← How a large business responds to external factors

Government policy as an external factor

A distinct category from general "legal obligations" — government POLICY changes (taxation, subsidies, bans, incentives, duties) that a business must respond to, confirmed as its own rotating part.

The named types of government policy to have ready

  • TAXATION changes — a higher company tax rate reduces retained profit available for reinvestment.
  • SUBSIDIES — government payments encouraging the purchase of certain products, or encouraging businesses to employ local labour.
  • RESTRICTIONS OR BANS — on materials or production processes, based on their environmental impact.
  • HEALTH AND SAFETY initiatives — new compliance requirements affecting how the business operates.
  • TAX AND OTHER INCENTIVES — to make operating a business in New Zealand more appealing.
  • CUSTOMS DUTIES — increases or decreases on imported goods, raising or lowering input costs.
Worked example Responding to a government policy change A government policy restricts the use of a particular packaging material on environmental grounds. Explain two possible actions a business could take in response. ACTION 1: switch to an approved alternative packaging material — maintains compliance and can be marketed as an environmental improvement, but likely costs more per unit and may need new supplier relationships and machinery. ACTION 2: redesign the product to reduce packaging volume overall — reduces the cost impact of the ban and cuts material use generally, but requires investment in redesign and possible customer education if the product looks different. For each action, state the SPECIFIC effect on the business (cost, marketing angle, operational change) — not just that the action complies with the new policy. ✓ Two genuinely different action types (substitute the material vs redesign the product), each with its own named effect, gives the Justify part that follows something real to weigh. ✕

Naming a policy without naming the specific business action taken in response

Describing what the government policy IS, without then naming a specific action the named business took or could take in response, does not meet what these parts ask for. The policy is the trigger; the actual mark is in the business's RESPONSE and its effect.

How to pick which government policy to prepare

  • Choose a policy genuinely relevant to your prepared large business's actual industry (a duty/tariff for an importer, a subsidy for an exporter, an environmental restriction for a manufacturer).
  • Prepare TWO plausible actions in response, of clearly different kinds (e.g. one operational change, one strategic/marketing change), ready for the Justify part that typically follows.
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A policy can be an opportunity as well as a threat

Not every government policy change is a cost to prepare a defensive answer for — a SUBSIDY or a tax INCENTIVE is a genuine opportunity a business can act on to expand or invest, and a strong answer recognises when a policy actually helps the business rather than assuming every policy question is about managing a burden.

Practise just this