Factors influencing the strategies firms adopt in the recession.

I will be speaking about the factors that made the businesses react to the recession in the way they did.
One factor could of been there price elasticity because if you are inelastic this means that you can afford to put your prices up with the raising costs, but if you are a small business and are elastic, this will be harder as if you raise your prices with your costs you will lose customers and so more money, so they need to find other ways of making the money back of which they are losing by putting the prices up.
Another reason it HR or employee relations, this means if you have good employee relations or Hr you can reduce their wage, or the amount of time they work to reduce their costs and delay putting their prices up, an example of this is KPMG these offered 11,000 staff a dramatic cut in hours hoping it would save them making people redundant, and so they could lower their costs and keep the same amount of people working with the company.
The main one in this recession I would say is the availability of finance, this is if you can get banks to lend you money or if you can get any kind of funding this could be through the stock market or through methods like business angels. In this recession banks have not been borrowing as much as they normally would have because they have had their own cash flow problems, this has left many businesses without an available finance option. An example of a business of this happening is to a small business called 2K manufacturing, this is a manufacturer that produces an award winning material, he was turned down by all the UK banks for funding this left him with a big gap to fill as he wanted to expand and he ended up going to a bank abroad.

Strategies firms could have adopted to prepare for the recession

In this recent recession there have been lots of failing businesses and I am going to explain why I think these have failed and why they could have succeeded.

One reason why the company could have failed is a bad cash flow through the business, a good example of this is MFI this was a furniture sale stall, its cash flow problems could be caused by bad debts from there debtors this means they will not get most of the money back from people that owe them. Also it could be from too many sales which have left no money in the company to pay for day to day bills like people’s wages and their rent.

Another reason is bad brand image, this was why Woolworths failed they had a bad brand image and stocked to much of the wrong stock, this left them with no customers and massive debts to their creditors, all this caused people not to visit or revisit Woolworths causing them to shut their doors for a final time.

Different departments in a business must work well for the business to survive and make a substantial profit.

For the business to survive the HR must work very well, this is because the employees need to be happy and motivated to get the best work out of them, and if the HR are not working well then this is nearly an impossible task, another thing they need to do very well is to hire the best people for the job, this is so they know what they are doing and means that the business could save money through training somebody up or rehiring because the person who has been hired is wrong for the job.

Another department is marketing, this is important because it is there job to create an interest in the products or service the business is selling, but they need to do it efficiently and without wasting money on something that is obviously not going to attract more attention. If the marketing department fail the repercussions of this will be felt throughout the business.

Some business have prepared for the recession, one of these are cost control this is where you control your out goings, this could be to reduce them as much as possible, this can be done by having words with your suppliers or reducing your capacity utilisation. This means for the business they can reduce their prices to the customers or to increase their profit margins.

Another thing they can do is diversify into other markets, this means that they make a new product or buy another business in a completely different market to what they are currently in, this means that when one of their markets are failing they will still have an income from the other market to keep the business up and running.

is government funding good or bad?

The banking sector is arguably the most helped sector in the UK economy, most people blame the recession on the banking sector as they had to many “bad debts”.

The banking sector struggled because people was struggling to pat back debts and mortgage repayments, which dramatically increased the bad debts that the company had and so made them lose money and their profit margins was under threat. In 2008 and the business lost around £10 billion.

The government decided to help HBOS by buying up a lot of their shares to fund the business and to replace the bad debts they had, HBOS accepted from the government £11.5 billion this was just to keep the bank running and to pay of the bad debts.

The government also made peoples savings safe inside the bank, this kept the money inside the bank because people wasn’t taking their money out and leaving the business without bad cash flow problems.

Another sector the government has helped keep alive is the car industry, even though this has been done indirectly, the government has helped it a lot. They have helped the car industry by the scrappage scheme, this is where a car which is 10 or more years old is traded in and you can buy a brand new car with £2000 off the original price.

This has caused a lot of people trading in their old cars for new cars and so have been helping the car industry by getting rid of their stock pile of vehicles and turning it into cash for the business.

The reason why the government has helped the car industry is because they are struggling and so are cutting down their capacity utilisation, this could mean either more people losing hours, or that people are being laid off, this could cost the government more in the long run as more people are claiming benefits, and people are earning less which means that there is less tax being paid.

Another sector that has been helped out by the government is the service sector , this has been helped by the government dropping VAT rates from 17.4% to 15% this encourage people to spend more as things would be cheaper, and so demand goes up as a consequence of this, this means that the companies earn higher profits and sell more goods and so they can afford to keep running and not go out of business.

Also this could increase the profit margins of the business this is because they could not pass the savings onto the customer and so they could keep the difference increasing their profit margins.

