirations of the
Customer
Task 3 - P5.3 – Based on the two contrasting economic environments
selected describe the influence of supplying the product/service to the
business and customers – focusing on:
Availability of
Raw Materials
Scenario
Criteria
Competition of
Raw Materials
Tasks
1
2
Logistics
3
4
5
Availability
of Labour
Assessment
Competition
of Labour
Profitably
Government
Support
Assessment Outcome – M2
Task 4 - M2.1 – Based on the TWO contrasting economic
environments selected analyse and compare the impact of changes
in demand and supply on a selected business
Development of Internal Structures
Functional Areas
Assessment Outcome – D2

Task 5 - D2.1 – Evaluate to what extent a selected business is
likely to be affected by changes in the economic environment
Business
Activities
Scenario
Criteria
Business
Strategy
Tasks
1
2
3
Internal
Structures
4
5
Assessment
Functional
Activities
Stakeholders