Competitive environment - AQAUncertainty and risks
The competitive environment relates to how a business is affected by its competition and how it adapts its businesses practices to enable it to compete effectively.
A business will face uncertainty when a lack of information makes an outcome difficult to predict.
Businesses can face uncertainty around:
entering new markets such as online or international markets
economic uncertainty such as recession
competitor actions such as price cuts, new products, takeoverA takeover occurs when an existing business expands by buying more than half the shares of another business. and merger When two or more businesses join together to operate as one business.
changes in relationships with trade blocs such as the European Union, and the impact on international trade
developments in technology
social changes such as tastes and fashions
Risk is the possibility of something going wrong, for businesses this will usually lead to lower sales and reduced profits.
Businesses face many risks. These can be internal (inside the business), or external (outside the business).
Internal risks include:
industrial action by employees such as going on strike
fire or theft, including data theft through hackedIf a computer has been hacked, someone has gained unauthorised access to it.
bad publicity from poor treatment of employees
losing good employees to competitors
External risks include:
new competitors
natural disasters
new laws
How businesses can minimise risk
In order to minimise risk, businesses can do a number of things:
write a business planA document that sets out the future intentions of the business.
invest in training for employees
use experts and ConsultantA person who provides expert advice on a particular topic.
