tutor2u Exam Coaching & Revision Workshops

Get Summer 2014 Right First Time with tutor2u Exam Coaching & Revision Workshops

AS & A2 Economics   |  AQA AS & A2 Business and AQA & Edexcel GCSE Business

Business Studies Resources Popular resources on the {my channel} blog Resource tags for the blog RSS Feed for the blog Twitter feed for this blog Teacher Email Resource Newsletter Category listing for this blog Business Studies Blog Home Page
Tracker Pixel for Entry

Economic Influences in action - austerity hits IWB maufacturer Promethean

Friday, July 27, 2012
Print Tweet This!Save to Favorites

Business Studies students often find economic influences a difficult topic to get to grips with. Here is a current example of a firm that has been hit by tighter government budgets brought about by recession and the need to cut spending.

Promethean is the second largest manufacturer of interactive whiteboards in the world. The Blackburn based business generates 60 per cent of its turnover from sales in the USA and budget cuts in American schools have led to orders being slashed.

Promethean has just issued a profits warning and states that its turnover for the first half of the year is likely to be in the range of £80-85 million compared to analyst estimates of £100 million.

The Daily Telegraph reports that its stock market value is now £44m, a fraction of its high point of £400m. Promethean is itself being forced to cut costs including the loss of 20 jobs but the firm emphasises it is still cash positive and has not had to touch its bank facilities.

So, let’s just set out the cause and effect here:

1) Around the world, governments have been cutting back on spending to try to help reduce budget deficits as a result of recession.

2) Promethean makes interactive whiteboards and schools in the USA account for 60% of its business. As US education budgets have been squeezed, Promethean has not been selling as many products as forecast.

3) Promethean has issued a profits warning to investors because its revenues are likely to fall short of earlier predictions and they expect to make a £7m loss in the first half of the year compared to an £8m profit in the equivalent period last year. They have embarked on a series of cost cutting measures to help restore profit margins, including 20 redundancies.

4) The stock markets have reacted badly to the news and the value of Promethean’s shares has fallen. This would make it more difficult for Promethean to raise finance on the stock exchange in future. It could also leave it vulnerable to takeover.

5) Despite all this, the directors state that Promethean is cash positive and currently in good financial shape. Students should note that well managed and prudently financed businesses can survive difficult times like this, although as Promethean states, business conditions are challenging and there are no immediate signes of any improvement. Nevertheless, do not jump to the conclusion that bad news like this necessarily leads to the failure of a business.

As a footnote, cynics will be interested to note that the market capitalisation of the firm now stands at less that five times the £8.5m in fees taken by the investment banks Goldman Sachs, JP Morgan Cazenove and Gleacher Shacklock on the company’s flotation two years ago.


blog comments powered by Disqus

AQA A2 Business Studies BUSS4 Section A Research Theme for 2014

Revision workshops for business studies from tutor2u

Business Studies Revision / Exam Coaching Workshops Coming Up:

GCSE Business (AQA Unit 2 & Edexcel Unit 3)

Thursday 24 April 2014 - Birmingham
Friday 25 April 2014 - London (Stratford City)

AQA AS & A2 Business (BUSS1 & BUSS3)

Monday 20 January 2014 - London (Stratford City)
Tuesday 21 January 2014 - London (Fulham Broadway)
Wednesday 22 January 2014 - Bristol (Cribbs Causeway)
Thursday 23 January 2014 - Birmingham (Star City)
Friday 24 January 2014 - Manchester (Salford Quays)

AQA AS & A2 Business (BUSS2 & BUSS4)

Tuesday 25 March 2014 - London (Stratford City)
Wednesday 26 March 2014 - London (Fulham Broadway)
Thursday 27 March 2014 - Bristol (Cribbs Causeway)
Friday 28 March 2014 - Birmingham (Star City)
Tuesday 1 April 2014 - Newcastle (Metro Centre)
Wednesday 2 April 2014 - Leeds (The Light)
Thursday 3 April 2014 - Manchester (Salford Quays)

Post-Easter (BUSS1/BUSS2 Combined & BUSS4)

Monday 28 April 2014 - London (Stratford City)
Tuesday 29 April 2014 - London (Fulham Broadway)
Wednesday 30 April 2014 - Bristol (Cribbs Causeway)
Thursday 1 May 2014 - Birmingham (Star City)
Friday 2 May 2014 - Manchester (Salford Quays)

Try some of these superb starter activities for Business Studies:

Business Studies Blog Economics Blog
Geography Blog Politics Blog
   
Give It A Go! Blog Sociology Blog
   

tutor2u online store

PowerPoint Lesson Activities Teacher Conferences & CPD Courses
Exam Coaching & Revision Workshops Pre-release Case Study Toolkits
A Level Economics Teaching Support Resources for Business Studies
Digital Magazines  


Enter your Email



TBBLE 2014 - Teaching & Learning Resources for Business Studies

50+ New Teaching & Learning Resources for GCSE, A Level & IB Business

Latest resources

Resource categories Blog RSS feed Blog RSS Feed
© Copyright Tutor2u Limited 2013 All Rights Reserved