Syllabus: AQA - AS and A Level Business
Module: 3.7 Analysing the Strategic Position of a Business (A-level only)
Lesson: 3.7.7 Analysing the External Environment to Assess Opportunities and Threats: The Competitive Environment

Introduction

This article supports the AQA A-level Business curriculum, specifically section 3.7.7: Analysing the External Environment to Assess Opportunities and Threats: The Competitive Environment. This is a critical component of the A-level only content, helping students explore how competitive forces influence strategic decision-making in real organisations.

The unit plays a dual role—supporting curriculum mastery and deepening workplace readiness, a key pillar in Enterprise Skills’ mission to develop commercial awareness for all students. It also contributes to meeting Gatsby Benchmark 4, by linking academic content to career contexts and decision-making scenarios.

Key Concepts

In line with the AQA specification, students must grasp:

• Porter’s Five Forces Framework:

  • Threat of New Entrants: How barriers like capital requirements or regulation influence competition.

  • Bargaining Power of Buyers: Customers’ influence on pricing and quality.

  • Bargaining Power of Suppliers: Supplier control over prices and availability.

  • Threat of Substitutes: Alternative products/services that may reduce demand.

  • Industry Rivalry: Intensity of competition among existing firms.

• Strategic Implications:

  • How businesses adjust functional areas (marketing, operations, HR, finance) in response to competitive pressures.

  • The importance of differentiation, pricing strategies, and innovation in maintaining competitiveness.

• Analysing Opportunities and Threats:

  • Using Porter’s framework to evaluate industry attractiveness.

  • Integrating insights into SWOT analysis and strategic planning.

Real-World Relevance

Porter’s Five Forces isn’t just a classroom model—it’s widely used in boardrooms. Consider these recent examples:

• UK Grocery Sector: Tesco and Sainsbury’s face increased rivalry from discount entrants like Aldi and Lidl, who exploited low supplier power and high buyer sensitivity to undercut prices.

• Streaming Industry: Netflix’s shift toward advertising plans responds to threat of substitutes like Disney+ and YouTube, and rising buyer power as consumers churn for better value.

• Pharmaceuticals: The bargaining power of suppliers surged during COVID-19, with limited vaccine raw material availability influencing pricing, timelines, and global strategy.

These examples show students how strategic thinking plays out across sectors—supporting their development of commercial literacy and workplace confidence.

How It’s Assessed

This unit appears in Paper 1 and Paper 2 of the AQA A-level Business assessment, often linked to 10- or 20-mark questions focused on strategic analysis. Key exam features include:

• Command Words: Analyse, Assess, Evaluate—students must demonstrate clear reasoning, not just knowledge.

• Application to Case Study: Successful responses link Five Forces to the context provided in the scenario.

• Structured Argument: Higher marks are awarded for balanced answers that weigh options and make justified recommendations.

• Synoptic Thinking: Integration with other syllabus areas like marketing mix, innovation, or operational efficiency is often expected.

Encourage students to apply models practically—not just recall definitions.

Enterprise Skills Integration

This topic sits squarely within three key strategic themes from the Enterprise Skills Framework:

• Commercial Awareness: Understanding market dynamics, strategic positioning, and stakeholder pressures.

• Decision-Making & Problem-Solving: Applying structured models (like Porter’s) to evaluate strategic responses.

• Workplace Readiness: Developing the analytical mindset used in roles like consultancy, finance, or marketing.

Enterprise Skills simulations give students hands-on experience of managing product pricing, reacting to new entrants, and repositioning their business—building the problem-solving confidence employers demand.

As one student put it:

“This helps me get into the mindset of a business owner—especially when I’m asked a 20 marker on what a business should do.”

Careers Links

This topic aligns with Gatsby Benchmarks 4, 5 and 6, particularly through:

• Benchmark 4: Students link theoretical models to strategic roles across industries.

• Benchmark 5: Use real case studies and employer-led insights to show how companies analyse competition in practice.

• Benchmark 6: Replicate workplace strategy sessions using simulated business scenarios or employer challenges from Skills Hub Futures.

Relevant careers include:

• Management Consultant

• Business Analyst

• Marketing Strategist

• Financial Planner

• Innovation Officer

Tools such as the Employer Challenge Library or Decision Matrix Templates in Skills Hub can support these links.

Teaching Notes

Common Pitfalls:

• Students often list Five Forces without applying them to context.

• Confusing “high” vs “low” power—use real product examples to clarify.

• Missing the strategic link—why does this matter to decision-making?

Teaching Tips:

• Use mini case studies (e.g. comparing Uber and traditional taxis) to explain each force.

• Set up class debates: “Is supplier power rising or falling in fast fashion?”

• Use Skills Hub simulations to let students “feel” the model’s application in live decision-making.

Extension Ideas:

• Ask students to apply Five Forces to a business of their choice and present strategic recommendations.

• Connect this to AQA Unit 3.8 (Choosing Strategic Direction) to show how external analysis informs future plans.