In this assignment I will evaluate the impact of changes in the economic environment
on McDonalds. McDonalds operate in tertiary sector mainly known for its fast food
products, it is a multi national business that is operating in more than 120 countries
and serves about 68 Million customers daily through their 36,000 outlets and 1.9
Million employees.
Economic environment are all those economic factors that have an effect on the
performance of a business. Business depends on the economic environment for all the
needed inputs. It also depends on the economic environment to sell the finished
products. It is rightly said that the economic environment influences a business to a
great extent, referring to all those economic factors that affects the functioning of a
business unit. A business can rely for input as well as to sell its manufactured
products. Trained economists who supply the Macro economic forecast and
researches are present in major companies, which demonstrate the significance of
economic environment in a business. Such economic environments include; recession
(also known as trough), growth, boom, downturn and recovery. Below are some of the
economic environments that I’ll be analysing:
Inflation is an increase in the general price of goods and services in an economy over
a period of time. High inflation can occur when the economy is struggling and during
this phase the prices of the products tend to increase where as the wages/salaries of
the people remain same. Hence when inflation rises people cannot afford the same
products as they once could but as the prices of all other products rises, they have less
money to spend therefore they cannot afford certain products and hence businesses
also struggles during this phase.
Boom is when the economy is doing very well and growing rapidly. During this phase
the economy is at its best and people have money to spend, therefore the businesses
can expect their sales to grow at a rapid pace as the demand of the products or
services are at its peak. As the sales would increase, businesses would have to hire
more employees in order to cater the increase in their sales; therefore it will create
employment opportunities. There can also be a shortage for employees and as a result
to motivate them or making them stick around with the business they might be paid
higher wages so that they are with the business during this period specially as they
would require their expertise.
Recession is a period of temporary economic decline during which trade and other
industrial activities are cut down. This is often measure by the fall in the countries
GDP, however government intervenes in such circumstances and cuts down tax rates
such as a reduction in corporate tax or VAT. This in return helps the businesses to
keep its operations going as the overheads would decrease. It also helps to build
consumers confidence as they wont hesitate to spend money. This in return would
help the government to help the country get out of Recession.
Trough is the lowest point of the business cycle that marks the end of a period of
decline in the business cycle. The effects can be that unemployment could be at its
peak; businesses might also be closing down or restricting its operations. Therefore
businesses would be targeting to lower their overheads and hence they would be
required to unemployee some of its employees.
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on McDonalds. McDonalds operate in tertiary sector mainly known for its fast food
products, it is a multi national business that is operating in more than 120 countries
and serves about 68 Million customers daily through their 36,000 outlets and 1.9
Million employees.
Economic environment are all those economic factors that have an effect on the
performance of a business. Business depends on the economic environment for all the
needed inputs. It also depends on the economic environment to sell the finished
products. It is rightly said that the economic environment influences a business to a
great extent, referring to all those economic factors that affects the functioning of a
business unit. A business can rely for input as well as to sell its manufactured
products. Trained economists who supply the Macro economic forecast and
researches are present in major companies, which demonstrate the significance of
economic environment in a business. Such economic environments include; recession
(also known as trough), growth, boom, downturn and recovery. Below are some of the
economic environments that I’ll be analysing:
Inflation is an increase in the general price of goods and services in an economy over
a period of time. High inflation can occur when the economy is struggling and during
this phase the prices of the products tend to increase where as the wages/salaries of
the people remain same. Hence when inflation rises people cannot afford the same
products as they once could but as the prices of all other products rises, they have less
money to spend therefore they cannot afford certain products and hence businesses
also struggles during this phase.
Boom is when the economy is doing very well and growing rapidly. During this phase
the economy is at its best and people have money to spend, therefore the businesses
can expect their sales to grow at a rapid pace as the demand of the products or
services are at its peak. As the sales would increase, businesses would have to hire
more employees in order to cater the increase in their sales; therefore it will create
employment opportunities. There can also be a shortage for employees and as a result
to motivate them or making them stick around with the business they might be paid
higher wages so that they are with the business during this period specially as they
would require their expertise.
Recession is a period of temporary economic decline during which trade and other
industrial activities are cut down. This is often measure by the fall in the countries
GDP, however government intervenes in such circumstances and cuts down tax rates
such as a reduction in corporate tax or VAT. This in return helps the businesses to
keep its operations going as the overheads would decrease. It also helps to build
consumers confidence as they wont hesitate to spend money. This in return would
help the government to help the country get out of Recession.
Trough is the lowest point of the business cycle that marks the end of a period of
decline in the business cycle. The effects can be that unemployment could be at its
peak; businesses might also be closing down or restricting its operations. Therefore
businesses would be targeting to lower their overheads and hence they would be
required to unemployee some of its employees.
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