assessing changes in the business enviroment

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assessing changes in the business environment

relationship between the businesses and economic environment -

Business cycle -

boom- high levels of customer spending, interest rates will be higher (because of more spending- more returns), usually high inflation, prices go up as wages and other costs go up =more investment and more jobs leads to potential shortages and difficulties supplying demand

slump- low levels of customer spending, low interest rates- too encourage more spending = less investment and more unemployment, more bankruptcies and insolvencies, gov lower interest rates to encourage spending , prices fall to compete with lower disposable income, less profit, large scale redundancies occur.

upswing - increasing expenditure, existing spare capacity used. rises in production. increases in investment = businesses begin to charge higher prices, more business start ups, investment in fixed assets improve,

down turn (recession) - increased interest rates, demand falls, capacity utilisation falls, profits fall and investment cut. = new markets being explored, stockpiled products, workers hours cut or laid off, insecure firms may become insolvent

trends in key economic variables - usually inflation goes up when interest rates go up. when interest rates go up saving increases and spending decreases - less borrowed

when interest rates rise - exchange rate rises - potential of high returns from banks on foreign investment

price of exports when pound depreciates = falls =imports price rises

price of export when pound appreciates = increase = imports prices fall

price elasticity important for overseas sales- if price elastic then then increase in exchange rare could be harmful as demand will fall when prices increase

exchange rates can massively influence business strategies - it can determine what markets to enter and what imports or exports are needed

globalisation of markets -

developments in emerging markets

evaluating the strategies businesses might deploy in response to these changes