One reason why the all this was a good idea for the government to do is because it saves people going out of work and could create more work for other people. This benefits everyone in the country as more people are in work and so are not claiming of the government and more people are paying taxes which means altogether the government could be better off.

A reason why all this could be a bad idea is that can the government actually afford all these investments? The government are already very high in debt roughly around £175bn so can we keep investing in these companies that would go bankrupt if we didn’t help them.

I think altogether it is a good idea because it helps us get out of the recession faster it creates more jobs and it helps everything along in the long run and so for me it is the best option.

Who has benefited from the recession???

The recession has cause problems for most company's with people like Woolworths going out of business, and other big companies losing a lot of money, but for some companies is has been the most profitable time of the business cycle for them.

I am going to speak about a business that has done very well in the recession, and a business that the recession has been a threat to and a hard time.

Primark, this business has had an increase of profits of 8% to £252 million this is pretty good in a boom, but in a recession this is amazing, but how have they achieved these increased profits?

Primark is a cheap retailer, because they are cheap and people have less disposable income, more people look for cheapness and less at quality, this is basically Primark.

They have achieved sales of £1.1 billion, this is because they are cheap and people are not bothered about different brands on clothes, but there profit margins are under pressure, this is because of the exchange rate from the sterling to the dollar, because much of Primarks clothing is sourced in dollars, this has means they get less clothing for their money, because the pound is weaker.

Even though Primark shows its low prices and tries to get the lowest costs on their products possible, but what has been sacrificed to achieve these low, low costs.

One thing is the quality of the product, as much of Primarks clothing could be seen as "tacky" and "cheap", this could turn out bad for the company very soon as we are coming out of the recession, this means for the business that people might go towards other better quality products because of their increase in disposable income and will probably stay away from stores like Primark.

Another thing could be there ethical views. In 2005 Ethical Consumer Magazine as the least ethical of the main clothing stalls in the UK. This is because there was allegations that children in India was actually making there clothes, this would of dropped there sales in clothes because people did not like Primark's ethical rules, this could stop repeat business and lose a lot of their profit.

A business that hasn't done well in the recession is Land rover, they have only made £55 million in the last 3 months of 2009 but the quarter before they made a loss of £60 million, this is due to the recession and people not being able to afford the big cars expensive cars they sell.

To cut costs they had cut there week down to 4 days so they was only producing cars from Monday to Thursday, also they will cut some night shifts so they are not wasting money by paying workers to produce a minimum amount of work.

Heathrow's third runway

Heathrow

Heathrow are building a third runway for their airport, I will be talking about the effects it will have on stakeholders of the new BAA building and if the decision is in the best interests of BAA.

One of the stakeholders for the expansion are the government, they believe that this expansion should go ahead, this is because for them the benefits of more jobs, higher tourism which means more income for the business therefore more money for the government from tax, outweigh the risk of noise pollution and the amount CO­₂ increase due to more planes flying. This will benefit most people this is because they can increase budgets in departments like the NHS, or for education.

Another stakeholder that are up for the expansion are the employees of BA, this is because they will feel their jobs are more secure because the company is expanding and hiring new employees so it is very unlikely they will start to make people redundant so the employees will feel safe and secure in their job, as a consequence of this they will be a lot more motivated. As they are more motivated they will work a lot harder and will increase productivity and have high customer service which will make more people want to revisit the airport.

A stakeholder that will not like the takeover will be the community, this is shown by their campaigns and support for groups like green peace, they are upset about the amount of their community that is going to be destroyed and torn down, with 700 homes looking to be demolished to make room for the BAA expansion, I think also they will not be happy about the amount of noise pollution they will have, this will probably also drop the prices of the house because of the nearly constant noise pollution, this could mean that the community could lose a lot of their money because of this expansion, plus they could also have their friends and families moved away.

Another very angry stakeholder is green peace, they do not like the project because of the increase of ‘greenhouse gases’. They plan to build like a fortress structure on the land they have brought on the site where the new runway is going to be built. The aim of this will be to stop the expansion all together as it will stop BA expanding.

I think the idea is in the best interests of the country, I think this because the advantage of more jobs that are desperately needed, and more money for the government which is also needed with the amount of debt the government are in seem to be a lot more beneficial to a lot more people because the homes destroyed and the noise pollution will only effect the local community and maybe communities around them. Success of the expansion depends on the amount of funding and the backing of the government and some of the communities, this is because they will need the funding to finish the project especially if they go over budget, but after the project is complete they will still need employees and customers from the local communities. The stakeholders against the expansion I think will never be happy, as they are unhappy about the inevitable, there will be an increase in planes and so greenhouse and noise pollution, but also space needs to be created and so communities need to be broken.