unit 1 p5 m2 RESUB

•Introduction

In this assignment I will discussing the contrasting economic environments on business activities within my two selected businesses.

•

1.The first business I will be looking into is Tesco. Tesco is a British multinational grocery and general merchandise store. There headquarters is located in Welwyn Garden City in England however, there are around 6,810 stores worldwide.

My other business is, Meningitis Now which is the UK’s largest Meningitis charity which is located in Gloucestershire in England yet there are not located elsewhere.

What is an economic environment

•The economic environment are the external factors in a business market. Such as; customer income,  advertising, availability, price, competition, GDP,  interest  rates, etc. They are factors which influence buyer behaviour and the economic environment is constantly changing which can either be a good or a bad thing for the economy and country. This is based on buying behaviour. If customers buy more then the economy will be stable and successful however if customers start buying less then the economy  would be weak and this could lead to a recession.

•When the economy grows and the customer demand and supply is increasing we call it economic growth and this is good for the economy as they are making more money because people are spending more on goods and services. Sometimes the economy can grow too much and this is called inflation.

•Inflation is the rate of the prices goods are rapidly increasing by and rising too high. This is extremely bad for the unemployed, people who have low income and people who earn a low wage. Supplier costs are going to increase as well which turns into a nightmare for the majority of people in the economy. 

The importance of stability

•If the economy is stable this will be a huge benefit for Tesco and Meningitis Now as their businesses will run smoothly.

•Tesco’s will make a lot of profit in the time the economy is stable and they may want to introduce new lines or thin about introducing new stores in a city where there is a high customer income to make more profit. Things like GDP, customer income and exchange rates will grow steadily meaning customers will have more money to spend.

•For Meningitis Now, when the economy is stable it means that the volunteers will still be able to volunteer because say the economy went into recession and people lost their jobs, they will need to use their time to find another job, maybe full time which means people wont be able to volunteer leaving Meningitis Now with not a lot of staff which can lead to it potentially shutting down because they are a small business an therefore do not have enough funds to keep it running without staff or essentials.

The importance of stability

•If the economy is stable this will be a huge benefit for Tesco and Meningitis Now as their businesses will run smoothly.

•Tesco’s will make a lot of profit in the time the economy is stable and they may want to introduce new lines or thin about introducing new stores in a city where there is a high customer income to make more profit. Things like GDP, customer income and exchange rates will grow steadily meaning customers will have more money to spend.

For Meningitis Now, when the economy is stable it means that the volunteers will still be able to volunteer because say the economy went into recession and people lost their jobs, they will need to use their time to find another job, maybe full time which means people wont be able to volunteer leaving Meningitis Now with not a lot of staff which can lead to it potentially shutting down because they are a small business an therefore do not have enough funds to keep it running without staff or essentialsWhat is a ripple effect

•The ripple effect is a period in which an individuals reduction in spending decreases and this effects peoples income and their ability to spend money.

•It is best described as a single action having a severe effect over several different businesses. The ripple effect has a lot of consequences including; income rises, economy growth, more jobs, unemployment decrease, productivity increases, spending increases etc.

•An example of this is when a business like e.g. Topshop loses a lot of profit, people lose their jobs and their will be less products on the shelve and no new stock would be coming into the store. Therefore, the customers base would decrease a lot and this affects Topshop massively.

How boom effects Tesco’s

•Boom is when the economy does extremely well and there is a high level of economic growth which means the wages of employees may increase., leading to unemployment decreasing. This then makes people spend more as they have more money to spend and increases the demand for goods and services.

•This is a positive factor for Tesco because customers will have more money to spend ensuring the business makes more money. This requires people to make the goods therefore a lot more people have jobs in a boom, causing less unemployment in the economy which is a good thing. This is also good for Tesco’s as they can employ people easily as there will be a lot of people wanting jobs and this is helping to reduce unemployment.

•On the other hand, it can have a negative effect on Tesco. One reason is because  it can lead to inflation. Another is because of their competitors because if more people have more money to spend they are going to want to spend it in a more high end store such as; Marks and Spencer's, Sainsbury's, Waitrose's. Also Tesco’s own brand F&F isn't going to sell because  customers don’t need to buy value products when they can buy it at a higher end store so this means Tesco’s need to rethink their advertising or branding to get more people interested.

How a recession effects Tesco’s

•Recession is when the goods and services purchased decrease and the economy is not growing, its going the opposite way. They are measured in 3 month periods and if they produce less than the previous 3 month then you are in a recession.

•In 2008 Tesco went into recession as customers were turning to the cheaper option stores for grocery's “Recession hits Tesco: Grocery giant’s sales fall to lowest figure in 16 years as shoppers turn to budget rivals” as a result of this, a lot of people lost their jobs  as there are less jobs are there are less jobs needed if less products and goods are being made and this leads to an increase in unemployment.

