Summary BTEC Business Unit 1: Exploring business Learning Aim C and D (Distinction)
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Course
Unit 1 - Exploring Business
Institution
PEARSON (PEARSON)
C.P4 Discuss the effect of internal, external and competitive environment on a given business.
C.P5 Select a variety of techniques to undertake a situational analysis of a given business.
C.M3 Assess the effects of the business environment on a given business.
C.D2 Evaluate the extent to which ...
Unit 1:Exploring business
Name:Muhammed Abdul Saif
Candidate Number:017204
Centre Number:10500
Red text=Improvements made
The effects of the environment on Volkswagen
Introduction
Volkswagen is one of the biggest car manufacturers in the world. They have been operating
for over 70 years constantly making innovative, high quality and attractive cars for
consumers to enjoy. Volkswagen is present in over 140 different markets and produces cars
at 29 locations in 12 countries. They have more than 170,000 employees which shows how
large of a business they have become.1
The internal, external and competitive environment of Volkswagen (P4)
Introduction
For this section of the report I will be explaining the internal, external and competitive nature
of Volkswagen and the effects of these certain business environments.
External environment
Political factors
One of the political factors is that the government can provide support to Volkswagen if they
want it. The government can provide certain grants to businesses for specific purposes such
as relocation. In some cases the government may provide a business with a grant in order to
boost the economy or if the business is helping the government achieve their objectives. 2
The government can also provide training for new businesses. Businesses can get help on
the financial and marketing side of business. The EU’s current policy is that they cover the
movement of goods across borders without having to face tariffs. The government is also
looking to cut greenhouse gases to improve the environment. The European Union also
cares for their consumers, ensuring that they are protected when they buy goods. 3 The EU
provides businesses with lots of support. Examples of this are funding, grants and
subsidies.4 Although this is a good thing for Volkswagen they will not receive any grants due
to them being a very large business. Furthermore the EU is starting to become more
regulated which has harmed Volkswagen. In 2018 Volkswagen were fined 30,000 euros for
every car they made due to the car being faulty.5 This meant that Volkswagen lost millions
due to the EU becoming more regulated and catching them out. Instead of denying this
Volkswagen admitted to the emissions scandal and had to pay $4.3 billion in penalties. 6 This
helped Volkwagen restore some of their reputation as they admitted to their wrongs.
,Unit 1:Exploring business
Name:Muhammed Abdul Saif
Candidate Number:017204
Centre Number:10500
As Volkswagen's main operation is located in Berlin, Germany it means that they are part of
the European Union.7 As they are a member of the EU it means that they receive some
benefits. One key benefit of Volkswagen being part of the EU is that they can get lower
administrative costs.8 This means that Volkswagen do not need to pay any taxes if they want
to trade with other EU countries. Volkswagen are affected in a positive way because if they
decide to purchase parts from other European countries they will have to pay little to no tax.
This connotes that Volkswagen can keep more of their profits which will help them run more
efficiently. As they are part of the EU Volkswagen do not face any issues from the EU when
it comes to tariffs.
Economic factors
Another part of the internal environment is economic factors. One economic factor
Volkswagen faces is exchange rates. An exchange rate is the value of one currency
compared to another. They are based on economic activity, market interest rates and the
GDP of a country.9 Exchange rates affect Volkswagen because they operate from all over
the world. For example, if the Euro starts to depreciate it will make the cost of importing
goods more expensive.10 This is bad for Volkswagen as their cost per unit will rise.
Furthermore they will have to raise the prices of their cars which would decrease the
chances of a person buying a car from them as customers are always looking for the best
deal possible. It is hard for Volkswagen to respond to exchange rates because it’s out of
their control. So the best Volkswagen can do is operate well consistently so they are not too
affected by exchange rates. 1 euro= £0.89 which is good for Volkswagen because if they
want to purchase goods from the UK they can purchase it for less euros.
