Economic

Economic factors are also very important as they determine prices on certain products, supply and demand of certain products, changes in inflation and unemployment, which can also have an effect on people’s living standards. For example, if the rate of inflation increases, then it can effect individual businesses and organizations as well as affect the consumers and the economy of the whole country. If the rate of inflation in the UK is higher than in the other countries, then the products produced by UK firms become less competitive in price, and businesses in the UK suffer. High rate of inflation in the UK, can then cause a fall in the number of UK exports, which then affects the balance of payments leading to unbalance and rise in the import penetration. As a result, this can cause the rate of economic growth to fall, so the country becomes less competitive as a whole. In order to cope with the new prices, some companies in the UK may have to make some employees redundant, which will cause the rate of unemployment to rise, which will not be good for the UK economy, as they will have to pay more benefits to the people who don’t work, and there will be less people in the country who will actually contribute to the UK economy. This will have a major effect on Apple products, as there will be less people who will be willing to buy Apple products due to the low wages or the fact that people are unemployed and don’t have enough money anyway. As the growth of the UK economy decreases, there will be fewer incentives from the businesses from the other countries to invest money into the UK businesses and UK economy. If there are restrictions made on trade, then some poor countries like Kenya might suffer, as their products might become less competitive on the foreign markets. Restrictions on trade might also mean that some of the UK products can become less competitive on the markets in the other countries, which will affect UK firms’ profits and economy as a whole.

 

Below there are some graphs and data, which I will use to analyse and show different effects of economic growth, rate of inflation and unemployment on the economy.

 

GDP rose by 0.7 per cent in the third quarter of 2007, down from 0.8 per cent in the second quarter and revised down by 0.1 per cent compared with the preliminary estimate. The level of GDP is now 3.2 per cent higher than the third quarter of 2006.

The output of the production industries was flat in the latest quarter compared with a rise of 0.7 per cent in the previous quarter. The decrease in growth was due to weakness in mining and quarrying, down 1.3 per cent and flat growth in manufacturing.

Growth in the service industries rose by 0.9 per cent in the third quarter, the same rate recorded in the previous quarter. Growth continues to be dominated by the business and financial services sector, however growth slowed a little to 1.5 per cent following growth of 1.7 per cent in the previous quarter.

 

It is evident from this graph that there was an increase in GDP by 3.2 percent in the third quarter of 2007, comparing to the third quarter in 2006. From what it’s evident in the text, growth in the service industries rose by 0.9 per cent. Economic growth means, that it stimulates employment. If there are more people employed, there’s more contribution to the economy, which is good for the country as it helps to raise people’s living standards. As there are more people in work, there are more people who pay taxes, which is good for the government as it brings more money to them, so that they can spend it on further research, and invest money into development of new products, rather than supporting unemployed people who don’t work and contribute to the economy. This also allows a large number of people to have more spending power, which means they are more likely to buy luxury goods. This means that the demand for such products will increase. Larger outputs encourage businesses to expand and invest money into buying new machinery.

Rise in incomes results in businesses becoming more confident, which might have a good impact on certain firms and their profits. As the employment increases, and people get more spending power, living standards rise, so that people have more time to look after themselves. So as the GDP rises, living standards rise as well.

However, there are also some disadvantages and risks involved. For example, if the economy grows very rapidly, there’s a high risk of having the inflation. This can also be affected by some external factors. For example, if somebody suddenly gets a high pay rise, he would not necessarily choose to buy a very expensive car, as the congestion taxes need to be paid due to the congestion tax policy.

Unemployment is another very important aspect, which affects the economy.

 

UNEMPLOYMENT (www.statistics.gov.uk)

 

 

The trends in the employment and inactivity rates are broadly flat but the trend in the unemployment rate is falling. There has been a further fall in the number of people claiming Jobseeker's Allowance benefit. The number of job vacancies has increased. Growth in average earnings excluding bonuses is unchanged, but earnings growth including bonuses has increased.

The employment rate for people of working age was 74.4 per cent for the three months to September 2007, unchanged from the previous quarter but down 0.1 over the year.

The number of people in employment for the three months to September 2007 was 29.22 million. This is the highest figure since comparable records began in 1971; it is up 69,000 over the quarter and up 178,000 over the year. Total hours worked per week were 937.8 million, up 0.3 million over the quarter and up 10.4 million over the year.

The unemployment rate was 5.4 per cent, unchanged over the previous quarter but down 0.2 over the year. The number of unemployed people increased by 6,000 over the quarter but fell by 47,000 over the year, to reach 1.67 million.

The claimant count was 824,800 in October 2007, down 9,900 over the previous month and down 130,300 over the year.

 

It is evident from the data given above, that the rate of unemployment in the UK was decreased by 0.2 per cent in 2007, which suggests that economy is doing better as there are more people employed. Unemployment causes many problems, such as: fall in economic growth, decrease in the living standards, waste of scarce resources and decrease in the national output, which makes businesses in one country less competitive to the other businesses in the world. As the rate of unemployment rises, it results in the increase in the number of people who claim unemployment benefits, which means that the government has to spend more money on poor people or unemployed instead of investing money into the research. Usually, high rate of unemployment causes taxation level to go up. Also, if there are less people working on the country, it means there are less people in the country who pay taxes, so the amount of money received from taxation is likely to decrease. In this case unemployed people don’t work, receive benefits from the government and don’t contribute to the economy, which is bad. In addition to this, high rate of unemployment means, that people have less spending power, which means there are less people in the country who can afford to buy luxury products, so the demand for these products decreases. The rise in government spending and fall in tax revenues is likely to result in the government borrowing more money from the other countries.

