Unit 1 - The Business Environment (P5)
Describe the influence of two contrasting economic environments on business activities within a selected organisation (P5)
Describe the influence of two contrasting economic environments on
business activities within a selected organisation (P5)
The two contrasting environments I am going to look at are:
1. Economy in growth
Sainsbury’s PLC
Stability – If the economic environments are stable for Sainsbury’s then that means they can
make better-informed decisions because there is more stability within the economy. If the
economy in the UK is stable, Sainsbury’s are likely to have a higher turnover and be
profitable. Therefore, at a time like this Sainsbury’s may wish to introduce new lines or
perhaps expand or find a city or town where they may wish to introduce new stores. Their
suppliers will also benefit because they need to supply more products and that will give
them an idea if they need to increase their rates of production. If the economy is more
stable then there will be steady levels of employment and exchange rates. This means that
they are making more profit as customers have more money to spend.
Cost of borrowing money – When the economy is stable Sainsbury’s will be able to borrow
more finance if they wish to expand or move into a new country. This will also have an
impact on employment in Sainsbury’s and so will have a positive effect on the state of the
economy. If Sainsbury’s need funds they usually go to banks but only when the interest rates
are low. Recently due to Brexit, the interest has risen from 0.25% to 0.5% in November 2017
but it has increased slightly more in August 2018 from 0.5% to 0.75%. This shows that
borrowing money is very expensive right now. If interest rates are low then Sainsbury’s will
be willing to borrow as they can feel they can afford their repayments. This will increase the
demand for goods and services within their business and help economic growth.
Government support – The government provides us with new road networks, rail networks
and air structures. This means that if Sainsbury’s wants to develop one of its branches in a
new area then they need a road to access Sainsbury’s which will make it more convenient.
Sainsbury’s are helped by the government in area of planning policy. This has allowed them
to dominate the retail landscapes in many areas. Apart from this, the Government doesn’t
really help Sainsbury’s at all. Sainsbury’s are successful within their business and help
economic growth.
Unemployment rate – If the rate in unemployment is low then that means there are less
people unemployed. Therefore, demand for goods and services increases. This will have a
position impact for Sainsbury’s as they are able to employ more staff because of their
increase in demand for their products. Sainsbury’s can offer more training programmes and
staff can promote themselves within the Tesco business.
2. Economy in recession
Sainsbury’s PLC
Rate of inflation – Inflation means that there is a rise in the price of goods and services. As
of now the inflation rate is 1.7% but the government has predicted the target to be 2%. This
shows that the prices of products are increasing but not that much. Recently in the news,
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