Economic growth is an increase in the production of goods and services which provide an
economic impact. An increase in capital goods and technology can help increase economic
growth. It is measured through GDP which provides an insight on how well the economy of a
country is doing.11 The economic growth for Germany has increased by 1.8%. 12 This is
important for Volkswagen to know because it helps them attract new talent from all over the
word. So by having the best talent possible Volkswagen will be able to run their operations
much more efficiently. Furthermore, having good economic growth helps increase business
performance and profit as consumers will have more money to spend on Volkswagen
vehicles.13
Social factors
Demographics are the characteristics of people or organisations within a certain
geographical location.14 A demographic trend is when this group of people all begin to like a
7 https://www.tutor2u.net/business/reference/external-environment-the-european-union
8 https://www.investopedia.com/terms/e/exchangerate.asp
9 https://www.upfx.co.uk/latest-news/post/how-do-exchange-rates-affect-business
10 https://www.investopedia.com/terms/e/economicgrowth.asp
11https://economy-finance.ec.europa.eu/economic-surveillance-eu-economies/germany/economic-forecast-
germany_en
.
12 https://www.nibusinessinfo.co.uk/content/importance-business-growth
13 https://www.businessnewsdaily.com/15779-small-business-marketing-demographics.html
14https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/new-push-european-democracy/
impact-demographic-change-europe_en
, Unit 1:Exploring business
Name:Muhammed Abdul Saif
Candidate Number:017204
Centre Number:10500
certain product or service, Examples of demographics are age, gender, race and occupation,
The current demographic trend in the EU is the average number of childbirth per woman was
1.5 which is below the value of 2.1 which is needed to maintain a stable population. 15 This is
not good for Volkswagen as the amount of people they can sell to is starting to decrease. If
the population is decreasing it means that less people will buy Volkswagen cars. In order to
combat this Volkswagen may have to increase the price of their cars so they can maintain
the amount of profit they are earning. If there are not enough people to buy Volkswagen cars
they could be forced to do this.
Consumer tastes/ preferences is what customers like to purchase for when they go shopping
for a product or service. For example, the consumer preferences in the EU is that they prefer
quality and price over anything else.16 This is important for Volskwagen to know because it
will help them decide on how to price their goods. As EU consumers care about price a lot,
Volkswagen may have considered pricing their cars a bit more cheaper in order to meet the
needs of EU consumers. In addition Volkswagen must use good quality parts if they want to
retain and attract more customers who reside in the European Union. This definitely affects
Volkswagen as they have to create and price their cars based on consumer tastes and
preferences. Volkswagen can respond to this by matching their consumers needs as this is
what will help them retain their customers.
Technological factors
Automation is when a task is able to be completed with little to no human input. Technology
such as automation has helped Volkswagen massively. To explain, Volkswagen has
invested in automation plants so their electric cars can now be made more quickly. 17 They
have ordered 2200 new robots to now produce electric cars at Emden, Hanover and
Chattanooga.18 This has affected Volkswagen positively as now they do not need to pay their
employees to do work for them. Although Volkswagen has to purchase the robots it will end
up working out cheaper for them in the long run because they do not need to pay the robots
at all unlike normal employees. Other than money by using robots Volkswagen are able to
get their cars made much quickly at a constant rate. Furthermore when Volkswagen gets
their e-vehicles made they do not need to worry about employees complaining or getting
tired as now with robots they will constantly work for them without any issues. Ever since
automation has started to become more popular Volkswagen have responded in a way
where they have been able to benefit largely.
Another technological factor which is considered in the external environment is
communication. Modern technology has made communication much easier via the use of
text messages and emails. For example with modern technology now businesses can do
video conferences19. This means that Volskwagen do not need to physically meet their
15 https://ec.europa.eu/eurostat/documents/3217494/5713579/KS-DY-09-001-EN.PDF/35c63f24-25fe-42a8-
8ba3-8f4ff19ae3e9?version=1.0
16 https://www.volkswagenag.com/en/news/2020/10/Volkswagen-Group-invests-in-automation-for-Emden-
Hanover-and-Chattanooga.html#
17 https://www.volkswagenag.com/en/news/2020/10/Volkswagen-Group-invests-in-automation-for-Emden-
Hanover-and-Chattanooga.html#
18https://www.viessmann.co.uk/en/heating-advice/boilers/what-are-carbon-emissions-and-why-do-they-
matter.html
19 https://www.bbc.co.uk/news/business-34324772
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