Unit 207 – Understanding the Business Environment

Aim of this unit

This unit is to help the learner understand the business environment and how it impacts opportunities for learning and work.

Section One

  1. Understand that there are different types of business

There are different types of businesses in the world, and each one has its own unique set of strengths and weaknesses. For example, a startup might have more flexibility and creativity but might also be less stable than a well-established company. It’s important to know what type of business you’re dealing with so that you can understand its limitations and capitalize on its strengths.

There are four main types of businesses:

  1. Sole proprietorships
  2. Partnerships
  3. Corporations
  4. Limited liability companies (LLCs)

Sole proprietorships are the simplest and most common type of business. They’re typically owned and operated by a single individual, and they’re not required to have any formal structure or organization.

Partnerships are similar to sole proprietorships, but they involve two or more people who share ownership of the business.

Corporations are more complex and are typically owned by shareholders.

LLCs are a type of business that offers limited liability protection to its owners.

When you’re starting a business, it’s important to choose the right type of business for your needs. The type of business you choose will impact a number of factors, including liability, taxes, and funding. Make sure you do your research so that you can make an informed decision.

1.1 Define the private sector and give examples of types of private sector businesses

Definition: the part of the national economy that is not under direct state control.

The private sector refers to businesses that are run by individuals and companies rather than the Government. Most organizations within the private sector are also focused on making a profit.

Businesses in the private sector can range from sole traders to large multinational companies.

Examples include:

  • Sole proprietors: Designers, Hairdressers, Gardeners, Carpenters, Plumbers,
  • Partnerships: Dentistry, Legal, Accounting, Tax, Estate Agents, doctor’s surgeries
  • Small and Medium-sized Businesses: Retail, Hospitality, Food,
  • Large Multinationals: Apple, Tesla, McDonald’s, Disney, Netflix, Proctor & Gamble, PepsiCo, Sony, Microsoft
  • Professional or Trade Associations: Chartered Institute of Marketing, DVLA
  • Other: private schools, colleges, and hospitals
The various types of business structures that define how your business is set up
The various types of business structures that define how your business is set up

1.2 Define the public sector and give examples of the public sector organisations

Definition: the part of the economy that is controlled by the state.

The public sector refers to businesses that are owned by the local or national government rather than individuals. They very often provide services to the general public.

Examples typically include:

  • Education (Schools, Libraries)
  • Electricity
  • Emergency Services
  • Healthcare (NHS, Hospitals, Clinics)
  • Law Enforcement (Courts, Police, Magistrates)
  • Parliament (Political Parties)
  • Public Transport (Buses, Taxis, Community vehicles)
  • Social Services
  • Inland Revenue
  • Environment Agency

An example of the public sector includes the NHS/hospitals because they are not owned by individuals and are run by the government, and Taxpayers.

Other examples of public sector organisations include schools, councils, police, and leisure centres.

1.3 Define the voluntary sector and give examples of the voluntary sector organisations

Definition: is the undertaking of social activity by an organisation that is non-governmental or for profit. Sometimes called the third sector.

The voluntary sector refers to not-for-profit organisations such as charities or trusts. The aims of voluntary sector organisations are to preserve, protect and promote their cause. Normally comprised of skilled workers, and volunteers and usually have multiple stakeholders.

Examples include:

  • Helping the homeless
  • Supporting families of medical patients
  • Cancer research
  • RSPCA, Oxfam, Relate, Help for Hearos, Mind

1.4 Explain the possible advantages and disadvantages of working in one of the following sectors: private, public, or voluntary

Working in the private, public, or voluntary sector can have its advantages and disadvantages. Below we look at a selection of pros and cons for each sector.

Private sector


  • Variety of the workload.
  • Work for more than one client.
  • Operate from many locations.
  • Can work from home some or all of the time.
  • Better remuneration.
  • More agile to change.
  • More challenging and engaging work.
  • Financial bonuses.
  • Unlimited earnings are possible.


  • May have longer working hours and lower pay.
  • Low job security due to competitors.
  • Short-term contracts.
  • Poor work-life balance.
  • More stress and mental health issues to deal with.

Public sector


  • Set routine.
  • Flexible hours.
  • Higher job security – less likely to get fired.
  • Better pension prospects.
  • Normally offer better health packages including optical and dental care.
  • Voluntary overtime where available.
  • Better promotion opportunities.
  • Better work-life balance.


