Opportunities, risks, legal and ethical decisions

Changing Needs and Wants for Products:

Understanding how customer needs and wants evolve is crucial for business success. Here are some key factors driving change in product needs and wants for IGCSE Business students:

1. Technological Advancements:

New technologies constantly emerge, creating new possibilities and expectations for products.
Examples include:
- Increased demand for smart devices and internet connectivity in everyday products.
- Growing preference for mobile apps for shopping, banking, and communication.
- Expectation of faster processing speeds, larger storage capacities, and improved user interfaces.
- Reduction in demand for products such as CRTs and DVDs

2. Shifting Demographics:

Changes in population demographics can significantly impact product needs and wants.
Examples include:
- The growing aging population might require products designed for accessibility and senior living.
- The rise of dual-income households could lead to demand for time-saving appliances and convenience foods.
- Increasing urbanization may influence demand for space-saving furniture and compact living solutions.

3. Social and Environmental Concerns:

Consumers are becoming more conscious of social and environmental issues.
This can lead to a demand for:
- Products made with sustainable materials and ethical production practices.
- Eco-friendly packaging and reduced environmental impact.
- Products that promote healthy lifestyles and well-being.

4. Economic and Governmental Factors:

Economic conditions can influence purchasing decisions and product preferences.
During economic downturns:
- Consumers might prioritize affordability and value for money.
- Increased demand for budget-friendly alternatives and multi-functional products.
During economic booms:
- Consumers might be more willing to spend on premium products and innovative features.
Changes due to the government:
- Availability of grants and subsidies can boost or kill some enterprises. They may allow startups to survive, under performing sectors to be boosted, etc.
- Changes in taxes can help companies and may also allow people spend more with reduced personal taxes
- Changes in law make it easier for new products to be made, make it easier for businesses to be setup, etc.

5. Evolving Trends and Fashions:

Consumer preferences regarding style, design, and functionality change over time.
Businesses need to adapt to:
- Trending colors, patterns, and aesthetics.
- Changing fashion trends in clothing, accessories, and homeware.
- Evolving consumer preferences for product features and functionalities.

Remember:

Staying informed about these factors and conducting market research is crucial for businesses to adapt and create products that meet evolving customer needs and wants.
Businesses that anticipate and respond to changing trends can gain a competitive advantage.

Risks involved in enterprise

Starting and running an enterprise involves inherent risks. Here are key areas of risk to consider:

1. Financial Risk:

This refers to the possibility of financial loss for the enterprise. Examples include:
- Insufficient funds: Not having enough capital to start, operate, or grow the business.
- Poor cash flow: Difficulty managing cash inflows and outflows, leading to cash shortages.
- Debt burden: Difficulty repaying loans or incurring high-interest rates, impacting profitability.
- Unexpected expenses: Unforeseen costs like equipment failures, legal issues, or market fluctuations.

2. Economic Risk:

This refers to external economic factors impacting the enterprise’s performance. Examples include:
- Economic downturns: Reduced consumer spending due to recessions or economic crises.
- Incorrect estimation of customers and customer taste due to improper market research
- Inflation: Rising costs of raw materials, labor, and production, affecting profit margins.
- Interest rate changes: Fluctuations in interest rates impacting loan repayments and borrowing costs.
- Currency fluctuations: Changes in exchange rates affecting import/export costs and international sales.

3. Health and Safety Risk:

This refers to the potential for accidents, injuries, or illnesses related to the enterprise’s operations. Examples include:
- Workplace accidents: Injuries to employees due to unsafe work environments or improper equipment.
- Product liability: Products causing harm to customers, leading to lawsuits and compensation claims.
- Safety regulations: Failure to comply with health and safety regulations resulting in fines or business closure.
- Environmental hazards: Pollution caused by business activities leading to environmental damage and fines.

4. Human Resource Risk:

This refers to issues related to the people employed by the enterprise. Examples include:
- Recruitment and retention difficulties: Finding and keeping qualified employees can be challenging.
- Employee turnover: High employee turnover can lead to lost productivity and increased training costs.
- Low employee morale: Unmotivated or dissatisfied employees can impact productivity and customer service.
- Skills gap: Employees may lack the necessary skills or training to perform their jobs effectively.

Remember for:

Identifying and mitigating risks is crucial for enterprise success. Different strategies can be implemented for each risk type, such as financial planning, economic forecasting, safety protocols, and effective HR practices.
By understanding these risks and taking proactive measures, entrepreneurs can minimize their impact and ensure the smooth operation of their business.

The stages of risk management:

Stage 1: Identify the risks
Stage 2: Analyze the implications of each risk
Stage 3: Is the risk worth taking – (if not worth, then stop the project)
Stage 4: If worth taking the risk, then how to manage the risk
Stage 5: Monitor & review

Stage 1: Identify the risks –

Identify various risks possible to the entrepreneurship using methods of risk analysis such as SWOT, PEST.

Stage 2: Analyze the implications of each risk –

For each risk identified, consider the following;

What are the chances of it happening?
What are the potential consequences?
Analyze the positive & negative effects
Assess the potential negative effects against the potential rewards
If possible rewards outweigh the negative risks, then proceed with the project.

Stage 3: Is the risk worth it? –

This depends on the entrepreneurs attitude towards risk
If he is risk averse, he may discontinue or if he is a risk taker he will proceed with the project.

Stage 4: Plan to manage the risk –

Mitigate: try reducing the risk by changing the risk
Accept: If nothing can be done about the risk, then set aside a sum to cover up any negative effects of risk
Transfer: Pass on the risk to an outside agency who will be able to better manage the risk
Eliminate: If you chose to avoid risk, you will have to give up on the positive impact of the risk.

Stage 5: Monitor and Review

Reducing Risk –

Detailed research- PEST/ SWOT analysis
Seek advice from formal / informal support
Prepare a business plan
Spread the risk through diversification. It is the process of selling products or selling to different markets.

Monitoring Risk –

Risks can change over time. Changes can happened due to internal and external factors that keep changing. Therefore risks have to be constantly monitored.

Attitudes to Risk –

One can be risk averse, which means he avoids risk most of the times, or all of the time.
He can also choose to be risk keen, or always ready to take risks as he might believe that’s the only way to grow his business.
They can also be risk reducers, who take risks, but mitigate it enough to not harm their business if anything goes sideways.

Legal obligations –

Employment- Contracts to be made to resolve disagreements. Minimum wage laws should be followed.
Production, health & safety laws
Laws relating to marketing and selling to protect customers
Finance: laws regarding money invested to protect interest of shareholders.

Ethical Considerations –

Ethics: Moral values and principles that govern a person’s behavior or the conducting of an activity.
Being ethical involves actions and behavior that go beyond what is legally required
Ethics and profit can conflict.
An ethical firm considers the impact of its decisions on all the stakeholders

Advantages of being ethical –

An ethical brand image can lead to better reputation
Can attract customers
Can attract new employees and help retain the existing ones.
Suppliers will be willing to supply goods and offer discounts
Lenders may be willing to offer support
Can provide a USP (unique selling point)

Disadvantages of being ethical –

Increased cost of purchasing materials
Expectations from the employees, customers, suppliers, etc.
Additional cost involved