Responsibilities Of Odeon And UCI Cinemas Group And Its Business Environment
ODEON AND UCI CINEMA GROUP AND ITS BUSINESS ENVIRONMENT
By Viktoriya Nikolaeva Yordanova
BADM 004 Business Environment
Advanced Diploma in Accounting and Finance
London College UCK
08 February 2010
List of contents
Summary Page 3
Identifying the mission, objectives and responsibilities of ODEON and UCI Cinemas Group Limited and its environment Page 4
Conclusion Page 12
References Page 13
Summary
There are many governmental and industrial policies, as well as social and natural and other influences which affect the UK economy today. These are divided into two separate, but interdependent, business environments – the macroeconomic and the microeconomic environments. …show more content…
To better understand what they are and what their effects are on business we are going to look at the Britain’s best known cinema company, namely ODEON and UCI Cinemas Group Limited.
Identifying the mission, objectives and responsibilities of ODEON and UCI Cinemas Group Limited and its environment
The Company
ODEON and UCI Cinemas Group Limited is a limited liability partnership registered in England.
Its details are as follows:
Registered office: 54 Whitcome Street London WC2H 7DN United Kingdom
Registered in England: No: 01854132 ODEON and UCI Cinemas Group LLP (referred to simply as OUCG) is the only subsidiary of ODEON and UCI Cinemas Holdings Limited (set up in 2007 with the sole purpose of refinancing OUCG), which in turn is a subsidiary of the private equity firm Terra Firma.
As a service provider OUCG operates in the tertiary sector of the economy.
As we know, in the basis of every good business is a good management which always has an idea of where it wants the business to be in the future. And that is the mission statement.
The Company is keeping true to its mission of delivering excellence and offering pioneering technology for the optimum film viewing experience. This is being achieved because all of its employees share its values of team work within an empowering environment where every day is different and everyone works together to achieve the OUCG’s goals and …show more content…
ambitions.
Objectives are then set in order to achieve those business goals and these are set out in the “Our Strategy†section of the Chief Executive’s Review of the “ODEON and UCI Cinemas Annual Review 2008†report. They are to leverage the benefits of scale achieved after the integration of the ODEON and UCI businesses, to grow the sales per customer and to improve the business by utilising the available technology – website, point-of-sale infrastructure and digital projection (3D and IMAX) to offer an alternative content offering (opera, live Formula One racing, international football, contemporary music).
OUCG is a multinational business which currently operates in seven European markets: United Kingdom, Portugal, Spain, Italy, Ireland, Austria and Germany. In the first four countries it is the market leader, and in the other three countries it ranks second, third and third respectively. It ranks first in Europe with a total number of cinemas and screens standing 200 and 1,802 respectively.
In the UK it holds a 27 percent share of the local market (measured by Box Office).
Revenue for the Group was up 6 per cent year-on-year. Although EBITDA (earnings before interest, tax, depreciation and ammortisation and one-off items) was up by 5 percent to 72 million pounds, OUCG made a loss of 53.2 million pounds, 11.2 million more than in 2007.
There has been increased investment to improve customer experience through refurbishment and introduction of new technology. This has benefited the Group in that it has not seen any substantial decrease in attendance or revenue due to the global economic recession. Cinema has proved to be a recession proof business. OUCG has opened another flagship cinema in the UK – in Liverpool. The Leicester Square flagship ODEON has remained the preferred location for a global film premiere contributing to the success of the business.
The Stakeholders
Of course there are a lot of stakeholders in OUCG; however, some of the most important ones are the investors, customers, employees, or a trade union, and the government. Progress has been made “to source, promote and merchandise healthier food alternatives†in response to the wide spread concern by the public and the government about health and wellbeing. These include the use of less sugar, offering larger size of bottled water and offering fruit smoothies.
Disabled customers are also well catered for. Only 5 of the 105 cinemas in the UK are not equipped with audio description and sub-titling facilities, and those are being looked into. As an equal opportunities employer OUCG considers all job applications accordingly and tries to accommodate disabled employees.
OUCG has also invested in activities to reduce its environmental impact. It is changing cinema lighting to use LED bulbs to reduce energy consumption. Staff awareness has contributed towards reduction of the energy and gas consumption – reportedly down by 4 percent in 2008. Toilet facilities are being updated to improve efficiency and reduce water consumption. A cup recycling pilot scheme has been introduced.