  • May end up doing the same thing every day and therefore, the job becomes boring.
  • Poor working culture.
  • Zero contract hours.
  • Slow change management structure.
  • Salaries are on par with the private sector but have less chance of an increase over the same period.
  • No financial bonuses.
  • Harder to be promoted outside of existing roles.
  • Remuneration follows legislative changes.
  • Bureaucracy – innovation, approval, funding, red tape, etc.

Voluntary sector


  • Helping others is considered a self-rewarding job.
  • Flexible hours to suit.
  • Potential to be paid more than being in either public or private sector.
  • Collectively working towards a common goal.
  • Exposure to lots of experience, opportunities, and skills.


  • Low or zero pay and longer working hours.
  • Time-consuming.
  • No sense of achievement – ie. A charity helping homelessness and promoting food banks but unfortunately, the problem may remain.
  • Constant funding issues.
  • Legislative and compliance issues.
Seven key functions within a business
Seven key functions within a business

Section Two

2. Understand how businesses function

It’s no secret that in order to be successful in business, you need to have a good understanding of how businesses function. But what many people don’t realize is that this applies not just to those who are starting their own businesses, but also to those who are working for someone else.

In order to be an asset to any business, you need to know what makes it tick – and that includes understanding the basics of accounting and financial analysis.

The most important thing to remember is that businesses are in the business of making money. They do this by selling products or services and generating revenue. But in order to make money, they need to spend money as well – on things like inventory, wages, and overhead costs. All of these factors need to be taken into account when assessing a business’s financial health.

One of the best ways to learn about how businesses function is to work for one. If you’re currently employed, take some time to understand how your company makes money and what its financial goals are.

This will not only give you a better appreciation for your job, but it will also give you insight into how you can be more helpful to the business. If you’re not currently employed, consider volunteering with a local organization or starting your own business.

2.1 Describe the following business functions:
a. Operations
b. People
c. Information
d. Research and development
e. Finance


Operations involve all of the activities that a company does in order to produce its goods and services. It encompasses everything from research and development, to production, marketing, and sales. Operations are responsible for ensuring that the company’s products and services are delivered on time and at the right price.

Operations are a critical part of any business, and it is important to ensure that they are run smoothly and efficiently. There are several different ways to optimize operations, and it is important to tailor these methods to the company’s specific needs. In general, however, there are a few key areas that all businesses should focus on:

-Cost reduction: One of the most important goals of operations is to reduce costs. This can be accomplished through a variety of means, such as streamlining production processes, reducing waste, and negotiating better prices with suppliers.

-Efficiency: Operations should also be designed to be as efficient as possible. This means ensuring that all steps in the production process are necessary and that there is no wasted motion or effort.

-Quality: In addition to being efficient, operations must also produce high-quality products and services. This means paying attention to detail at every stage of production, from design to delivery.

Operations are a vital part of any business, and they can make or break a company. By focusing on cost reduction, efficiency, and quality, businesses can ensure that their operations are running smoothly and effectively.


In any business, it is the people who make it work. The right employees can turn a small company into a powerhouse, and the wrong ones can sink it. Hiring the right people is essential to success, and that starts with knowing what you’re looking for.

People are the most important asset in any business. Hiring the right people, and then retaining them, is essential to success. The three key things to look for in prospective employees are skills, attitude, and fit. Once you’ve hired the right team, keep them happy and engaged by recognizing their accomplishments, offering opportunities for growth, and providing a positive work environment.

Human resources are the backbone of any business. They are responsible for making sure the right people are hired, and then keeping them happy and engaged. They play a key role in employee retention, by creating a positive work environment and offering opportunities for growth and development.

Marketing people are responsible for creating and executing campaigns to promote a company’s products or services. This can include everything from traditional advertising like TV commercials and print ads to more modern methods like social media marketing and content marketing. Marketing is also responsible for market research, which helps them understand the needs and wants of their target audience.

Salespeople are responsible for generating revenue for a company. They do this by finding and nurturing relationships with potential customers and then closing deals. The sales department is often the face of a company, as they are the ones who interact with customers on a day-to-day basis.

Accounting people are responsible for maintaining financial records, preparing financial statements, and managing the budget. They play a key role in ensuring the financial health of a company and providing decision-makers with the information they need to make informed decisions.


