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Economic Environments Essay

Recession A significant decline in activity across the economy, lasting longer than a few months Trough The stage of the economy’s business cycle that marks the end of a period of declining business activity and the transition to expansion. BoomA period of time during which sales of a product or business activity increases very rapidly. RecoveryA period of increasing business activity signalling the end of a recession. GDPThe monetary value of all the finished goods and services produced within a country’s borders in a specific time period. Economic GrowthAn increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Capitalization In accounting, it is where costs to acquire an asset are included in the price of the asset. NationalisationRefers to the process of a government taking control of a company or industry. InfrastructureThe basic physical systems of a business or nation. Transportation, communication, sewage, water and electric systems are all examples of infrastructure. PrivatisationThe transfer of ownership of property or businesses from a government to a privately owned entity.

4b) Now briefly describe the two different economic environments you have chosen and explain the effects that the two environments would have/did

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have on your organisation (P5 part).

Within my selected organisation, Tesco, there are 2 important economic environments that have an influence on business activities. Both economic environments will have a different way on affecting Tesco. The economic environments are growth and recession. Economic growth occurs when more goods are being produced and consumed, and incomes are rising. A growth company tends to have very profitable reinvestment opportunities for its own retained earnings. Economic growth will affect Tesco as it would increase their profits due to more people wanting more products and wanting to spend their money. As people have more money to spend on luxuries instead of the essentials it means that the higher value products will be brought. For example the Andrex toilet rolls will be brought instead of Tesco value, because of this it means more money is being spent in the store which is an advantage for Tesco. Recession occurs when people involved in business become more cautious and: * Customers cut back on spending, and start to save more

* Manufactures and sellers cut back on their orders, produce fewer goods and start to cut back costs in general, including by laying off workers. Because economic recessions will put Tesco’s customers under money worries they will only be purchasing from the store, instead of what they want; only what they need. Examples on what Tesco customers would want include: chocolate, ice cream, sweats, and walker’s crisps instead of Tesco value, the luxuries. Examples on what Tesco customers need include: toothpaste, milk, bread and more, just the essentials.

4c) Select at least five different business activities (such as recruitment, financing, product design, supply chain, marketing) and, in a table format, explain how the organisation might have to alter them and why, to suit the two different economic climates (M2).

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