The main factors economic factors, which can affect my chosen business and product, are:

 

· Changes in VAT taxes

· Rate of employment

· Economic growth

· Living standards

 

Apple is a technological product, and VAT is being paid for almost all products, apart from food and child clothing. For example, if the European government decides to increase the VAT taxes, this will mean that prices on Apple products will be affected. As the VAT increases, the Apple can either keep the prices the same, but pay VAT by themselves, which will decrease their profits, or increase the prices on Apple products. As the prices on Apple products will increase, it might result in a decrease in demand for their products, which will still affect Apple profits. In this case the company will suffer anyway. This also means that Apple might have to design new pricing strategies, invent new products or change their design, in order to make their products more attractive, or increase promotion in order to encourage more sales and encourage their customers to buy their products for higher prices.

 

Rate of unemployment, economic growth, and living standards are the other three factors, which are linked together and have a major affect on Apple and the products they produce. For example, if the rate of employment decreases, or there’s an increase in the rate of unemployment, it means there will be less people with a spending power and ability to buy luxury products such as Apple. When there’s a lot of unemployment, people are desperate for a job, so the employers offer lower wages. Due to the fact that on average people’s wages decrease, they are less likely to buy luxury goods like Apple, so the demand for their products is likely to decrease.

In addition to this, it also relates to the economic growth. If there’s an increase in the economic growth, people’s incomes increase, so their living standards are also likely to increase. As this happens, people become get more spending power, which allows them to purchase luxury goods, like Apple products. Therefore, if there’s an increase in the economic growth, the demand for Apple products will likely to be increased as well.

 

Social

One of the examples of social factors can be: population changes, healthy eating, obesity, education and etc.

 

For example, if the population increases, it means there will be more potential consumers for your products.

 

Making sure that the good level of education is provided, helps to increase the number of well educated, highly trained employees. This then increases the efficiency, so high quality products and services are provided. This makes sure, that in the future young employees will contribute a lot to the economy and bring more money to the government by paying taxes.

 

Encouraging people to eat healthy food, improves health provision and health care. If people are healthier, there is less need in spending more money into NHS and hospitals, so the money can be spend on other things. This, as a result increases living standards.

 

These factors have a direct effect on the Apple and their products. For example, if the population increases, there’s a potential that there will be more customers in the future, meaning that there’s some potential for the increase in profits of Apple, if it stays in the market and carries on developing new products.

 

Another social factor can be an increase over the years in the use of technology. If the customers start buying more technological products, there’s likely to be an increase in the demand for Apple products in the future.

 

Change in the preferences or image of the customers can also be a very important factor for Apple. As soon as people grow up, they are less likely to buy and use technological products, because they might simply be too complicated for them and seem to be difficult to use. Also, sometimes as the person gets older, he sometimes stops using certain products. For example, when I was a child a used to play ‘Lego’ and my parents bought it for me, but as I got older I stopped playing and using ‘Lego’ products, and started to consume and use more complicated products like CD and mp3 players. Every company aims their products at a certain age group. Apple is usually aiming at the young audiences, so their products have modern design, are colourful and involve using new technology. Similar situation might happen with Apple. Those customers who used to consume their products and buy for example, iPods, have now grown up so that they want to buy and use something more expensive and interesting. E.g. these customers might now be interested in buying cars, or they might now think that iPods are a bit childish for them. Therefore, Apple needs to think about other products, which can be aimed at the older age groups. For example, selling Apple TV’s. Recently introduced Apple TV is a more expensive product, and only those people can buy it who work and can afford it. In my case I want to introduce new Apple swimming goggles, so the situation with this particular product is different. People of different ages do swimming, and it is evident from my research that even those customers who are 40 or 60 who do swimming, would still like to listen to the music while swimming. In this case changes in preferences due to the changes in age would not necessarily affect my product.

Sometimes there’s a simple change in customers’ preferences. For example, they can switch from buying Apple products to buying Creative products, as they might become more attractive products than Apple in the future. There is also a possibility that other company than Apple invents a completely new technological product, which will be unique and attractive, so people might switch from buying Apple to buying something different. Sometimes people lose their interest in the product completely due to the change in fashion or other influences. For example, a new type of music player might be invented in the future, so the customers might stop buying not only Apple mp3 players, but all other mp3 players completely.

 

TECHNOLOGICAL

Basically, there might be new methods of production introduced into the business or new machinery being bought, which can help firms to produce more efficiently, which means bringing more profits into the business. This can reduce the costs of production of certain products, which can increase profit margin for the company. If Apple introduces new technology, it means that it might be producing more products in a shorter period of time. This, however, might also mean, that Apple might make some workers redundant. Making workers redundant won’t be very good for both, economy and the image of the business itself.

Although, the some businesses like Apple might have to make some workers redundant, if they introduce new technology, they will be producing more efficiently so making more profit. This means, that certain businesses will be contributing a lot to the economy, as they will be paying more taxes. As a result government’s taxation revenue will increase, which will, as a result, make UK firms and the country more competitive. Introducing new technology, will not only benefit Apple from an economic and social point of view, but will make it more competitive on the market, which means customers will be more likely to give their preferences to Apple products.

Inventing or using new materials for packaging can also be an important factor for Apple, as it might help it decrease their pollution to the environment and decrease the costs of recycling. This might not only decrease Apple costs of recycling, but make it more environmentally friendly, and improve its image, which might make their products more popular amongst those people.

 

 

· Use of internet

Makes it easier for firms to trade, sell goods and provide services.