Employees are offered development and training programmes to facilitate career advancement and personal development with view of improving performance. A reward and recognition strategy has been employed to make sure that OUCG is offering its employees “market competitive rewards packagesâ€. The necessary structure has been put into place to ensure effective communication between management and employees or their trade union representatives.
The government is very interested in the survival of any business as this would keep unemployment numbers down and will also contribute to the economy. It is also interested that OUCG is adhering to the law by providing equal opportunities for employment, having health and safety policies in place and implementing them, not monopolising the market, and contributing to the local community. To help implement the latter OUCG is supporting two recognised national charities, The Variety Club and the NSPCC, by organizing local and national events.
The macroeconomic environment
“Business organisations operate in an economic environment which shapes, and is shaped by, their activities†(Worthington, 2006, page 82). The macroeconomic environment is the influences or factors which affect the whole industry within which the business operates, such as changes in the social, political, natural, technological, legal and regulatory and economic environment. These are all factors which influence the organisation but cannot be influenced by it. An analysis will show the changes which are most likely to happen and affect the business and its competitors. The microeconomic environment is the immediate business environment of the organisation and is concerned with customers, finance, local community, suppliers, competitors, labour and industrial relations (Buckley, 1994). The micro environmental factors influence the organisation but are also influenced by it.
The macro and micro economic factors depend on the economic system that the local government chooses to govern by. There are three different types of economies: the centrally planned, the free-market and the mixed economy. In a centrally planned economy the government has total control of what is produced, in what quantity and also sets the price for the end product. This can happen because the government owns and/or controls the major economic resources; it decides on the targets for production and consumption and distributes resources accordingly. The planned economy requires “a high degree of co-operation and co-ordination between sectors and enterprises†(Worthington, 2006, p83) and good leadership and management skills of the political party at power.
The free-market economy, on the other hand, represents the complete opposite to the planned economy. The resources are produced and allocated and priced in accordance with their demand. The power of supply and price determination rests in the hands of the privately owned organisations or the individuals who own the resources. It is the market which dictates the economy, and not the opposite.
Operating a nearly free-market economy, but with governmental interventions in some areas of the business activities, is the most widespread type of economy nowadays. The most common areas of intervention are the provision of public services (healthcare, police, defence, law courts, fire services, and education), “the protection of employees and the consumer, to control business and to regulate the level of economic activity†(Buckley, 1994, p.11). The UK is a prime example of a mixed economy. The state owns shares in commercially operated enterprises, examples of which are the recently nationalised Northern Rock bank, the NHS, and the BBC. Local government and government agencies are financed by the taxpayer, and through borrowing, and exercises their influence by operating regulatory services, for example issuing licenses and permits. Control is also exercised through subsidies. These can be for different purposes – reduction of pollution, to increase employment, to regenerate an area.
The social and natural environment
The natural environment consists of all those natural factors which affect business organisations, for example storms, floods, earthquakes, heat, and others.
These are all factors which neither consumers nor businesses can change.
The social environment represents those factors in the external environment which reflect the consumers’, and society’s as a whole, attitudes, beliefs and behaviour towards the business’ activities. The way a business reacts to the social environment and its changes is known as corporate social responsibility (CSR), or just social responsibility. OUCG’s CSR activities have already been discussed.
CSR is also implemented internally. As already mentioned, employees are offered skill enrichment opportunities to enhance their abilities and performances. If employees have more disposable income they will spend more in local businesses and so will be supporting the growth of the local economy.
The effects of industrial policies
The UK government has a number of “industrial policies†in place to try and influence the industrial and commercial environment. These include attempts at direct industrial interventions, policies concerning competition and monopoly control, privatisation policies, regional policies to influence industrial locations and those aimed at economical regeneration of certain
localities.
Business activities are governed by these policies, whether it brings social benefits or imposes social costs. More often than not, the social benefits intended outweigh the costs. If a business benefits the society it is rewarded with subsidies and grants, but if it incurs more costs it is discouraged through a system of fines, taxes and legislation.
OUCG has been affected by the competition and monopoly policy. The Competition Commission (CC) is an independent public body which helps “ensure healthy competition between companies in the UK for the benefit of companies, customers and the economy†(www.competition-commission.org.uk). When the ODEON merged with the UCI Cinemas the Competition Commission asked that 11 cinemas be sold off before the merge can go ahead. This was because the merger fell into one of the CC categories for investigation.
