Refer to Table 2 and any other information. Evaluate the likely impact on BFB's future decisions of changes in external influences.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2021). The mark or mark type is shown in brackets.

1. [Knowledge] The external environment includes consideration of the economic, social, technological, demographic and legal factors that influence BFB.
2. [Knowledge] Changes in real GDP measure economic growth.
3. [Knowledge] Inflation is a sustained increase in the average price level.
4. [Knowledge] The unemployment rate measures the percentage of the labour market without work.
5. [Knowledge] The exchange rate index measures the value of a currency against a basket of other currencies.
6. [Knowledge] Understanding of government fiscal and monetary policies.
7. [Application] Consumer price inflation is increasing and may impact costs and pricing decisions.
8. [Application] Increasing costs may mean that BFB needs to identify methods of increasing efficiency.
9. [Application] Rate of economic growth is forecast to slow to below 3% by 2023.
10. [Application] Country C's currency has depreciated since 2019 making imports more expensive.
11. [Application] Unemployment is falling making recruitment more difficult and will impact wages.
12. [Application] Government may reduce spending to control national debt.
13. [Application] Government may increase interest rates to control inflation. Link to BFB expansion plans.
14. [Application] Increase in number of BFB's direct competitors and impact on marketing
15. [Analysis] Potential increase interest rates will increase borrowing costs for BFFC making plans for growth less profitable thus impacting decision about growth and methods of financing.
16. [Analysis] Depreciation will impact cost of the many components from around the world. As costs increase this will affect pricing decisions of BFB.
17. [Analysis] Inflation will affect the discretionary income of households and potentially reduce spending in the economy affecting demand for cycles.
18. [Analysis] New factory may face increased wage pressure costs due to fall in unemployment.
19. [Analysis] Continued increase in real GDP will support decisions of BFB regarding growth.
20. [Analysis] New competitors may increase pressure on BFB to reduce prices and thus impact revenues and profit.
21. [Evaluation] Identification of most important external factor and justification
22. [Evaluation] Diversification of BFB will reduce risk.
23. [Evaluation] The external environment is dynamic and may change in the future and affect profitability differently. What if government changes policy?
24. [Evaluation] Contingency planning may be significant.
25. [Evaluation] Elements that the evaluation/judgement might depend on: Impact of cost increases on profitability depend on price elasticity of demand. Data in Table 2 is forecast. Actual changes may be very different. Managers ability to plan for forecast changes. Competitor actions in response to changes will be important.
26. [Evaluation] Significance of other factors influencing decisions Internal strengths and weaknesses will influence decision making in response to external influences Proposed takeover may influence response of BFB