The Economy & Business

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Economic Booms and Recessions

The economy has a major impact on businesses.

Economic cycles

The economy is the state of a country’s production and consumption of goods and services. A country’s economy goes through cycles of booms and recessions.

Booms

A boom is when the economy is growing significantly and the businesses in it are generally doing well.

Recessions

During a recession, economic output falls (for 2 successive quarters there is negative economic growth) and because of this, businesses usually experience a fall in demand for their products.

What Determines if There is a Boom or Recession?

The economic climate (whether it is doing well or poorly) reflects whether businesses are doing well or badly for several reasons. A few different factors can indicate the state of the economy:

Unemployment

A recession leads to high levels of unemployment. This is bad for businesses because unemployed people have less money (disposable income) to spend.
If less people buy goods, a business' revenues will fall and it is likely that profits will fall too.
- For example, the sales of supermarkets like Sainsbury's might fall during a recession because consumers will tend to buy essential groceries, but not expensive wine and DVDs.

Consumer spending

A recession can lead to a fall in consumer spending because of:
- Unemployment - If someone loses their job, they will spend less.
- Reduced consumer confidence – If people are worried about the future then they are more likely to save just in case they lose their job. This leads to less spending.
- Decreased income – People’s income may fall during a recession and this leads to less money being spent on goods and services.

Changes in Income and Businesses

The effect that a change in income has on businesses is less simple. Some firms might benefit from a fall in income and some firms might suffer from a fall in income.

Necessities

A fall in income can mean that people have to spend a greater proportion of their money on necessities.
- Even if income falls, it is unlikely that people will change the amount of money they spend on products like water.
- This means that they will have less money to spend on their wants (like a Playstation 4 console).
Because of this, businesses that provide products and services for consumers’ wants rather than their needs will suffer if incomes fall.

Luxury products (and services)

When people’s income falls, people are less likely to spend money on ‘luxury’ goods or services and instead will favour discount shops and cheap goods and services.
- Aldi and Lidl tend to increase their market share of grocery shopping in recessions, with supermarkets like Waitrose losing market share.
- Poundland and Primark generally increase their market share when incomes fall.

1Enterprise & Entrepreneurship

1.1The Dynamic Nature of Businesses

1.1.1The Dynamic Nature of Businesses

1.1.2Risk & Reward

1.1.3The Role of Business Enterprise

1.1.4The Role of Business Enterprise 2

1.1.5The Role of the Entrepreneur

1.1.6End of Topic Test - Dynamic Nature of Business

1.1.7Grade 9 - Dynamic Nature of Business

1.2Spotting a Business Opportunity

1.2.1Customer Needs

1.2.2Market Research

1.2.3Market Segmentation

1.2.4The Competitive Environment

1.2.5Primary & Secondary Market Research

1.2.6End of Topic Test - Business Opportunities

1.2.7Application Questions - Business Opportunities

1.2.8Exam-Style Questions - Market Segmentation

1.3Putting a Business Idea into Practice

1.3.1Business Aims

1.3.2Business Objectives

1.3.3Business Revenues & Costs

1.3.4Costs - Calculations

1.3.5Revenue - Calculations

1.3.6Business Profits & Break-Even Analysis

1.3.7Profits & Losses - Calculations

1.3.8Interest - Calculations

1.3.9Cash & Cash Flow

1.3.10Cash & Cash Flow 2

1.3.11Cash Flow - Calculations

1.3.12Sources of Business Finance

1.3.13End of Topic Test - Business in Practice

1.3.14Grade 9 - Business in Practice

1.3.15Exam-Style Questions - Business in Practice

1.4Making the Business Effective

1.4.1The Options for Start-Up & Small Businesses

1.4.2Limited Liability

1.4.3Franchising & Not-For-Profits

1.4.4Business Location

1.4.5The Marketing Mix

1.4.6Business Plans

1.4.7End of Topic Test - Effective Business

1.4.8Application Questions - Effective Business

1.4.9Exam-Style Questions - Business Plans

1.5Business Stakeholders

1.5.1Business Stakeholders

1.5.2Technology & Business

1.5.3Legislation & Business

1.5.4Legislation & Business 2

1.5.5The Economy & Business

1.5.6External Influences

1.5.7End of Topic Test - Business Stakeholders

1.5.8Grade 9 - Business Stakeholders

2Building a Business

2.1Growing the Business

2.1.1Business Growth

2.1.2Finance

2.1.3Changes in Business Aims & Globalisation

2.1.4Ethics & Business

2.1.5The Environment & Business

2.1.6End of Topic Test - Growing a Business

2.1.7Application Questions - Growing a Business

2.1.8Exam-Style Questions - Business Growth

2.2Making Marketing Decisions

2.2.1Product

2.2.2Product Life Cycle

2.2.3Price

2.2.4Pricing Methods

2.2.5End of Topic Test - Product & Price

2.2.6Grade 9 - Product & Price

2.2.7Promotion & Advertising

2.2.8PR & Sales Promotions

2.2.9Sponsorship & Product Placement

2.2.10Promotional Mix

2.2.11End of Topic Test - Promotion

2.2.12Application Questions - Promotion

2.2.13Exam-Style Questions - Promotional Mix

2.2.14Place & Wholesalers

2.2.15Direct to Consumer

2.2.16E-commerce & M-commerce

2.3Making Operational Decisions

2.3.1Job Production

2.3.2Batch & Flow Production

2.3.3Working with Suppliers

2.3.4Effective Supply Chains

2.3.5Just In Time & Just In Case

2.3.6Managing Quality

2.3.7Total Quality Management

2.3.8The Sales Process

2.3.9End of Topic Test - Operational Decisions

2.3.10Grade 9 - Operational Decisions

2.3.11Exam-Style Questions - Managing Stock

2.4Making Financial Decisions

2.4.1Gross Profit & Net Profit - Definitions

2.4.2Gross Profit - Calculations

2.4.3Net Profit - Calculations

2.4.4Rate of Return

2.4.5Rate of Return - Calculations

2.4.6Research & Financial Data

2.4.7Marketing Data

2.4.8Percentage Change - Calculations

2.5Making Human Resource Decisions

2.5.1Organisational Structures

2.5.2Organisational Structures 2

2.5.3Recruitment

2.5.4Effective Recruitment

2.5.5Training a Workforce

2.5.6Motivating a Workforce

2.5.7End of Topic Tests - Human Resources

2.5.8Application Questions - Human Resources

2.5.9Exam-Style Questions - Human Resources

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