The macroeconomic policies and the influence of the global economy
As already mentioned, the UK is a mixed economy. It is, by large, acting as a free-market economy but the government exercises its influence through different macroeconomic policies aimed at achieving economic growth, control inflation, improve the level on employment in the UK, improve living standards, and achieve a favourable balance of payments (control public borrowing, control import and export levels and others), and a stable exchange rate. These policies can affect the whole country or can be regional.
Fiscal and monetary policies
Policies that affect the whole country include the fiscal and monetary policies. “Fiscal policy involves the use of government spending, taxation and borrowing to influence both the pattern of economic activity and also the level and growth of aggregate demand, output and employment†(tutor2.net). There is usually a time lag between the government’s decisions to spend and their implementation. The effect of such spend, however, is felt immediately.
The monetary policy involves the use of interest rates to control the level and rate of growth of the aggregate monetary demand in order to control the economy. It is the Bank of England that has been charged with the task of overseeing the monetary policy and has “operational independence†to set interest rates so as to maintain price stability and achieve sustainable economic growth and high level of employment. The use of monetary policy can clearly be seen in the current economic downturn as the Bank of England has repeatedly lowered the interest rate, as low as 0.5 percent, to try and increase consumer spending and encourage investment as the cost of borrowing has decreased.
Inflation control
The UK government has adapted the Consumer Price Index as a new measure of inflation with a target CPI of 2 percent. Other indicators of change in inflation are the changes in monetary aggregates and changes in the exchange rate.
Control of unemployment levels
The increase of investment is likely to raise the level of employment. Conversely, rising level of unemployment affects the efficient use of resources and puts a strain on the public services. The effects of unemployment on the business are two-fold. On one hand, high levels of unemployment imply a pool of labour readily available and generally at a labour cost lower than that of low unemployment. On the other hand, there is less disposable income to go around and sales may fall. There are three types of unemployment: cyclical, structural and technological. The first is caused by general deficiency in demand, the second – by deficiency in demand for the goods of a particular industry, and the third – by the introduction of new labour-replacing technology.
The balance of payments
The balance of payments is the net balance of credits (income) and debits (expenditure) occurring from the country’s international trade over a certain period of time. The current balance of payments, as of the third quarter of the 09/10 financial year, stands at a deficit of £4.7 billion, down from nearly £8 billion the same time last year, according to the Office of National Statistics. The general trend is of reducing the deficit on the balance of payments and this is regarded as a ‘favourable’ balance of payments situation.
Controlling public borrowing and the exchange rate
A public borrowing situation occurs when the government’s annual revenue is in deficit (income is less than its expenditure) and in order to retain the same level of public services it has to borrow money. A continued borrowing over time results in the accumulation of National Debt. A persistent high level of public borrowing can result in increase of interest rates; inflation, growth and the balance of payments can also be affected by the lack of investments and confidence in the government’s abilities to control the economy.
The exchange rate is a measure of the external value of the British pound – how much of a foreign currency can £1 buy. The fluctuations of the exchange rate can affect the value of imports and exports and, thus, influence business activities, the inflation and the balance of payments.
The global economy
The global economic recession has prompted governments to slice interest rates in the hope it will curb inflation and attract investment to ease the strain on the ever growing National Debt. Some businesses find themselves having to downsize or even close down for the fear, or reality, of lack of sales. It has raised unemployment levels even higher resulting in the 25 percent rise in individual insolvencies in the last quarter of 2009 (The Financial Times online, 2010). Because of the bigger size of the pool of labour the remuneration packages are smaller. Employees are having to deal with pay rises being put on hold, or even take pay cuts, just to stay in employment. The balance of payment is also suffering because of the drop in the pound sterling value which has made imports even more and exports even less competitive on the UK and international markets.
As already mentioned, the widespread rise in concern within businesses about what the future holds is not of great importance for the OUCG where attendance numbers have not fallen significantly to cause concern and total employee numbers for UK and Ireland stand at 5,593.