Businesses need accurate and timely information in order to make sound decisions. Information is gathered from a variety of sources, including customers, suppliers, and financial institutions. This data is analyzed and used to make strategic plans and forecasts.

This plays an important role in an organisation because it guides every decision it makes or expects to make. Thus, information is important in the decision-making and problem-solving processes, and without the right information, organisations are bound to make mistakes in these key processes.

An organisation needs to have information about its Strengths, Weaknesses, Opportunities, and Threats in what is known as a SWOT Analysis. The main idea of a SWOT Analysis is to ensure the organisation knows its internal and external position in order to secure and grow its business.

The information is also important because it helps the organisation devise better strategies for dealing with its competitors. Knowing its brand value proposition is what helps provide laser focus in a crowded market.

Research and Development

Research and Development is the process of exploring new ideas and possibilities for a business. It can involve testing products or services to see how they work, developing new methods or processes, and coming up with innovative solutions to problems. R&D is essential for businesses that want to stay ahead of the competition and keep growing.

R&D can be a costly undertaking, but it can also bring significant rewards. It can help businesses to find new ways to improve their products or services, come up with more efficient production methods, and develop better marketing strategies. R&D can also help businesses to tap into new markets and create new opportunities for growth.

Investing in R&D can help businesses to stay competitive and keep up with the latest trends and technologies. It can also make businesses more agile and responsive to change. R&D can be a risky proposition, but it can pay off big for businesses that are willing to take the plunge.

For example, a restaurant may conduct market research by giving customers a tester of a new dish and then collecting their feedback in order to refine the dish and add it to the menu.


Finance is the management of money and investments. It is concerned with the allocation and use of financial resources over time in order to achieve desired goals.

Finance is a critical function for any business. Without accurate financial information, it would be difficult to make sound decisions about where to allocate resources or how to grow the company. Finance professionals are responsible for tracking revenue and expenses, forecasting future trends, and managing risk.

Finance is also responsible for the management of financial assets, such as investments. The goal of finance is to maximize the return on investment while minimizing risk.

Finance is a broad field that includes many different sub-disciplines, such as accounting, auditing, taxation, and financial planning. There are many career paths within finance, such as corporate finance, investment banking, and financial analysis.

Some of the most common tasks can include:

  • Managing the company accounts
  • Dealing with suppliers and affiliates
  • Keeping and maintaining financial records/reports
  • Creating profit and loss accounts and forecasting
  • Paying employees and outstanding invoices
Individuals working within a particular organization will make decisions and manage the organisations differently
Individuals working within a particular organization will make decisions and manage the organisations differently

2.2 Compare the possible advantages and disadvantages of working for a national organisation and a Small and Medium-sized Enterprise (SME)

National organisations and Small and Medium-sized Enterprises (SMEs) are both types of businesses, but they differ in a number of ways. National organisations are typically larger, have more resources, and may be better known. SMEs are typically smaller, have fewer resources, and may be less well known. Both types of businesses have advantages and disadvantages which are listed below.

National Organisation


  • As most national companies have multiple locations it is possible that you can work from one or many locations.
  • More opportunities to progress within their working environment.
  • Department for most functions of the business which allows you to talk to someone within that department who can help you.
  • Dedicated staff to fulfil a role.
  • More incentives are offered in the form of additional days off, gym membership, parking privileges, and extra holiday entitlement.


    • Less recognition from the employer as there are so many employees and therefore, hard to stand out.
    • Easy to be overlooked for promotion.
    • Your hard-working contribution can go unnoticed.
    • Too many departments and red tape slow down the process of decision-making.

    Small-medium enterprise (SME)


    • More recognition from the employer as there are fewer employees.
    • More conducive environment to stand out and have your ideas heard.
    • Personal feeling that you are making a difference.


    • The contribution you made to the company is only felt once you leave.
    • Less individual departments for every function of the business; therefore, too many roles fall on your shoulders.
    • Fewer business incentives as the company may find it too hard to afford them or allow you extra time off due to its possible impact.
    • Hours may increase as you become overworked due to you being able to do more.
    The changing face of employment is both local and global
    The changing face of employment is both local and global

    Section Three

    3. Understand changing patterns of employment

    The world of work is changing. Rapidly. And if you want to stay ahead of the curve, you need to understand how these changes are affecting employment patterns and job prospects.

    One thing is clear: traditional career paths are no longer a guarantee of success. The days when you could graduate from college, get a good job with a reliable company, and retire after 40 years are gone. The global economy has made it too easy for companies to outsource or automate jobs, and the rise of the gig economy has given people more options than ever before.