•Similarly, the government therefore need to pay for unemployment benefits and this is a disadvantage because they also are getting less from TAX and VAT because there are less people paying because less people have jobs. If the government put TAX down, then this will increase the amount of people buying services and goods therefore this will produce more jobs for Tesco’s as there are more products needing to be made.

•As Tesco’s are an extremely large business, going into  a recession will not ensure it needs to closed down as they have sufficient funds to get themselves out of a recession. What they can do to get out of it is by increasing product prices which is not a good thing for Tesco’s however in 2009 it was claimed that they have beat recession with the fastest sales growth in years.

Labour

•In businesses the labour force is so important. A business need experienced qualified workers who would increase sales and gain popularity for the business. Businesses want the best staff possible as there is a lot of competition.

•Topshop has a good name for having skilled staff and this is because it is an extremely successful business. They need these staff to be friendly and approachable for people to come in to the store and increase the sales. The business need to maintain their successful business therefore this means they can keep producing goods to increase sales. Topshop have various roles such as; supervisor, manager, sales assistant, store manager, assistant manager. Each different role requires different training.

•Meningitis Now is a charitable business and a voluntary work job and people volunteer to work there. A lot of people are very charitable and willing to help out and may want to be part of a charitable successful business such as Meningitis Now. It may be harder than topshop to get a job at Meningitis Now as people have to security checked, police checked and CRB checked to check they are not criminals. 

•In businesses the labour force is so important. A business need experienced qualified workers who would increase sales and gain popularity for the business. Businesses want the best staff possible as there is a lot of competition.

•Topshop has a good name for having skilled staff and this is because it is an extremely successful business. They need these staff to be friendly and approachable for people to come in to the store and increase the sales. The business need to maintain their successful business therefore this means they can keep producing goods to increase sales. Topshop have various roles such as; supervisor, manager, sales assistant, store manager, assistant manager. Each different role requires different training.

•Meningitis Now is a charitable business and a voluntary work job and people volunteer to work there. A lot of people are very charitable and willing to help out and may want to be part of a charitable successful business such as Meningitis Now. It may be harder than topshop to get a job at Meningitis Now as people have to security checked, police checked and CRB checked to check they are not criminals. 

Demand of products

•Demand is best described as the higher the price, the lower the demand will be. For example the more money something is the less the demand for that good. People will therefore go and buy something else like a substitute product or go to a different store.

•If the demand for a product increases, the curve will move to the left whereas if the demand for a product decreases then the curve will move to the right. there are a whole range of factors which can affect the demand of goods and some are;

1.Competition and competitors

2.Price and affordability

3.Level of income a customer gets

4.Advertising

5.Level of GDP (gross domestic products)

Continuing…

•Elasticity shows much demand will change when the price changes. Elastic demand is when you raise the price of most items, people will buy less as they will go buy substitutes so the demand goes down for that product. Examples of these products are; phones, computes, chocolate bars etc. When the price changes because of the elasticity the demand will change drastically. For example, if a Milky Way increased its price from 40p to 70p people would stop demanding it and buy a substitute therefore they will stop supplying so many of them as there will not be a high demand for them.

•On the other hand, inelasticity is when a price changes, the demand for that product doesn’t change by a lot as these products, goods and services are seen as necessity’s. Examples of these are goods like cigarettes, petrol and food as a whole as there are no substitutes for those products therefore people are not going to stop buying them and will cut down on other things.

Supply of products

•Supply is how much suppliers are willing to give to the businesses and organisation’s, it is how much they charge.

•In the graph, it is explained as follows- The more profit that is made means the more the suppliers want to supply their goods and services and this  is because firms are more willing to supply that good for a higher price. Therefore, if the price is going up then the more supply they will make.

•In the graph if the quantity goes down then the curve would go to the left. Yet if the quantity is going up because they are making more profit then the curve would shift towards the right.

•Businesses need to be able to have the right raw materials and required labour to turn it into goods and services to use. Also, they need to be able to produce the goods and services at a profit which the government can help the business if they need.

Supply of products

•Supply is how much suppliers are willing to give to the businesses and organisation’s, it is how much they charge.

•In the graph, it is explained as follows- The more profit that is made means the more the suppliers want to supply their goods and services and this  is because firms are more willing to supply that good for a higher price. Therefore, if the price is going up then the more supply they will make.

•In the graph if the quantity goes down then the curve would go to the left. Yet if the quantity is going up because they are making more profit then the curve would shift towards the right.

•Businesses need to be able to have the right raw materials and required labour to turn it into goods and services to use. Also, they need to be able to produce the goods and services at a profit which the government can help the business if they need.