Business and the Economic Environment P E** S T

The game plan explained…. Mrs Reid Mr Cole 4.2 The Relationship between Businesses and the Economic Environment 4.1 Understanding Mission, Aims and Objectives 4.4 The Relationship between Businesses and the Social Environment 4.5 The Relationship between Businesses and the Technological Environment 4.3 The Relationship between Businesses and the Political and Legal Environment 4.10: Key Influences on the Change Process: Culture (part one) 4.6 The Relationship between Businesses and the Competitive Environment 4.7 Internal Causes of Change 4.8 Planning for Change 4.10: Key Influences on the Change Process: Culture (part two) 4.12 Implementing and managing change Supporting learning for the pre-release theme (Ongoing) Revision (BUSS4) 4.9 Key Influences on the Change Process: Leadership 4.11 Making strategic decisions PESTE

The Relationship between Businesses and the Economic Environment • assessing the effects of the following factors on business organisations: impact of economic factors trends in key economic variables globalisation of markets developments in emerging markets evaluating the strategies businesses might deploy in response to these changes. Knowledge of the determinants of macroeconomic factors is not required. Candidates should be familiar with the following economic factors: the business cycle, interest rates, exchange rates, inflation, unemployment and economic growth The Relationship between Businesses and the Economic Environment

The Relationship between Businesses and the Economic Environment Between now and half term we will focus on the impact on the following areas on business strategy: The Business Cycle Interest Rates Exchange Rates Inflation Unemployment The International Economic Environment and Economic Growth

Objectives Analyse the effects of the business cycle on businesses Explain appropriate strategies for firms at different stages of the economic cycle Overview of economic growth, inflation, unemployment and exchange rates

Analysing the business cycle Article – “Understanding the business cycle” Questions Briefly describe the main changes in growth, inflation and unemployment from 1980 -1995 Describe the effects of a recession on: The construction industry The pharmaceutical industry

Groups Inflation and Interest rates Unemploy-ment Exchange Rates Economic growth Ellie Carly Chloe Clemmie Fran Danielle Nicole Laura Sophia Hanne Aimee Annabel Katie

Government’s main economic policy objectives Low inflation Steady and sustained economic growth High levels of employment Acceptable balance of payments position

Government economic policy objectives: Economic growth An _______ in the value of goods and _______ produced in a country or area Full employment When the demand and _______ for ______ in an economy are in __________ at the price of market ______ Inflation The general or persistent _______ in ______ over time Balance of payments The value of _______ minus the value of imports Balance of payments deficit: when _______ > _______ Balance of payments surplus: when _______ > _______

Government economic policy objectives: Definitions Economic growth An increase in the value of goods and services produced in a country or area Full employment When the demand and supply for labour in an economy are in equilibrium at the price of market wages Inflation The general or persistent increase in prices over time Balance of payments A record of currency flows into and out of a country The value of exports minus the value of imports Balance of payments deficit: when imports > exports Balance of payments surplus: when exports > imports

Measuring Economic Growth The rate of increase in the size of an economy over time Gross Domestic Product (GDP) The value of a country’s output over a period of time A rising level of economic activity will be reflected in a higher level of GDP

Measuring inflation CPI (Consumer prices index)

Measuring unemployment Claimant count

Measuring current account Deficit as % of GDP

Group work In your groups find out the trends over the last 10 years for all the macroeconomic variables For each of the indictors explain two advantages and two disadvantage for UK businesses

A case study: Beaconsfield Plenary A case study: Beaconsfield Conclusions: The local population are well educated, so likely to have well paid jobs, and thus income to purchase a number of luxury goods Many homeowners, again indicating wealth As a business, property prices and rent are likely to be high, so costs may be higher than another location, but the customer base locally will support higher prices Question Consider the state of the current UK economy. What impact will this information have on businesses in Beaconsfield? www.upmystreet.com