    So what does this mean for your job prospects? It means that you need to be prepared for a world of constant change. You need to be flexible, adaptable, and willing to learn new skills on the fly. You need to be comfortable with ambiguity and uncertainty. And you need to be ready to take risks.

    With more hybrid working and virtual opportunities available than ever before, the way we work is changing. The skills employers are looking for are changing too. So if you want to stay ahead of the curve, it’s time to start thinking about your future career in a new way.

    The first step is to understand the changing patterns of employment. Here are three key trends that you need to know about:

    1. The rise of the gig economy

    The gig economy is a term used to describe the increasing trend of people working on a freelance or contract basis, rather than in traditional full-time jobs.

    A study by Upwork and the Freelancers Union found that 36% of the US workforce is already freelancing.


    There are a number of reasons why the gig economy is on the rise. With the advent of the internet, it’s easier than ever to find work online. And as companies increasingly look to cut costs, they’re more willing to outsource work to freelancers.

    The gig economy offers a lot of advantages. It’s flexible, which means you can often choose your own hours and work from anywhere in the world. And it can be a great way to make some extra money on the side.

    However, there are also some drawbacks. The lack of job security can be a major downside, and many freelancers struggle to find consistent work. And because you’re not employed by a company, you don’t have access to things like health insurance and other benefits.

    2. The growth of the sharing economy

    The sharing economy is an economic model in which people share access to goods and services, instead of owning them.

    The best-known examples of the sharing economy are companies like Airbnb and Uber, which allow people to rent out their homes or drive their cars for money. But there are many other examples, such as TaskRabbit (a platform that allows you to hire someone to do odd jobs for you) and DogVacay (a service that allows you to find a dog sitter when you’re out of town).

    The sharing economy is often seen as a way to make money from things you already own. But it’s also about convenience and access. For example, with Airbnb, you can stay in a unique home in a new city, instead of a generic hotel room. And with Uber, you can get a ride at the push of a button, instead of hailing a taxi.

    The sharing economy is growing rapidly. A report by PwC found that the global sharing economy was worth $15 billion in 2014 and is expected to grow to $335 billion by 2025.

    However, the sharing economy is not without its challenges. For example, many people are concerned about the lack of regulation and the potential for exploitation. And some worry that the sharing economy will lead to a decrease in quality jobs.

    3. The rise of robotics and artificial intelligence

    Robotics and artificial intelligence (AI) are two of the most disruptive technologies of our time. And they’re having a major impact on the world of work.

    Robots are increasingly being used to automate manual tasks. For example, there are now robots that can pack boxes in warehouses and deliver food to customers. In the future, robots could even be used to care for the elderly and drive cars.

    AI, on the other hand, is being used to automate cognitive tasks. For example, there are now AI-powered chatbots that can handle customer service inquiries and AI-powered algorithms that can identify patterns in data. In the future, AI could be used for even more complex tasks, such as writing reports and making decisions.

    The rise of robotics and AI is having a major impact on the labour market. A recent report by McKinsey found that up to 30% of jobs in the US could be automated by 2030. And a separate study by PwC found that 38% of jobs in the UK are at risk of automation in the next 20 years.

    The impact of automation is already being felt. A recent study by the Brookings Institution found that manufacturing jobs in the US have declined by 33% since 2000, due in part to automation. And a study by Oxford University found that 47% of jobs in the UK are at risk of being automated in the next 20 years.

    3.1 Outline some of the changes in patterns of employment locally

    The traditional 9-5 job is becoming a thing of the past. Many people are now working odd hours, or even remotely. This change has had a significant impact on the local economy, as well as on the way people live their lives.

    One of the most obvious changes is that people are no longer tied to one location. They can work from anywhere they have an internet connection. This has led to a rise in telecommuting and freelancing, which in turn has led to a rise in self-employment.

    Another change is that people are no longer working regular hours. They are instead working odd hours or switching between different jobs throughout the day. This makes it difficult for them to find time for anything other than work. It also makes it difficult for businesses to keep track of their employees’ schedules.

    Finally, the rise in technology has made it possible for people to do many things they couldn’t do before. For example, they can now shop online, bank online, and watch TV online. This has led to a decline in spending locally, as people no longer need to go out shopping or spend money on entertainment.

