Batten down the hatches - strategies for the next downturn
Is it really 18 months since many of us were pouring over research sources for the 2010 AQA BUSS4 research task on strategies for handling an economic downturn? Well dust those notes off folks cos here we go again with a second looming UK recession. But this time, will UK industry be ready?
read more...»Recession? Hair today, gone tomorrow
As we enter a period dominated by “cuts”, here is a profile of an industry which thrives on cuts. Some great business lesson material here on market segmentation, adding value and the nature of demand for a product.
read more...»AQA unit 4 - some really good evidence here
Wake up to Money, which is broadcast every morning at 5.30 on Radio 5, is often a good source of stories and anecdotes. It was particularly good today - and the excellent news is that you don’t have to set the alarm for that unearthly hour to hear it as you can download the Podcast. It will be well worthwhile for all AQA unit 4 students spending 20 minutes taking notes from today’s programme - they will start with a useful preview of the release of the updated GDP figure for quarter 4 of 2010, giving some good background data.
The interview that follows, with the CEO of Pret a Manger is gold dust - he talks about the figures that Pret have just released which show a big rise in sales and profits, despite rising commodity prices and a tough climate on the high street. His description of the relations with suppliers and marketing mix strategies that Pret have followed to allow them to achieve this through the recession should be noted and quoted as evidence in BUSS4 essays.
Finally, figures out this morning from the Internet Advertising Bureau show online advertising grew nearly 13% last year and now accounts for 25% of all advertising spending in the UK, and some more background is given for that data. Here is another little nugget that could be useful to prove to the examiner that candidates really know what they are talking about when it comes to strategic management - so please do use the links below!
Wake up to Money 29th March on i-player - available for 6 days from now
Wake up to Money podcast
Brief TV interview with Clive Schlee of Pret a Manger (...but the radio interview covers more ground)
Report about the study by the Internet Advertising Bureau (IAB)
The UK Economy - Business Investment
Business investment is a key part of economic activity. Firms invest in capital spending for a variety of reasons - for example to increase capacity, improve efficiency and take advantage of new technology. So what has happened to the value of business investment in the UK economy over recent years? The interactive chart below shows the quarterly value of business investment (in £ms) over recent decades. The chart updates once the latest ONS data is available, so bookmark this blog entry if you would like to be able to check latest trends in business investment.
read more...»The Profit Margin Bloodbath of UK Recession
A significant piece of research from accountants KPMG estimates that price discounting by UK firms cost them £20bn - and things may be getting worse as the economic conditions in 2011 worsen further…
read more...»How to find an export market
The main topic of this story on the BBC website is a new report by the British Chambers of Commerce, which says that while the UK’s service sector is suffering domestically, many manufacturers are enjoying an export-led boom. It gives a great example of clockmakers Smiths of Derby, who were suffering from a lack of domestic demand in the recession for their expertise in renovating and maintaining clocks around the UK from St Paul’s Cathedral to Arsenal’s Emirates stadium.
read more...»Britain’s changing High Street - Poundland, nail bars and empty shops
This report on the BBC website highlights the shift, in times of austerity, away from browsing the High Street for luxuries towards browsing the web for bargains - one result is that on average 14% of shops in the UK are vacant, a massive increase from 10.5% a year ago. But, as ever, the answer to ‘Is the British high street a good location for retail businesses?’ is “It depends….”
read more...»Strategy in Action: 10 Mins of Gold Star Insights from the Whitbread CEO
Students of business strategy (and their teachers) will rarely find a better video resource than this one. In particular, it ought to be required viewing for anyone taking AQA A2 Business BUSS4 or IB Business Management…
read more...»Cash flow problems put Pontins into administration
Pontins is the latest household name to fall victim to recession and the credit crunch. They have been put into administration, meaning that the future of the company is uncertain, for both staff and customers. The problem is that the banks are no longer willing to give them credit – so although they have customers willing to buy, they face the possibility of business failure due to a lack of cash flow.
read more...»External influences - local authority spending
As A2 students start to broaden their thinking about the influences on a business’s decisions, they have to learn about local and national government revenue raising and spending. I often find that they don’t know the different roles of local and national government, but an interactive device which the Local Government Authority is about the roll-out to all councils websites might help with that. The idea is to ask the public to play the role of council leaders in deciding where to make cuts in spending, changes in employees pay and in the fees charged for various services, in order to achieve the required cuts and keep any rise in council tax to less than 5%. It has been trialled by Redbridge local council in London, and you can see it in operation on their website.