Conclusion
It has been made clear that great many factors have influenced ODEON and UCI Cinemas Group’s decision making process and business activities. These factors have come from different sources but have helped to make OUCG what it is today – the market leader in film screening, and its brand name “Fanatical about film†is growing stronger despite of the global recession. And in the words of OUCG’s Chief Executive Officer, Rupert Gavin, “during recession, cinema ticket sales often rise†(as quoted by Reuters, January 2010). ODEON and UCI Cinemas Group Limited has proved one of the very small number of recession proof businesses in Britain today.
References
Leach, R. (2006). The Investor’s Guide to Understanding Accounts. Petersfield: Harriman House Publishing. P.59 and 74.
[Anon.]. (2010) External business environment [online]. Tutor2u.net. Available from: http://tutor2u.net/business/gcse/external_environment_introduction.htm. [Accessed 6 February 2010].
Buckley, M.W. (1994). The Structure of Business. 3rd ed. Harlow: Addison Wesley Longman Limited
Cohen, N. (5 February 2010). Individual insolvencies jump 25%. The Financial Times Online. [online]. Available from: http://www.ft.com/world/uk/economy. [Accessed 8 February 2010].
Competition Commission. (2010) Competition Commission - About us. [online]. www.competition –commission.org.uk. Available from: http://www.competition-commission.org.uk/about_us/index.htm. [Accessed 7 February 2010].
ODEON and UCI Cinemas Group LLP. (2009). Corporate Structure and Statutory Accounts. ODEON and UCI Cinemas Group. [online]. Available from: http://www.odeonanducicinemasgroup.com/corporatestructure.html. [Accessed 1 February 2010]
ODEON and UCI Cinemas Group LLP. (2009). ODEON and UCI Cinemas Annual Review 2008 ODEON and UCI Cinemas Group. [online]. Available from: http://www.odeonanducicinemasgroup.com/pdf/ar08/ODEONUCI_AR08.pdf . [Accessed 1 February 2010]
Office of National Statistics. (2009) Balance of Payments - 2009 Q3: UK current account deficit remains unchanged as a percentage of GDP. [online]. Office of National Statistic. Available from: <http://www.statistics.gov.uk/cci/nugget.asp?ID=194>. [Accessed 7 February 2010].
Worthington, I. and Britton, C. (2006). The Business Environment. 5th Edition. Harlow: Prentice Hall
By Viktoriya Nikolaeva Yordanova
BADM 004 Business Environment
Advanced Diploma in Accounting and Finance
London College UCK
08 February 2010
List of contents
Summary Page 3
Identifying the mission, objectives and responsibilities of ODEON and UCI Cinemas Group Limited and its environment Page 4
Conclusion Page 12
References Page 13
Summary
There are many governmental and industrial policies, as well as social and natural and other influences which affect the UK economy today. These are divided into two separate, but interdependent, business environments – the macroeconomic and the microeconomic environments. …show more content…
To better understand what they are and what their effects are on business we are going to look at the Britain’s best known cinema company, namely ODEON and UCI Cinemas Group Limited.
Identifying the mission, objectives and responsibilities of ODEON and UCI Cinemas Group Limited and its environment
The Company
ODEON and UCI Cinemas Group Limited is a limited liability partnership registered in England.
Its details are as follows:
Registered office: 54 Whitcome Street London WC2H 7DN United Kingdom
Registered in England: No: 01854132 ODEON and UCI Cinemas Group LLP (referred to simply as OUCG) is the only subsidiary of ODEON and UCI Cinemas Holdings Limited (set up in 2007 with the sole purpose of refinancing OUCG), which in turn is a subsidiary of the private equity firm Terra Firma.
As a service provider OUCG operates in the tertiary sector of the economy.
As we know, in the basis of every good business is a good management which always has an idea of where it wants the business to be in the future. And that is the mission statement.
The Company is keeping true to its mission of delivering excellence and offering pioneering technology for the optimum film viewing experience. This is being achieved because all of its employees share its values of team work within an empowering environment where every day is different and everyone works together to achieve the OUCG’s goals and …show more content…
ambitions.
Objectives are then set in order to achieve those business goals and these are set out in the “Our Strategy†section of the Chief Executive’s Review of the “ODEON and UCI Cinemas Annual Review 2008†report. They are to leverage the benefits of scale achieved after the integration of the ODEON and UCI businesses, to grow the sales per customer and to improve the business by utilising the available technology – website, point-of-sale infrastructure and digital projection (3D and IMAX) to offer an alternative content offering (opera, live Formula One racing, international football, contemporary music).
