Essay
UNIT 1 P5 – Describe the influence of two contrasting economic environment’s on business activities within a selected organisation (LEVEL 3 BUSINESS DIPLOMA)
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Unit 1 Bethanie BrownP5 – Describe the influence of two contrasting economic environment’s on business activities within
a selected organisation
There are many different economic environments and influences that affect a business regardless of
country and recognisability of the company. Though these effects can potentially be extremely
damaging, there are ways for the company to recover and improve.
To summarise the meaning of economic environment are factors external to a business that cause
effect such as employment, income, interest rates etc.:. The key influences of the causation of these
factors are: consumers, bankers, the government and suppliers. Bellow I will be highlighting two key
economic environment influences that will greatly effect many organisations.
Coca-Cola as a company is a well-established brand that is most defiantly effects by all these factors,
bellow I will be explaining the effects on businesses in general including Coca-Cola.
The overall meaning of recession refers to a period of time at which there is an economic decline
and as an outcome, trade is reduced. There are many factors that cause a recession and those are as
follows:
Credit Crunch – This is the shortage of finance in the economy, due to banks and other investors less
willing to lend money to those looking for a loan. This results in businesses especially not able to
borrow money to pay off their expenditure, which causes the level of debt of businesses and family’s
being greatly increased.
Falling house prices – this is linked with the credit crunch which causes a shortage of mortgages
being lent and paid back. This result in family’s less willing to invest in companies as their bills and
living essentials become their first priority.
Inflation – Inflation causes incomes to be reduced, which again limits the public’s spending.
Consumer Confidence – with job loss and reduced finance in the economy it causes consumers’
confident to decrease resulting in a decrease of spending.
The UK recession
During 2008 to 2013 the UK suffered through its greatest recession, the main course of this was due
to the banks not willing to lend, communally known as the credit crunch. It was a period of time
where unemployment was at its highest and spending was at its lowest. More than 200,000 small
businesses closed and over 8.7million jobs were lost. Over time the UK recovered but barely so. The
graph bellow shows how though the country is recovering it still has very far to come.
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