Business structure in the UK - the rise of micro companies
Here’s a term that ought to find itself into the next editions of the traditional business studies textbooks - micro-companies. Of course, it won’t (maybe in 2020) but it should. Because in the last five years there has been an increase of over 250,000 in their number in Britain.
read more...»Chicken Takes Over Burger, But Where’s The Beef?
The UK restaurant sector has endured a tough few years as it has struggled to respond to the recent recession. For those that have survived, attention is now turning to the competitive structure of the market, with many commentators expecting a consolidation of the market through a series of takeovers. It looks like the takeover process has begun…
read more...»Sources of finance - bank loans down by £28 billion
An interesting statistic here which savvy students will add to their notes - particularly those who want to demonstrate real-life evidence to their examiner.
According to statistics from the Bank of England, the amount of bank loans outstanding to UK businesses is now £471 billion, down from a peak of £503 billion in September 2008 (the month in which Lehman Brothers went bankrupt). Thats a pretty significant change in absolute terms, although the percentage change is less pronounced.
Nevertheless, that’s a big chunk of bank finance which is no longer on the combined balance sheets of UK firms. Students ought to be able to identify several reasons for the shift, including:
- Reluctance of banks to lend to firms during the recession / credit crunch
- A strategy of cash conservation by many firms, who cut back on dividends, capital spending and operating costs in order to reduce their debt and gearing
Can small firms shrug off their recession trauma?
An interesting short article in the Telegraph contains a suggestion that many businesses, particularly the small ones, are struggling to shake off the experience of surviving the recession.
read more...»External growth strategy - takeovers back in fashion for large UK firms post recession
A neat summary from the BBC of a trend developing during 2010 - the increase in the number and value of business takeovers as UK firms emerge from the economic downturn. This would make a useful lesson stimulus piece for students wanting to build their understanding of the rationale behind acquisitions as a means of business growth, and also to identify some real examples to supplement their exam research.
read more...»Recession Strategy - Manufacturing Emerges Leaner and Fitter
Here is a really useful new report from accountants PwC focuses on how the UK manufacturing sector has weathered the recent recession in the UK. Lots of great insights in there about how manufacturing firms have attempted to remain competitive during the downturn.
read more...»Analysing the Market - UK Cinema in 2010
A huge hat tip to Geoff for spotting this amazing resource which could prove really useful - particularly for students undertaking research tasks such as BUSS4….
read more...»Emerging Stronger - How UK Businesses Responded to the Recession
Cartching up on some extra research or AQA BUSS4, I really like this article in the Independent from a few weeks ago which summarises quite neatly the key strategies (mainly financial though) which UK firms undertook during the recession. Well worth students reading this one and adding a note or more to their revision sheets:
Key points (all of which we made in the BUSS4 workshops) include:
Strengthened balance sheets (more equity & cash; less debt)
Focus on reducing inefficiencies (i.e. minimising unit costs)
Exploit faster-growing economies in the emerging markets (particularly China & Asia)
Maximised cash flow by dramatically cutting back on capital spending
Action to reduce labour costs - but not just redundancies
After a period of dividend freezes or postponements, larger firms are now rewarding shareholders
Some good “macro” or big picture content there - the challenge for students is to identify and use more detailed, specific examples of these actions in their essays
BUSS4 data - what happened to business investment in the UK recession?
A recession is typically associated with a reduction in business investment (capital expenditure). As students prepare their final research evidence, what does the data show in terms of the total capital spending by UK firms during the recent recession?
read more...»BUSS4 Recession Strategies - The Crucial Role of the Business Model
A fantastic piece of survey research from accountants Grant Thornton arrives just in time for AQA BUSS4 students preparing for the Section A essays in June 2010 & Jan 2011…
read more...»BUSS4 - Recession Strategy Lessons from Four Female Entrepreneurs
This BBC article is really useful for students researching how businesses responded to the recent recession - and it also features an entrepreneur who will be joining us for the Business Teacher Conference on 18 June 2010!
read more...»Are fringe benefits being cut?
Watching this BBC news video is likely to make you want to apply to John Lewis for a job. The story looks at the range of perks which are being withdrawn by some employers during the recession and need to make cut-backs - topical in the light both of the new Prime Minister’s move to reduce the costs of chauffer-driven cars for ministers and also of the on-going BA dispute which now seems to centre around the withdrawal of perks. But at John Lewis the staff bonuses and other fringe benefits are still very much part of the package, and seem to work well for the employer that is regularly voted at the top of the customer service league tables - the suggestion is that here is an example of a fringe benefit really increasing the motivation to provide the service that the customer wants.
