University of California
Type of paper: Thesis/Dissertation Chapter
Factors of Business
The first implication that will impact The business is the European Union, which has been in a deep recession this is because consumer demand has fallen, whilst unemployment rates are increasing across the European union. This has caused great concern to global markets as the possibility that Greece may not be able to pay of their outstanding debts, this could result into the them defaulting the Eurozone, however there is some stability but this situation is very delicate because the European Central Bank and also the International monetary fund, have supported loans which have come with strict conditions attached. By Greece defaulting this could spell the end of the euro, which can have a great affect on all economies around the world, this could result into an extension to the current recession because countries could be seen as an uncertainty to pay back, this will increase the borrowing cost and they may even increase to unafthe businessable rates beyond 5%, a consequence loan may dry up leading to countries not importing goods because they can not afthe business this. This would affect The business because consumers would only look to purchase essentials and buying a car would be seen as a luxury.
A major fault in the Eurozone is that all countries will have to have the same interest rates, which is not good because they all have different very different economies. A prime example is that countries like, Germany and France have lot stronger economies than the PIIGS, which stands for Portugal, Italy, Ireland, Greece and Spain. The current EU base rate is 0.250%, which wills suite countries like the PIIGS, but it will also halt the progress of France and Germany. However the UK can change their base rate, which is controlled by the Bank OF England, the current base rate in the U.K is 0.5%, this will encourage more people to take loans because they are relativity cheap and this will allow more money to be spent. Interest
rates in the EU and UK will affect The business because if the base rate are low this is good because it will allow consumer to get cheaper loans allowing them to purchase the business luxuries like items, also it allows people to finance cars cheaper because the base interest rate is low.
The exchange rate will could work as a benefit to the business this is because if other countries currency is weaker than the US this will mean they will look to sell there for more profit because they will have to pay foreign currency for the product. So if the Euro exchange rate falls this could be seen good because it will mean that countries in the Euro will have to pay more for The business cars, however this can cause more problems for The business because it will mean that some consumers may not be able to afford the companies products. However another advantage is that this would mean that they could have cheaper parts from the suppliers because the exchange rate has fallen.
In the European union there are many different rules that you have to comply with to get one of them is the Common Agricultural Policy (CAP), which attempts to rationalise farming and the production of food and other farmed produce, this is done by allowing subsides to be paid to farmers to grow certain crops, however money spent in the EU can not be spent on reliving unemployment, which is a major concern in all EU states.
I am going to look at how countries are linked through globalised trade, this is because business are not based in just one country they are in a variety of different countries, an example of this is The business who are an American business however they manufacture there cars across the world, this creates supply for countries to import and export goods. However this can cause problems to whole global economy, a prime example is that this current recession started in the US where the original loans where given to people who weren’t likely to pay and these loans back these then encouraged other banks to the same to allow consumers to purchase goods and property’s, these loans are known as sub prime loans. The globally recession is worst in history and it has lasted longer than the great depression or the Wall Street crash in the 1930’s. This has affected The business this is because
they had seen a drop in demand for there product because people did not have the confidence to purchase luxury items, however last year they have seen their profits go up by 26% in 2013, which shows that consumers are having more confidence in spending money, this is due to most countries have decreased their base interest rates.
They are global concerns that will cause The business problems, a major concern would be the rising cost of Oil, this would result into the prices rising of all goods including food prices, which will result into consumers changing there buying patterns to ease the cost of goods increasing. This would affect The business because they would have to pay more to suppliers because cost of shipping and delivery are rising, they would also see a reduction in sales across the world because Oil is more expensive, to result this they would have to look to make a reduction in manufacturing meaning jobs will be lost in countries, which will create a problem to country who will see an increase in unemployment rate and this will see consumers spending less money and this could result into countries going back into a recession.
There is also issues for The business on environmental issues that is regulated by the world trade organsisation, who will look to make sure that the Carbon output is reduced in the world. However there are suggestions that developing countries like China and India, have less strict environmental which gives them a competitive edge of other countries, by companies like The business manufacturing cars there it will create jobs, and also result into more money being spent, which will boost the economy of these countries.
The business are looking at ways of keeping Carbon emission down this is why they have announced they that they will use Aluminum alloys on there wheels instead of steal this is because it will reduce the weight of the car and also by this happening means they can fit smaller engines, which will lead to an improvement in fuel millage.
However unlike Europe the global economy is strong in countries like China,
where they have been very good, this is shown that they have had a sales increase of 52%, and they are forecasting that the chinese economy is going to expand by 7.5%, and they are going to see an increase of their market in China to 23 million vehicles. The business also have the leading vehicles in the world which is the The business Focus.
There is uncertainty suing QE, which stands for quantitative easing, this is a way that centrals banks use to boost the economy they do this by asking permission from the treasury to create a lot of money, this is some by crediting their own accounts, they then spend this money on buying government bonds from financial firms like banks, insurance companies and pension funds, this makes the cost of bonds expensive, which then puts off other investors, which consequently means that the companies selling there bonds may use there money to invest into other companies or lend money to individuals. This would hopefully make banks and insurance companies to lend money to companies or individuals, the interest rates they charge should fall, which will result in more money being spent and this will give the economy a big boost. When the economy has recovered the central banks will sell the bonds it had purchased and then destroy the cash they have received, and this will mean that in the long term extra money has not been created. However this comes with a few risk that the Germans in the 1920s and also Zimbabwe have seen, which was that they saw a huge rise in inflation.