Analyse two threats to AFF from changes in its external environment.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2024). The mark or mark type is shown in brackets.

1. External influences are outside the control of the business and act as both a constraint and an enabler for FWB's activities.
2. External influences may include economic, political, legal and social factors.
3. Increased running costs due to inflation and wage increases.
4. Demand changes due to demographic change, such as more demand from older consumers.
5. Demand changes due to social factors such as changing consumer trends.
6. Inflation: Price rises will lead to increasing costs, such as power, gym equipment and possible pressure on wages of instructors and other employees.
7. Higher legal minimum wage will affect lowest paid, for example gym and equipment cleaners.
8. Gym membership and fitness classes are luxury goods.
9. Ageing population may mean traditional fitness class target market decreasing.
10. Key objective is increasing returns to shareholders (so profitability important).
11. Increasing costs will lead to the need to increase membership and other prices, may lead to lower demand and decreases in total revenue dependent on PED.
12. Consumers may find (real) incomes decreasing, will concentrate on buying essentials and cutting down consumption of luxuries such as gym memberships, leading to falling demand and decrease in total revenue and profit.
13. Fitness factories have high fixed costs, falling demand may lead to decreasing demand and falling profits very quickly.
14. Ageing population may mean some changes to product, maybe more yoga or fitness classes targeted at older people, change to marketing mix may increase costs leading to lower profits especially in the short term.