OUCG is a multinational business which currently operates in seven European markets: United Kingdom, Portugal, Spain, Italy, Ireland, Austria and Germany. In the first four countries it is the market leader, and in the other three countries it ranks second, third and third respectively. It ranks first in Europe with a total number of cinemas and screens standing 200 and 1,802 respectively.
In the UK it holds a 27 percent share of the local market (measured by Box Office).
Revenue for the Group was up 6 per cent year-on-year. Although EBITDA (earnings before interest, tax, depreciation and ammortisation and one-off items) was up by 5 percent to 72 million pounds, OUCG made a loss of 53.2 million pounds, 11.2 million more than in 2007.
There has been increased investment to improve customer experience through refurbishment and introduction of new technology. This has benefited the Group in that it has not seen any substantial decrease in attendance or revenue due to the global economic recession. Cinema has proved to be a recession proof business. OUCG has opened another flagship cinema in the UK – in Liverpool. The Leicester Square flagship ODEON has remained the preferred location for a global film premiere contributing to the success of the business.
The Stakeholders
Of course there are a lot of stakeholders in OUCG; however, some of the most important ones are the investors, customers, employees, or a trade union, and the government. Progress has been made “to source, promote and merchandise healthier food alternatives†in response to the wide spread concern by the public and the government about health and wellbeing. These include the use of less sugar, offering larger size of bottled water and offering fruit smoothies.
Disabled customers are also well catered for. Only 5 of the 105 cinemas in the UK are not equipped with audio description and sub-titling facilities, and those are being looked into. As an equal opportunities employer OUCG considers all job applications accordingly and tries to accommodate disabled employees.
OUCG has also invested in activities to reduce its environmental impact. It is changing cinema lighting to use LED bulbs to reduce energy consumption. Staff awareness has contributed towards reduction of the energy and gas consumption – reportedly down by 4 percent in 2008. Toilet facilities are being updated to improve efficiency and reduce water consumption. A cup recycling pilot scheme has been introduced.
Employees are offered development and training programmes to facilitate career advancement and personal development with view of improving performance. A reward and recognition strategy has been employed to make sure that OUCG is offering its employees “market competitive rewards packagesâ€. The necessary structure has been put into place to ensure effective communication between management and employees or their trade union representatives.
The government is very interested in the survival of any business as this would keep unemployment numbers down and will also contribute to the economy. It is also interested that OUCG is adhering to the law by providing equal opportunities for employment, having health and safety policies in place and implementing them, not monopolising the market, and contributing to the local community. To help implement the latter OUCG is supporting two recognised national charities, The Variety Club and the NSPCC, by organizing local and national events.
The macroeconomic environment
“Business organisations operate in an economic environment which shapes, and is shaped by, their activities†(Worthington, 2006, page 82). The macroeconomic environment is the influences or factors which affect the whole industry within which the business operates, such as changes in the social, political, natural, technological, legal and regulatory and economic environment. These are all factors which influence the organisation but cannot be influenced by it. An analysis will show the changes which are most likely to happen and affect the business and its competitors. The microeconomic environment is the immediate business environment of the organisation and is concerned with customers, finance, local community, suppliers, competitors, labour and industrial relations (Buckley, 1994). The micro environmental factors influence the organisation but are also influenced by it.
The macro and micro economic factors depend on the economic system that the local government chooses to govern by. There are three different types of economies: the centrally planned, the free-market and the mixed economy. In a centrally planned economy the government has total control of what is produced, in what quantity and also sets the price for the end product. This can happen because the government owns and/or controls the major economic resources; it decides on the targets for production and consumption and distributes resources accordingly. The planned economy requires “a high degree of co-operation and co-ordination between sectors and enterprises†(Worthington, 2006, p83) and good leadership and management skills of the political party at power.
The free-market economy, on the other hand, represents the complete opposite to the planned economy. The resources are produced and allocated and priced in accordance with their demand. The power of supply and price determination rests in the hands of the privately owned organisations or the individuals who own the resources. It is the market which dictates the economy, and not the opposite.
