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External factors and business response

What counts as an external factor

An external factor is something outside the business's control that affects it.
The standard's own definition is worth memorising: external factors are those outside the business's control that can affect its formation, functions, people, management and environment.
Compare with internal operations (AS90843), which are the things the business does control — its structure, its production process, its policies.

Internal — the business controls it	External — the business does not
Its organisational structure	A change in the minimum wage
Its leadership style	An ageing population in its market
Its production method	A new technology its competitors adopt
Its policies and procedures	A new obligation under the Privacy Act

The business cannot stop an external factor. It can only respond to it — and that response is what this standard assesses.

Political — changes to government policy, trade unions, employer associations.
Social — demographic change, ethical influences and societal expectations.
Technological — new technology in production, distribution, marketing and customer service.
Legal — the Employment Relations Act 2000, the Resource Management Act 1991, the Privacy Act 2020.

These four are the whole examinable list at Level 2. Learn them as four, and you can never be stuck for a factor.

The standard requires you to explain the nature and effects of the external factor and to explain how the business responds to those effects.
So every answer has two halves, and the second is the one candidates drop:

The factor — what has changed, and why it is outside the business's control.
The effect on the business — usually on its costs, its revenue, its staff, or its ability to operate.
The response — the decision the business takes.
The result of the response — how it protects or advances a business goal.

The exam almost always asks for one positive and one negative effect of the same factor.
An ageing population is a threat to a business selling to teenagers and an opportunity for one selling healthcare, home services or travel.
New technology raises costs for a business that must buy it and lowers costs for the business once it is running.
Train yourself to produce both. A factor that only ever looks like a problem in your answers will cost you marks on part (i) of most questions.

Change the product or service — reformulate, repackage, add a service, drop a line.
Change the market — target a different group, or a different region or country.
Change the process — automate, relocate, change supplier, change materials.
Change the people — retrain, restructure, recruit different skills.
Change the price — pass a cost increase on, or absorb it to protect volume.
Comply and demonstrate — for legal factors, put a policy and procedure in place and be able to show it was followed.

An external factor is something outside the business's control that affects it.
The standard's own definition is worth memorising: external factors are those outside the business's control that can affect its formation, functions, people, management and environment.
Compare with internal operations (AS90843), which are the things the business does control — its structure, its production process, its policies.

Internal — the business controls it	External — the business does not
Its organisational structure	A change in the minimum wage
Its leadership style	An ageing population in its market
Its production method	A new technology its competitors adopt
Its policies and procedures	A new obligation under the Privacy Act

The business cannot stop an external factor. It can only respond to it — and that response is what this standard assesses.

Political — changes to government policy, trade unions, employer associations.
Social — demographic change, ethical influences and societal expectations.
Technological — new technology in production, distribution, marketing and customer service.
Legal — the Employment Relations Act 2000, the Resource Management Act 1991, the Privacy Act 2020.

These four are the whole examinable list at Level 2. Learn them as four, and you can never be stuck for a factor.

The standard requires you to explain the nature and effects of the external factor and to explain how the business responds to those effects.
So every answer has two halves, and the second is the one candidates drop:

The factor — what has changed, and why it is outside the business's control.
The effect on the business — usually on its costs, its revenue, its staff, or its ability to operate.
The response — the decision the business takes.
The result of the response — how it protects or advances a business goal.

The exam almost always asks for one positive and one negative effect of the same factor.
An ageing population is a threat to a business selling to teenagers and an opportunity for one selling healthcare, home services or travel.
New technology raises costs for a business that must buy it and lowers costs for the business once it is running.
Train yourself to produce both. A factor that only ever looks like a problem in your answers will cost you marks on part (i) of most questions.

Change the product or service — reformulate, repackage, add a service, drop a line.
Change the market — target a different group, or a different region or country.
Change the process — automate, relocate, change supplier, change materials.
Change the people — retrain, restructure, recruit different skills.
Change the price — pass a cost increase on, or absorb it to protect volume.
Comply and demonstrate — for legal factors, put a policy and procedure in place and be able to show it was followed.