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Summary BTEC L3 Business Diploma > Unit 1 - P3 & P4
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Anushka Dsilva – 40121289Unit 1 – P5 & M2
In this report I’ll be writing about the influences of two contrasting economic environments
on business activities. The business I be writing about is McDonalds. I will also compare the
challenges faced by the McDonalds for two different economic environments.
McDonalds is the world’s largest fast food hamburger chain in the world. It is a large scale
business as it serves over 60 million customers on a daily bases, is located in 119 countries
worldwide that have 35,000 outlets and still growing rapidly. McDonalds is recognized not
only for fast food, but also for their good customer relationship which has earned them a
positive reputation in the market.
Economic environment are external factors that have an effect on the performance of a
business and the economy as a whole in both good and bad ways. Some of these external
economic factors are interest rate, inflation, GPD (Gross Domestic Product) and consumer
confidences. These economic factors affect an organization like McDonalds act like an
external constraint over a business. That means that business has little control over these
factors and also the economic environment.
Below are some examples economic environments:
Boom is a period of time in which the economy is at the highest or could also be a period of
rapid growth. During this time the sales of product and service for a business is at its highest
point. As a result of increased demand of its product or services from consumers. This helps
the business to boost up its morale and as a result leads the business to increases their
investments. It also helps the business to build up customer confidences for them to
purchases more products and services from them. This leads to higher profit margins for
business.
Recession is period of time where economic growth slows down and the level of output may
actually decrease. This results in unemployment and companies losing confidence resulting in
reduced investment. During this period, business experiences a fall in their sales and business
tend to save rather than spend their capital.
Downturn/Slump is a period of time in which there is a prolonged decline in the GPD in the
economy. This results in more unemployment. During this period during this period, business
experiences a fall in their sales and business tend to save rather than spend their capital.
Recovery is the period of time where things start to get better. It happens when the
consumers begin to increase in their spending on goods and services. This enables businesses
feel a little more confident as consumers are helping to increases sales of the business
products and services. That then allows business to increases in there invest again and build
stocks.
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