Operating a nearly free-market economy, but with governmental interventions in some areas of the business activities, is the most widespread type of economy nowadays. The most common areas of intervention are the provision of public services (healthcare, police, defence, law courts, fire services, and education), “the protection of employees and the consumer, to control business and to regulate the level of economic activity†(Buckley, 1994, p.11). The UK is a prime example of a mixed economy. The state owns shares in commercially operated enterprises, examples of which are the recently nationalised Northern Rock bank, the NHS, and the BBC. Local government and government agencies are financed by the taxpayer, and through borrowing, and exercises their influence by operating regulatory services, for example issuing licenses and permits. Control is also exercised through subsidies. These can be for different purposes – reduction of pollution, to increase employment, to regenerate an area.
The social and natural environment
The natural environment consists of all those natural factors which affect business organisations, for example storms, floods, earthquakes, heat, and others.
These are all factors which neither consumers nor businesses can change.
The social environment represents those factors in the external environment which reflect the consumers’, and society’s as a whole, attitudes, beliefs and behaviour towards the business’ activities. The way a business reacts to the social environment and its changes is known as corporate social responsibility (CSR), or just social responsibility. OUCG’s CSR activities have already been discussed.
CSR is also implemented internally. As already mentioned, employees are offered skill enrichment opportunities to enhance their abilities and performances. If employees have more disposable income they will spend more in local businesses and so will be supporting the growth of the local economy.
The effects of industrial policies
The UK government has a number of “industrial policies†in place to try and influence the industrial and commercial environment. These include attempts at direct industrial interventions, policies concerning competition and monopoly control, privatisation policies, regional policies to influence industrial locations and those aimed at economical regeneration of certain
localities.
Business activities are governed by these policies, whether it brings social benefits or imposes social costs. More often than not, the social benefits intended outweigh the costs. If a business benefits the society it is rewarded with subsidies and grants, but if it incurs more costs it is discouraged through a system of fines, taxes and legislation.
OUCG has been affected by the competition and monopoly policy. The Competition Commission (CC) is an independent public body which helps “ensure healthy competition between companies in the UK for the benefit of companies, customers and the economy†(www.competition-commission.org.uk). When the ODEON merged with the UCI Cinemas the Competition Commission asked that 11 cinemas be sold off before the merge can go ahead. This was because the merger fell into one of the CC categories for investigation.
The macroeconomic policies and the influence of the global economy
As already mentioned, the UK is a mixed economy. It is, by large, acting as a free-market economy but the government exercises its influence through different macroeconomic policies aimed at achieving economic growth, control inflation, improve the level on employment in the UK, improve living standards, and achieve a favourable balance of payments (control public borrowing, control import and export levels and others), and a stable exchange rate. These policies can affect the whole country or can be regional.
Fiscal and monetary policies
Policies that affect the whole country include the fiscal and monetary policies. “Fiscal policy involves the use of government spending, taxation and borrowing to influence both the pattern of economic activity and also the level and growth of aggregate demand, output and employment†(tutor2.net). There is usually a time lag between the government’s decisions to spend and their implementation. The effect of such spend, however, is felt immediately.
The monetary policy involves the use of interest rates to control the level and rate of growth of the aggregate monetary demand in order to control the economy. It is the Bank of England that has been charged with the task of overseeing the monetary policy and has “operational independence†to set interest rates so as to maintain price stability and achieve sustainable economic growth and high level of employment. The use of monetary policy can clearly be seen in the current economic downturn as the Bank of England has repeatedly lowered the interest rate, as low as 0.5 percent, to try and increase consumer spending and encourage investment as the cost of borrowing has decreased.
Inflation control
The UK government has adapted the Consumer Price Index as a new measure of inflation with a target CPI of 2 percent. Other indicators of change in inflation are the changes in monetary aggregates and changes in the exchange rate.
Control of unemployment levels
The increase of investment is likely to raise the level of employment. Conversely, rising level of unemployment affects the efficient use of resources and puts a strain on the public services. The effects of unemployment on the business are two-fold. On one hand, high levels of unemployment imply a pool of labour readily available and generally at a labour cost lower than that of low unemployment. On the other hand, there is less disposable income to go around and sales may fall. There are three types of unemployment: cyclical, structural and technological. The first is caused by general deficiency in demand, the second – by deficiency in demand for the goods of a particular industry, and the third – by the introduction of new labour-replacing technology.
