← How a large business responds to external factors
Economic and social change, and the response (every paper)
One positive, one negative, then TWO solutions compared with a two-reason justification. Exam-style Freight and input costs rise sharply Two solutions, and which is better. SOLUTION 1: switch to local suppliers — shorter, cheaper freight and a provenance story for marketing; but unit cost may be higher and local capacity limited. SOLUTION 2: consolidate into fewer, larger shipments — regains scale on freight; but ties up cash in inventory and slows response to demand changes. JUSTIFY with TWO reasons: local supply is better here because (1) it removes the exposure to further freight rises rather than just absorbing them, and (2) it supports the brand and kaitiakitanga positioning the business already markets on. ACKNOWLEDGE: it costs more per unit, which must be recovered through the premium positioning rather than volume. ✓ Two solutions, how EACH addresses the factor, then two reasons for the one you pick. That is the exact structure of the marking schedule.Other economic factors worth having ready
- EXCHANGE RATE changes: a weaker NZ dollar makes imported inputs more expensive but NZ exports more competitive overseas — the effect depends on whether the business imports or exports.
- INTEREST RATE changes: higher rates raise the cost of business borrowing (loans for expansion or equipment) and can reduce consumer spending on credit-funded purchases.
- AFFORDABILITY pressure: households prioritising essentials over discretionary spending hits businesses selling non-essential goods and services hardest first.
Naming an economic factor without saying WHICH DIRECTION it moves the business
Stating "exchange rates affect the business" names the factor but not its DIRECTION of effect — always specify whether the rate moving up or down helps or hurts THIS specific business, given whether it primarily imports, exports, or does both.Practice for this standard covers the whole topic — flashcards and quiz.