The dynamic business world: change, new ideas and consumer power

How does a business with thousands of shops vanish in about ten years? In the mid two thousands, Blockbuster had thousands of video rental shops around the world. On Friday nights, families queued in those shops to rent a film for the weekend. Within about ten years, almost every one of the shops had closed, and nobody had passed a law against them. The obvious guess is one bad manager or one bad year. So what wiped out a business that big? Keep that empty rental shop in mind; the end of this video says what emptied it.

A business environment is everything outside a business that affects it, such as its rivals, its customers, the economy and the law. A competitive environment means other businesses are trying to win the same customers, with their prices, their new products, and new firms joining the market. Which means a business must keep its prices, quality and service attractive, or customers go elsewhere. One examiner's report calls a question on what a competitive market is well answered, with students showing a good grasp of it. If competition already makes sense to you, you are in good company. A dynamic environment is one that keeps changing over time. Dynamic is about change, not about where customers live. Spokeshare runs three hundred hire e-bikes in a university city, and riders hire them through an app. Two students explain one way it operates in a dynamic environment. The first writes: Spokeshare is in a dynamic environment because students from all over the world use it. The second writes: e-bike batteries improve every year, so Spokeshare's three-year-old bikes now go less far on a charge than newer rivals' bikes. Which means it must replace bikes sooner than planned, or riders switch to the newer scheme. Which answer explains a dynamic environment, the first or the second? Take your pick, and hold on to your reason before I show you. The second. It names a change over time, better batteries, and what that change means for Spokeshare. The first is about where customers come from, which has nothing to do with change. One examiner's report, on a question about a business in a dynamic environment, says a common wrong answer took dynamic to mean having customers from all over the world. The fix is to define dynamic as changing over time, then name one change and what it does to the business. An innovative environment is one where new ideas, new products and new ways of working keep appearing. Innovation means turning a new idea into a product, or into a new way of working. A bakery that starts taking orders through its own phone app has innovated. Now pick one out. Which cafe is innovating? A, one lowering its prices. B, one delivering by electric cargo bike. C, one opening a second branch. B. Delivering by cargo bike turns a new idea into a new way of working. Lower prices and a second branch do more of the same. One examiner's report, on a question about innovation, says many students did not answer with innovation relating to new ideas. The same report says defining key terms and explaining what they mean is something schools should work on. So start each answer with a one-line definition in new words, then give the example.

Five kinds of change keep a business's world moving: technology, the economy, the law, environmental expectations, and what consumers want. Technology can make a product better, cheaper or unwanted. As phone cameras improved, fewer people bought cheap digital cameras, so camera makers lost sales. The economic situation changes how much people have to spend. When prices rise faster than wages, a restaurant sees fewer diners ordering a dessert. Legislation, which means new laws, changes what a business must do. When England banned some single-use plastic cutlery, takeaways had to switch to wooden or paper forks, at a higher cost. Environmental expectations rise, as customers expect businesses to waste less and pollute less, so a clothes shop may have to show where its cotton comes from. And what consumers want moves on, as tastes and habits change, like more people choosing oat milk in their coffee. How each of these hits a business in depth has its own video later in the course. Now a new case. A city charges older, polluting vans to enter its centre. Which of the five kinds of change is that? The law. Pollution is behind it, but what forces the change is a new rule, so a delivery firm with old vans must replace them, or pay every day it enters the centre. Change is a threat to a business that stands still, and an opportunity for a new one. New business ideas come about through changes in technology, changes in what consumers want, and products becoming obsolete. Obsolete means no longer wanted or used, because something better has replaced it, the way phone maps replaced the road atlas. LoopBox rents reusable takeaway boxes to cafes, and customers can return a box to any cafe in the scheme. Two students explain why the idea came about. The first writes: LoopBox washes the boxes and delivers them back to the cafes. The second writes: many customers now dislike single-use plastic and want takeaway food with less waste. So cafes offering a reusable box attract them, which creates demand for a business that supplies the boxes. Which one gives the reason the idea came about? Pick one, then hold on to it before I reveal it. The student who mentions single-use plastic. The other one describes what LoopBox does, a feature of the business, not the reason the idea appeared. One examiner's report, on a question about why a business idea came about, says that where answers went wrong, students had stated a feature of what the business did rather than the reason for doing it. The fix is to find the change in the case, a new technology or a new want, and say how it created demand for the idea.

A consumer is the person who uses a product or service, and consumers differ in age, income, tastes, needs and where they live. The consumer's roles and power appear on some courses and not others. If they are on your specification, this final part is yours. Which means one business can serve very different groups, like a cinema selling cheap morning tickets to pensioners and late shows to students. Dyfi Dough is a pizza van that parks in a different Mid Wales town each night, and its consumers play several roles in the business. They create demand, because the van only goes where people will buy. They are the end users, who eat the pizza, and they pay for it. They make informed choices, comparing the van with the chip shop down the road. They know their consumer rights, so an undercooked pizza gets a refund. And they give feedback. After each evening, Dyfi Dough's customers post reviews and photos online. Now build the chain yourself. What does that feedback let the owners do, and what does it lead to? The owners can see which pizzas people love and which get left half-eaten, so they can drop the slow sellers and make more of the favourites. And because hundreds of local people read those reviews, good feedback brings new customers to the van the following week. Consumer choice and power have grown, because of online shopping, price comparison sites, reviews and social media, and more competitors. Which means a business that disappoints customers now loses them faster. One bad review, seen by a whole town, can turn away far more of Dyfi Dough's customers than it could before social media.

Over to you for the recap, and most of it is new cases.

In new words, what is a competitive environment?

Other businesses are trying to win the same customers, with their prices, products and new firms joining the market.

Now a taxi firm loses fares when a ride-hailing app arrives in town. Which kind of change caused that?

Technology. A new app gave riders another way to book, and the old firm's fares fell.

A different question. A student says a dynamic environment means selling in many countries. What is wrong with that?

Dynamic means changing over time. Where a business's customers are has nothing to do with change.

Now a launderette's customers start posting reviews. Which consumer role is that, and what can the launderette do with it?

Giving feedback. The launderette can see what customers complain about, such as broken dryers, and fix it before they go elsewhere.

That empty rental shop now has its explanation. Blockbuster's world was a dynamic environment. Fast broadband and streaming arrived, which was a change in technology. People wanted films at home, at once, with no late fees, which was a change in what consumers wanted. The rental shop became obsolete, and new business ideas, such as the streaming services, took its customers. That is what wiped it out: no law and no single bad year, but the world around the business changing.

If the rental shop now makes sense, give this a thumbs-up, and there's no need to see this twice. If it has not settled yet, save it, because it comes with the questions: each new case you try makes it firmer.

That wraps up this chapter. The next chapter is How business decisions are made: functions, numbers, data and context. Hopefully that's next in your feed, but if not, search for ScholaFly B U oh two, oh oh.

Every other video is on scholafly.com too, easy to search by video code or by keyword. Whatever you're revising, go there and have a look, or, watch the next video.