Question

Create a list of 10 developments/changes that can occur in various external factors that will affect your business, and therefore, will require you to change your decisions or make new decisions in running the business. In this example use a Coffee shop.

EXAMPLE:

1. An increase in the cost of inputs.

Direct effects on business: it will negatively affect the profit margin.

Decision needing change and direction of change: I may have to cut down on other costs. Reduce staff to cut costs.

Answer 1

1. Inflation -

Direct Effect - It will decrease the demand for the products since buyer power reduces.

Decision: Lower the production and cut down on labor for the low cost of operation.

2. Recession -

Direct Effect - Demand will go down and the unemployment rate will increase.

Decision - Extend credit to buyers to engage them in purchasing. Improving existing products and introducing new ones.

3. Interest rate -

Direct Effect - If the interest rate goes up, the cost of borrowing money to invest in business goes up. In an existing business, operating costs will go up as working capital will require higher interest rates.

Decision - Cut down the operating costs of the business until the rates go normal as the long periods of high-interest rates may lead to inflation.

4. Technology -

Direct Effect - Existing products' life cycle will be shorter and inventory will become obsolete.

Decision - Provide offers for existing products and sell them out as early as possible. Invest in Product development and research and development.

5. Values -

Direct Effect - Haters will generate if the consumer changes the attitude towards the products.

Decision - Change in marketing campaigns may help. A new product name with new packaging will be required. Example - Consumer became environmentally aware and you sell coffee in Plastic Cups, Packaging needs to change.

6. Lifestyles -

Direct effect - Only trusted customers will remain in the market. New buyers will stop approaching.

Decision - Diversify the product mix in new lifestyle segments.

7. Government Policies -

Direct Effect - The risk of legal implications arises all of a sudden.

Decision - Adjust the standards as per the government regulations as soon as possible.

8. Competitor's entry -

Direct effect - Market share will decrease.

Decision - Differentiate the product from competitor's products.

9. Demographics -

Direct Effect - Decreasing market share, obsoletion of inventory, relatively lesser new customers.

Decision - Target untapped market for the products.

10. Natural Environment such as seasons-

Direct Effect - Products go out of season and will become obsolete.

Decision - Diversify to the new seasonal market and offer discounts on existing products.