Inflation damages businesses because it causes uncertainly. A rise in the rate of inflation might reflect a rise in the cost they have to pay; for example: * Employees will want more wages * Costs of materials may go up * Cost of fuel and energy may also rise. These rising cost will eat into the business profit. This keeps businesses to then have a choice to either keep prices constant or to see profits fall or raise to raise prices and perhaps lose out on competitors. The
This phase also heightens the threat of substitutes and mergers and acquisitions are common place. Rivalry among competitors is fierce as they seek to consolidate their position. Prices at this phase can also fall, putting a strain on profitability. From the case, we can see that low growth and stable profit margins are key characteristics. Despite overall stability in profit margins, due to the intense competition, earnings of individual firms can be volatile.
Situation Analysis Five Force: The force of Supplier is powerful, they sell raw materials at a high price to capture some of the industry's profits. The force of customer is powerful, too. Our auto-producing customers have the erratic production schedules. The competitive also struggling with earn decrease and production decrease. The threat of the substitution and new entry are weak.
Davis service group is affected by the Economic indicators that affects their business. Such as Provides employment- it would be booming, because people would have money to spend, affect the general environment within the area. This would enable to generate enough income into their business because they are able to expand their organisation within local and residential areas and also generate more employment and workers within their organisation. Inflation: Inflation is measured by looking at collective goods that customers buys from the organisation each month. Inflation can have a bad impact on Davis service group through many problems such as because their customers wouldn’t want to spend income on goods in their business because the pricing of goods would be high.
Many economists believe “that a rapid stock of the nation’s money causes inflation” (pg.169). The rate of inflation can affect borrowing power for a new business owner as, “the rate of inflation expected by the borrower and the lender will be influence by various interest rates” (pg. 169). When inflation is high, many lenders interest rate increase to compensate for the impact inflation has on their business and the decrease in purchasing power of money that has to be paid back in the future. Since, the FED set the interest rate in which the banks borrow from, Edgars’ ability to borrow enough money or establish a line of credit to start his business will be affected by inflation, interest rate and financial policies.
“but at the end of the day, the reality is that when you have to cut so much volume in production capacity, you have to look at your operations that are the most expensive to run, and Grand Falls-Windsor is one of them” . This clearly indicates that because of “slumping consumer demand for newspapers” is has become more costly to keep mills open. “the move comes as the company tries to maintain a high price for its product in a marketplace that has been in upheaval because of declining demand from publishers and turbulence because of currency change” . The owners are a key stakeholder because if costs begin to get too high, it is their decision whether the marketplace will eventually get better, or whether the decision to close in the only
Sainsbury’s Macro Environment 1) Economical factors Each government has an important impact on each company. Like other companies, Sainsbury was affected by a lot of economical factors as: * Taxation charges * Economic growth * Inflation * Exchange rates * Changes in income Each factor has a different impact on company. For example, the taxation charges force the company to increase the price of products to achieve the desired profit. If the taxation charges are low the price of products is lower and when the taxation charges are high, the price is higher. Another factor is inflation.
Since the UK is a net importer of oil, higher oil prices would damage economic growth more than it benefitted it, as we’d have to pay more as a country in order to acquire the oil that we needed. Oil being a large part of consumer consumption would also contribute to economic slowdown: the higher prices of petrol and other oil-related products would mean that overall consumption decreases as consumers are forced to pay a higher price on certain goods and services. Higher oil prices would also lead to decreased consumer confidence as consumers may not feel comfortable with having to pay so much for petrol or other oil-based products, and therefore would also result in a decrease in overall consumer spending. This would also have negative implications on businesses as well: a decrease in consumer spending would subsequently lead to a decrease in the revenues businesses are able to make due to decreases in consumer spending. A rise in oil prices would also directly affect business performance as oil is a cost of production to firms, especially to those which produce oil related products, hence reducing profits and limiting the amount of money that firms can reinvest.
As situations happen around the world the internal economy is being affected, the price of oil increases and more money in the market should be created, but this will affect the inflation, as more money is in the market, the GDP keep growing and the unemployment is decreasing. To balance the economic growth, lower the inflation, and make a reasonable rate of unemployment it is important to take in consideration that typically if money is released into the system the real Gross Domestic Product will increase, creating opportunities of work and decreasing the unemployment rate. After indentifying the tools used for the Federal Reserve and analyzing the influence this has with the money supply the Feds can add or take money into the system to control the levels of inflation, increase the Gross Domestic Product and reduce the
This is a long term effect because it occurred over a number of years and led to other factors such as the problem of inflation, which links with the population increase because as the resources became limited, prices for these resources increased as they were in higher demand. Therefore inflation then became another factor contributing to poverty. Inflation was another factor for the increase of poverty because the cost of living increased making it harder to afford the everyday supplies needed to survive. People's wages did not keep up with the rising prices making it difficult to survive especially those with low wages to start with, they were in a worse position. Buying simple supplies such as food cost more money, as a result they had less or no money to spend on anything else after purchasing food.