    These changes have had a profound impact on the local economy. They have made it more difficult for businesses to keep track of their employees and have led to a decline in spending locally. These changes will likely continue in the future, which will have even more implications for the local economy.

    Many factors affect the employment market which is evolving from the traditional 9 to 5
    Many factors affect the employment market which is evolving from the traditional 9 to 5

    3.2 Outline some of the changes in patterns of employment nationally

    The traditional 9-5 job is slowly becoming a thing of the past. With advances in technology, many companies are now offering their employees the option to work from home. This change in employment patterns has both pros and cons.

    On one hand, working from home can be a great way to save on transportation costs and avoid rush hour traffic. On the other hand, it can be difficult to stay focused when you’re not in an office setting. Additionally, working from home can often lead to isolation and a lack of social interaction.

    The gig economy is also on the rise. This refers to a situation where people are hired for short-term or freelance jobs, as opposed to traditional full-time employment. The Gig Economy has created opportunities for people to work flexibly and on their own terms. However, it can also be difficult to find stable work in the Gig Economy, and many people end up working for less pay than they would in a traditional job.

    The rise of the Gig Economy and the option to work from home have both had an impact on patterns of employment locally within the UK. What used to be a 9-5 job is now becoming more flexible, and people are able to work around their other commitments.

    This change in employment patterns is likely to continue in the future, as technology advances and more companies adopt flexible working arrangements.

    3.3 Outline some of the changes in patterns of employment in Europe and globally

    The traditional idea of a “job for life” is becoming a thing of the past. In Europe and globally, there are more and more people who are employed in short-term or contract positions. This change has had a number of effects on the workforce, including:

    • A rise in self-employment or freelance work
    • A decrease in job security and benefits
    • Increased competition for jobs
    • More jobs are being created in the service sector

    In the past, people usually stayed in the same job for their entire lives. They would work for a company, and when they retired, they would receive a pension and benefits. However, in today’s economy, that is no longer the case. People are now more likely to move from job to job, often multiple times throughout their careers. This trend is especially evident in Europe and other global regions where free trade has led to blurred boundaries between different types of work.

    There are several reasons for this change. First, the globalization of the economy has led to more competition. Companies are always looking for ways to reduce costs, and one way to do that is to hire workers from other countries where labour is cheaper. This has led to a decline in the number of good-paying jobs in developed countries.

    Second, technology has changed the nature of work. Many jobs that used to be done by human workers can now be done by machines or computers. This has led to a decline in the demand for unskilled labour, and an increase in the demand for skilled labour.

    Third, the baby boom generation is starting to retire. This is leading to a shortage of workers in many industries, and companies are having to look outside of their traditional workforce to find employees.

    These changes have had a major impact on the employment market in Europe. There is now more competition for jobs, and workers are often required to have more skills than in the past. However, these changes have also created new opportunities for those who are willing to adapt and learn new skills.

    3.4 Describe how changing patterns of employment may affect his/her choices for learning or work.

    As the job market becomes more and more competitive, it’s becoming increasingly important for workers to be able to learn new skills on their own time. However, many people find it difficult to balance learning with work and other responsibilities.

    Some people may choose to reduce their workload in order to have more time for learning. Others may choose to learn new skills that can help them in their current job. And still, others may decide to change careers altogether, in order to pursue a field where they can continue learning new things.

    Whatever the choice, it’s important to be aware of how changing patterns of employment can affect one’s ability to learn new things. With the right attitude and approach, however, anyone can find the time and resources necessary to learn new skills and improve their employability.

    Upskilling has become a necessity in the modern workplace. In order to stay ahead of the curve, workers need to be constantly learning new skills and expanding their knowledge base. However, with the ever-changing landscape of the job market, it can be difficult to keep up.

    Many workers may feel like they are falling behind and become discouraged. Others may feel like they are not progressing as fast as they would like.

    The key is to remember that everyone learns at different rates and there is no one-size-fits-all solution. Some people may need to devote more time to learning than others, but ultimately, everyone can benefit from upskilling.

    The best way to find out what works best for you is to experiment and try different approaches. There is no shame in admitting that you need help or that you don’t know everything. The most important thing is to keep learning and growing so that you can stay ahead of the curve and stay employable by increasing your own personal and professional development.

