M2 – Compare the challenges to selected business activities within a selected organisation in two different economic environments
The two contrasting environments I am going to look at are: 1) Economy in Growth –Economic growth is the increase in the market value of the goods and services produced by an economy over time. Economic growth can be measured by changes in inflation. Gross Domestic Product is used to measure population differences between countries.
Tesco
Stability - Stable economic conditions for Tesco means that they can make better informed decisions because there is more stability within the economy. If the economy in the UK is stable, Tesco’s are likely to have a higher turnover and be profitable therefore at a time like this Tesco may wish to introduce new lines, perhaps expand or find a city or town where they may wish to introduce new stores. Tesco suppliers will also benefit from this as they are supplying Tesco with more products and it will give them an idea if they need to increase their rates of production. If the economy is more stable then there will be steady growth in GDP, steady levels of employment and exchange rates. This means that Tesco will be more profitable as customers have more money to spend, they will need to employ for staff and it is better for the economy as Tesco can exports mass amount of home grown products cheaply.
Cost of Borrowing Money – When the economy is stable Tesco will be able to borrow more finance if they wish to expand or move into a new country. This also would increase the potential for employment in Tesco and so will have a positive effect on the state of the economy. Tesco tend to borrow finance when the banks interest rate is lower. In recent years, the interest rate has been at an all time low. This is beneficial for Tesco as their repayment of interest on finance borrowed would be quite small.