Commercial Awareness

[GabbyPalinskaite]

Hi! Just wondering how it is best to approach the question that asks for your understanding of how a business generates and maintains a profit?

 

[ZNadeem]

Hi! Just wondering how it is best to approach the question that asks for your understanding of how a business generates and maintains a profit?

• Introduce the Formula: Begin with the fundamental concept: Profit = Revenue - Cost. Explain that understanding this balance is crucial for any business, as increasing revenue and managing costs are the core drivers of profitability.
• Maximising Revenue: Discuss how businesses generate revenue by selling goods or services, diversifying offerings, or entering new markets. Use examples like a law firm increasing revenue through cross-border deals or niche practice areas.
• Minimising Costs: Highlight cost management strategies such as operational efficiency, outsourcing, or investing in technology. For instance, explain how law firms save costs through legal tech tools that streamline processes.
• Maintaining Profitability: Focus on the “maintain” aspect, emphasising how businesses adapt to challenges and future-proof operations through innovations like AI and tech. Use real-world examples, such as firms embracing AI for document review or predictive analytics to optimise decision-making.
• Incorporate Real-life Examples: Throughout your answer, weave in examples. This demonstrates commercial awareness and makes your response more engaging and tailored.