    Businesses are affected by market forces and the best way to analyse them is with Porter's Five Forces Analysis
    Businesses are affected by market forces and the best way to analyse them is with Porter’s Five Forces Analysis

    Section Four

    4. Understand how business activity is affected by market forces

    The business world is constantly changing, and in order to stay ahead of the competition, it’s important to understand how market forces affect business activity.

    Business activity is greatly affected by the macro environment within which it operates. The four key market forces that constantly interact and impact business are:

    • Technological change
    • Consumer demand
    • Economic growth
    • Globalization
    • Deregulation

    Each of these forces can have a positive or negative effect on businesses, so it is important for companies to be aware of them and how they are evolving.

    For example, in a recessionary economy, demand for products will likely be low as people have less money to spend; while in a period of high technological change, businesses that are able to adopt new technologies quickly may have a competitive advantage over those do not.

    The macro environment is not the only factor that impacts business activity, but it is a significant one. Businesses need to monitor the macro environment closely and adapt their strategies accordingly in order to stay successful.

    Technological change

    Businesses have to be aware of technological changes in order to stay afloat. In the past, businesses could get by with just a few employees who had a wide range of skills. However, with the advancement of technology, that is no longer the case.

    Businesses now need employees who are specialists in certain areas and who can use technology to do their jobs. If businesses don’t keep up with these changes, they will be left behind.

    The advancement of technology has also changed the way businesses communicate with their customers. In the past, businesses could get by with just a phone and a fax machine. However, now businesses need to have an online presence in order to reach their customers.

    Customers expect businesses to be available 24/7 and to be able to answer any questions they may have. If businesses don’t meet these expectations, they will lose customers to their competitors.

    Technology has also changed the way businesses sell their products. In the past, businesses would have to rely on print advertising and face-to-face sales meetings. However, now businesses can reach a global market by selling their products online. This gives businesses a much larger potential customer base, but it also means that they have to compete with other businesses that are selling the same products.

    Overall, technology has had a major impact on business activity. Businesses need to be aware of these changes and adapt their strategies accordingly in order to stay competitive.

    Consumer demand

    As consumers, we have a lot of power. We can choose to buy or not buy products from businesses, and our choices affect their bottom line. When demand for a product is high, businesses are able to make more money because they can charge more for it. However, when demand is low, they may have to lower prices or even close down altogether.

    In the current climate, with many people out of work or on reduced incomes, consumer demand has decreased. This is having a knock-on effect on businesses large and small, that are struggling to stay afloat. Retailers have had to close stores, manufacturers have cut back production, and suppliers have laid off staff. The whole economy is feeling the pinch, as consumer spending is a key driver of growth.

    Looking ahead, it is hard to predict how consumer demand will evolve. However, if we all start spending again, businesses will be able to get back on their feet and the economy will start growing once more.

    Economic growth

    The relationship between business activity and economic growth is a two-way street. Businesses affect the economy by creating jobs and producing goods and services. Economic growth, in turn, affects businesses by providing them with more customers and a larger pool of potential employees. In short, businesses are both the cause and effect of economic growth.

    There are a number of ways in which business activity affects economic growth. One is through job creation. When businesses expand, they often need to hire more workers. This increases employment and puts more money into people’s pockets, which they can then spend on goods and services, boosting the economy.

    Another way businesses affect economic growth is by producing goods and services. When businesses produce more, it increases the supply of goods and services in the economy, which can lead to lower prices and higher levels of consumption. This, in turn, can spur economic growth.

    Yet another way businesses affect economic growth is through innovation. When businesses come up with new products or services, it can lead to increased levels of productivity and economic growth.


    Globalization has had a profound effect on business activity, and the trend is only expected to continue in the years ahead. Companies are increasingly looking to expand into new markets, and this has led to a heightened level of competition.

    At the same time, advances in technology have made it easier for companies to do business across borders, and consumers have more choices than ever before. This has put pressure on businesses to be more innovative and efficient, and it has also led to lower prices for consumers.

    There are both positives and negatives to globalization, but it is clear that it has had a major impact on the business world. In the years ahead, companies will need to adapt to the new reality in order to remain competitive. Those that are able to do so will reap the rewards, while those that lag behind will be left behind.


    Deregulation of business activity can have a number of impacts on the economy. When businesses are freed from government regulation, they may be more likely to engage in price-fixing, cartel behaviour, and other anti-competitive practices. This can lead to higher prices and reduced competition in the marketplace, which is not good for consumers or the overall economy.