The balance of payments
The balance of payments is the net balance of credits (income) and debits (expenditure) occurring from the country’s international trade over a certain period of time. The current balance of payments, as of the third quarter of the 09/10 financial year, stands at a deficit of £4.7 billion, down from nearly £8 billion the same time last year, according to the Office of National Statistics. The general trend is of reducing the deficit on the balance of payments and this is regarded as a ‘favourable’ balance of payments situation.
Controlling public borrowing and the exchange rate
A public borrowing situation occurs when the government’s annual revenue is in deficit (income is less than its expenditure) and in order to retain the same level of public services it has to borrow money. A continued borrowing over time results in the accumulation of National Debt. A persistent high level of public borrowing can result in increase of interest rates; inflation, growth and the balance of payments can also be affected by the lack of investments and confidence in the government’s abilities to control the economy.
The exchange rate is a measure of the external value of the British pound – how much of a foreign currency can £1 buy. The fluctuations of the exchange rate can affect the value of imports and exports and, thus, influence business activities, the inflation and the balance of payments.
The global economy
The global economic recession has prompted governments to slice interest rates in the hope it will curb inflation and attract investment to ease the strain on the ever growing National Debt. Some businesses find themselves having to downsize or even close down for the fear, or reality, of lack of sales. It has raised unemployment levels even higher resulting in the 25 percent rise in individual insolvencies in the last quarter of 2009 (The Financial Times online, 2010). Because of the bigger size of the pool of labour the remuneration packages are smaller. Employees are having to deal with pay rises being put on hold, or even take pay cuts, just to stay in employment. The balance of payment is also suffering because of the drop in the pound sterling value which has made imports even more and exports even less competitive on the UK and international markets.
As already mentioned, the widespread rise in concern within businesses about what the future holds is not of great importance for the OUCG where attendance numbers have not fallen significantly to cause concern and total employee numbers for UK and Ireland stand at 5,593.
Conclusion
It has been made clear that great many factors have influenced ODEON and UCI Cinemas Group’s decision making process and business activities. These factors have come from different sources but have helped to make OUCG what it is today – the market leader in film screening, and its brand name “Fanatical about film†is growing stronger despite of the global recession. And in the words of OUCG’s Chief Executive Officer, Rupert Gavin, “during recession, cinema ticket sales often rise†(as quoted by Reuters, January 2010). ODEON and UCI Cinemas Group Limited has proved one of the very small number of recession proof businesses in Britain today.
References
Leach, R. (2006). The Investor’s Guide to Understanding Accounts. Petersfield: Harriman House Publishing. P.59 and 74.
[Anon.]. (2010) External business environment [online]. Tutor2u.net. Available from: http://tutor2u.net/business/gcse/external_environment_introduction.htm. [Accessed 6 February 2010].
Buckley, M.W. (1994). The Structure of Business. 3rd ed. Harlow: Addison Wesley Longman Limited
Cohen, N. (5 February 2010). Individual insolvencies jump 25%. The Financial Times Online. [online]. Available from: http://www.ft.com/world/uk/economy. [Accessed 8 February 2010].
Competition Commission. (2010) Competition Commission - About us. [online]. www.competition –commission.org.uk. Available from: http://www.competition-commission.org.uk/about_us/index.htm. [Accessed 7 February 2010].
ODEON and UCI Cinemas Group LLP. (2009). Corporate Structure and Statutory Accounts. ODEON and UCI Cinemas Group. [online]. Available from: http://www.odeonanducicinemasgroup.com/corporatestructure.html. [Accessed 1 February 2010]
ODEON and UCI Cinemas Group LLP. (2009). ODEON and UCI Cinemas Annual Review 2008 ODEON and UCI Cinemas Group. [online]. Available from: http://www.odeonanducicinemasgroup.com/pdf/ar08/ODEONUCI_AR08.pdf . [Accessed 1 February 2010]
Office of National Statistics. (2009) Balance of Payments - 2009 Q3: UK current account deficit remains unchanged as a percentage of GDP. [online]. Office of National Statistic. Available from: <http://www.statistics.gov.uk/cci/nugget.asp?ID=194>. [Accessed 7 February 2010].
Worthington, I. and Britton, C. (2006). The Business Environment. 5th Edition. Harlow: Prentice Hall