There is also an article here, written in March this year, which looks at precisely what benefits BA staff have become accustomed to. When the video report was shown on BBC Breakfast on Friday it was followed by a discussion with Laura Tennison, who will be speaking at the tutor2u Business Teachers Conference later this month, in which she gave a robust view of the need to give all employees the same perks, regardless of their grade or length of service, and had a clear preference for giving people more money as a reward rather than offering fringe benefits such as gym membership or health insurance which may not be equally highly valued by everyone. She also discussed the difficulty of removing a fringe benefit, which is not part of the employment contract, when the employer no longer wishes to provide it, but the employee has got used to it. Unfortunately this interview does not seem to be available from the BBC website - I will keep looking for it and post the link to it if it becomes available
Managing People - Will Staff Turnover Increase as the UK Emerges from the Recession
Employees who held tight during the recent recession in the UK might be about to leave their employers very soon - according to a new survey.
read more...»Recession Strategy - For Airlines it is all about Unit Costs
Proof (if proof were needed) for business students wanting to understand the key to a profitable strategy for airlines during an economic downturn. Competitive advantage comes from keeping unit costs as low as they can go. Lots of press coverage on the news that Ryanair is proposing to make its first dividend payment - but the real story in the Ryanair coverage is how an airline can be so profitable despite almost impossibly tough trading conditions in the airline industry.
The answer lies in Ryanair’s obsession with effiency & productivity. It squeezes every pound of revenue it can from flexible pricing structures and pricing add-ons. But is also drives hard bargains with suppliers and minimises unit costs through industry-leading capacity utilisation (“load factors”). Love’em or hate’em, you have to admire Ryanair’s ability to make profits when the external environment is so hostile to all airlines.
This article in the Independent provides some useful context on Ryanair’s most recent, impressive results. Some good materials in there for BUSS4 students looking to add some research evidence to their essays. I liked this sentence which sums things up quite neatly:
“Cut-price airlines have withstood the recession better than their premium rivals, and Ryanair’s passenger numbers shot up by 14 per cent to 66.5 million in the year to 31 March. The group’s handling costs also fell by 9 per cent as airports fought hard to retain business in the face of cutbacks by non-budget carriers.”
Emerging from Recession - Manufacturing Leads the Way
A good economics piece in The Telegraph today which is of relevance for business students in their final revision.
The article explains that manufacturing output in the UK has grown in each of the last eight months. Britain’s factories are helping to lead the UK economy out of recession (whilst recent data suggests that the service sector has struggled to grow).
Successful exploitation of growth opportunities in emerging markets like China & India are part of the reason. Another reason is a reversal of the process of de-stocking (i.e. firms beginning to rebuild rather than reducing stock levels) which occured during the recession.
The third, and perhaps most important cause of strong demand for UK manufacturing is the low level of the Pound. Weaker sterling makes UK products relatively cheaper in international markets, although some will suffer from the flip-side - higher costs of imported raw materials and components.
Strategy Case Study - Asda Nets Netto
As we emerge from the recession, expect to see a sharp increase in mergers and acquisitions activity. A great example announced yesterday - the acquisition by Asda or 193 Netto stores which enables Asda to claim that it is now the number two grocery retailer in the UK behind Tesco.
read more...»BUSS4 - Dyson’s Success is a Great Example to Use in Section A Essays
A terrific article on Dyson in The Guardian today which is pure gold dust for AQA BUSS4 students preparing for the Section A essays on the recent recession in the UK…
read more...»Countdown to BUSS4: Get into the Research Detail
How much detail should students go into as they finalise their research findings for BUSS4 and prepare to provide well-evidenced essay paragraphs?
read more...»Long Product Life Cycles - Grocery Brands Stand the Test of Time
Looking back through some articles I flagged for follow-up, I came across this excellent piece from March 2010 reporting on the best-selling grocery brands in the UK during 2009. It is particulalrly useful for two reasons…
read more...»BUSS4 UK Recession - More Profit & More Customers - How Sainsburys Did It
Grocery retailer Sainsbury’s have increased net profit by 17% and added 1 million customers since the start of the economic downturn. How did they do it?
read more...»
