Business Btec Task 2 Unit 7

There are many factors which effect the economic environment, factors such as Growth because more goods are being produced and consumed due to higher demands for products and services. Recession impacts the economic environment because in the time of recession income is low. This means people will be cautious on what they spend their money on. Labour also has a major effect because the more people that are working the better the economy. It means people can afford to purchase items allowing businesses to stay open and allow economic growth. If more people are unemployed they are unable to spend alot of money causing the economy to go into recession and undoing the economic growth. Spending power increase means the economy is generating more income.
The term business environment implies to external forces, factors and institutions that are beyond the control of an individual business organization.
GDP (Gross domestic product) is measured by the average income – the availability of goods and services produced within the company. If GDP falls it shrinks the economy e.g house prices decrease but if GDP rises it allows the economy to grow in affect house prices increase.
3 popular companies that are not UK based would include: * Apple which is based in USA * Samsung based in China * HSBC based in Hong Kong
3 popular UK based companies are: * Tesco * Aston martin * Virgin
The four elements of a business cycle are slum, recovering, boom and recession
Employment effects the economic environment because it means more people are generating income which can then be used to purchase items that help businesses stay open. If the number of employment decreased more business would be out of pocket and then be forced to shut down.
Stability is very important because it allows businesses to create short to medium term plans as a prediction for their existing products. This helps them make a projection for the businesses future and allows them to make changes that are necessary to future products.
The effect of instability has a negative impact on all aspects of the business world causing businesses to shut down. For example if a suppliers business doesn’t have stability and closes down all the business it supplies to will have to find another supplier who may charge double or maybe even triple the price. If the business cannot afford to pay the supplier they become bankrupt and close down and ever company affiliated with that business has lost out too.
Recession is caused by a shrink in the economy. It is also defined as ‘a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product (GDP), real income, employment, industrial production and wholesale-retail sales’ according to http://www.investopedia.com/ask/answers/08/cause-of-recession.asp ( this reference is pretty reliable as it was said by the national bureau of economic research. The effects of recession include rise in unemployment (people becoming redundant because companies can no longer afford to keep them). Change in life style- people can no longer afford luxury so switch to living a very simple life style. Decrease in investment because families need all the money they have at this point and businesses unable to afford to stay open so they close.
Factors that form the business environment include: * Political factors * Environmental factors * Social and cultural factors * Technological factors
A cost benefit analysis is an analysis of the cost effectiveness of different alternatives in order to see whether the benefits outweigh the costs. Its purpose is to determine if it is a sound investment/decision (justification/feasibility) and to provide a basis for comparing projects. It involves comparing the total expected cost of each option against the total expected benefits, to see whether the benefits outweigh the costs, and by how much. (http://en.wikipedia.org/wiki/Cost%E2%80%93benefit_analysis Wikipedia is not always reliable but I cross referenced it with http://management.about.com/cs/money/a/CostBenefit.htm)