OxfordAQA IGCSE Business: Influences on Business — Revision Notes

Condensed for the final weeks. For the full explanation, use the Influences on Business study guide.

The exam skill this topic tests: mechanism, not label

Every sub-topic here is an external pressure a business does not control. The mark is never for naming the pressure — it is for explaining the mechanism by which it reaches the business’s costs, revenue or decisions. Practise finishing this sentence for each influence: “This affects the business because it changes ___, which then changes ___.”

Six influences, six one-line mechanisms

• Technology — new ICT and e-commerce widen a business’s reachable market and communication channels with stakeholders, but also raise the cost of staying current.
• Ethics and environment — acting beyond the legal minimum (fair treatment, environmental care) can cost profit directly, but protects reputation and stakeholder trust — always state the trade-off, not just the “right thing to do.”
• Economic climate — interest rates change borrowing cost directly (loans, overdrafts) and consumer spending indirectly (via disposable income); employment levels change how much households have to spend.
• Globalisation — wider markets and cost advantages both cut both ways: they bring opportunity (bigger markets, cheaper inputs) and threat (new competitors) at the same time.
• Legislation — a legal requirement (employment, health & safety, consumer law), distinct from ethics’ choice; raises compliance cost but can also protect a business from being undercut by unsafe competitors.
• Competitive environment — the amount of competition a business faces shapes its pricing power and risk; developing-country businesses often compete on cost advantage against developed-country rivals.

Ethics vs legislation — the distinction examiners test

These two are the most commonly confused pair in this topic:

	Ethics	Legislation
Nature	A choice beyond the legal minimum	A legal requirement
Driver	Stakeholder expectations of fairness/honesty	The law
Failure to comply	Reputational damage, lost trust	Fines, legal action, forced closure

A strong answer never treats “acting ethically” as free — it names the specific profit trade-off (higher cost, lower short-term margin) the syllabus expects you to identify.

Exchange rates — direction matters

Get the direction right every time:

• Currency weakens → exports cheaper for foreign buyers (helps exporters), imports more expensive at home (hurts importers).
• Currency strengthens → the reverse: exports more expensive abroad (hurts exporters), imports cheaper (helps importers).

State which side of the transaction (importer or exporter) is being asked about before deciding whether a currency movement helps or harms.

Interest rates — direct and indirect effects together

A rate rise has two separate channels: it directly raises a business’s own loan/overdraft repayments (higher fixed costs), and it indirectly reduces customer spending power (higher mortgage/credit costs for consumers, lower disposable income, lower demand). A complete answer names both channels, not just one.

Weighing two influences against each other

Higher-mark questions often ask which of two influences poses the bigger risk to a specific, described business, not just to explain each in isolation. Answer this by comparing scale and speed: an influence with a small effect that arrives immediately (a modest interest-rate rise on a heavily-indebted firm) can matter more in the short term than a larger effect that unfolds slowly (long-run globalisation pressure on a firm with little foreign exposure). State which factor you are weighing by — scale, speed, or how directly it touches the specific business described — rather than asserting one influence is “obviously” bigger.

Exam traps

• Naming an influence without explaining the mechanism that connects it to cost, revenue or decisions.
• Treating ethical behaviour as costless or purely reputational.
• Confusing ethics (choice) with legislation (legal requirement).
• Getting exchange-rate direction backwards for exporters vs importers.
• Explaining only the direct effect of an interest-rate change and missing the indirect, consumer-spending channel.
• Assuming legislation only harms a business, ignoring its role in levelling competition against non-compliant rivals.

Sharia-compliant finance — a specific, examinable detail

The syllabus explicitly names Sharia-compliant alternatives alongside conventional interest-based borrowing when covering the economic climate’s effect on business. A candidate who can state that Sharia-compliant financing avoids conventional interest (riba) and instead structures financing around profit-sharing or asset-backed arrangements is answering with the specification’s actual named detail, rather than treating “interest rates” as the only borrowing-cost mechanism a business might face. This is a small but genuinely examinable point that a general business-studies answer, written without reference to this specific syllabus, would likely miss.

Self-test

1. What is the difference between ethics and legislation as influences on business?
2. A country’s currency weakens. Who benefits more directly: an exporter or an importer, and why?
3. Name the two separate channels through which a rise in interest rates affects a business.
4. Give one advantage and one disadvantage of globalisation for a developing-country business.
5. Why might legislation sometimes benefit, rather than only cost, a business?

Answers: 1. Legislation is a legal requirement with penalties for non-compliance; ethics is a voluntary choice to act beyond that legal minimum because stakeholders consider it fair or honest. 2. The exporter, because a weaker currency makes their goods cheaper for foreign buyers, increasing competitiveness abroad. 3. A direct channel (higher loan/overdraft repayments raising the business’s own costs) and an indirect channel (reduced consumer disposable income lowering demand). 4. Advantage: access to larger international markets and potential cost advantages; disadvantage: exposure to stronger international competition — any valid pair is acceptable. 5. It can create a level playing field by forcing all competitors to meet the same safety, pay or consumer-protection standards, preventing a rival from undercutting through non-compliance.