    Additionally, deregulation may lead to an increase in environmental pollution as businesses attempt to cut costs by polluting more.

    Finally, deregulation may also lead to a financial crisis if businesses are allowed to engage in risky financial practices without government oversight.

    Diagram demonstrating the relationship between supply and demand forces on a business
    Diagram demonstrating the relationship between supply and demand forces on a business

    4.1 Explain the relationship between supply and demand in the business environment

    In any business, the goal is to find the perfect balance between supply and demand. If there is too much of one or the other, it can lead to disaster. Let’s take a closer look at each side of this equation.

    Supply is how much of a product or service is available to meet customer needs. It’s determined by how much of that good or service a company produces and how much it plans to produce in the future. The more a company produces, the more likely it is to reach its maximum capacity and have to turn away customers. This can be bad for business, as it means losing potential revenue.

    Demand, on the other hand, refers to how many customers are interested in buying a particular product or service. The higher the demand, the more likely companies are to raise prices as they try to maximize their profits. However, if demand falls too low, companies may be forced to reduce prices in order to move their products off the shelves. This can cause losses for businesses if they produce too much of a good that isn’t selling well.

    The key to success in business, then, is to find the right balance between supply and demand. If a company can produce enough of a good or service to meet customer demand without reaching its maximum capacity, it will be able to generate profits without having to raise prices.

    On the other hand, if a company produces too much of a good or service, it will have to either sell at a discount or stockpile its products, neither of which is ideal.

    4.2 Describe the relationship between price and profit

    In order to be successful, a business must find the right balance between price and profit. If a business charges too much, it will lose customers; but if it charges too little, it will not make a profit. A successful business must find the perfect middle ground where it can charge enough to cover its costs while still making a profit.

    There are a few things to consider when setting prices, such as production costs, shipping and handling, marketing, and overhead. A business must make sure that its prices are high enough to cover all of these expenses while still making a profit. If any of these costs increase, the business may need to raise its prices in order to stay afloat.

    It is important to keep an eye on the competition when setting prices. If a business charges too much, its customers may go to a competitor that offers lower prices. On the other hand, if a business charges too little, it may be undercut by its competitors. A business must find the right balance between being competitive and making a profit.

    There is a positive correlation between price and profit. This means that as the price of a good or service increases, so too does the profit margin for the company providing it. In other words, companies can charge more for their products without losing customers, as long as those products are seen as high quality and worth the extra money.

    However, it is important to note that there is a limit to how much companies can charge without losing business. If the price of a good or service becomes too high, customers will look for alternatives, even if it means sacrificing quality. Therefore, businesses must be careful not to price their products too high, or they risk losing out on potential profits.

    Venn diagram showing the relationship between price and profit
    Venn diagram showing the relationship between price and profit

    4.3 Identify the connections between markets and competition

    In order to understand how markets and competition work, it’s important to first understand what a market is.

    A market is defined as a group of people who have a need or want for a product or service and are willing and able to pay for it. In addition, a market is usually broken down into smaller segments based on things like geography, age, gender, or income level.

    Competition occurs when two or more businesses offer products or services that meet the needs of a particular market segment. When this happens, the businesses will compete for customers by offering lower prices, better quality products or services, or by providing more value in some other way.

    The level of competition in a particular market can vary greatly. For example, the market for small businesses in a rural area is likely to be much less competitive than the market for large businesses in a major city. In general, markets that are more difficult to enter are usually more competitive.

    There are many different types of markets, but they can generally be classified into two main categories: perfect competition and monopolistic competition.

    • Perfect competition is a market structure in which there are many small businesses that offer identical products or services.
    • Monopolistic competition is a market structure in which there are many small businesses that offer slightly different products or services.

    In general, the more competitive a market is, the more efficient it is. This is because businesses in competitive markets have an incentive to keep their prices low and their quality high in order to attract and retain customers. In addition, competitive markets usually lead to innovation as businesses try to find new ways to differentiate themselves from their competitors.

    There are a few key things to remember about markets and competition:

    • Markets are groups of people who have a need or want for a product or service and are willing and able to pay for it.
    • Competition occurs when two or more businesses offer products or services that meet the needs of a particular market segment.
    • The level of competition in a market can vary greatly.
    • In general, the more competitive a market is, the more efficient it is.
    • Competitive markets usually lead to innovation as businesses try to find new ways to differentiate themselves from their competitors.

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