Business Economics
Canny pricing in a slowdown
There is a super feature on pricing strategies from Adam Jones’s management blog on the Financial Times web site - available here
Canny businesses are willing and able to adjust their pricing strategies to suit ever changing business consumers. The key seems to be in having good market intelligence about which consumers have a demand that is sensitive to price and those who spending on goods and services is affected more by changes in real take-home income. Deep discounting is often observed in an economic slowdown or outright recession as businesses look to shift unsold stock, maintain sales volumes and generate extra cash to tide them through the tough times. But as the FT blog points out, offering discounts to consumers can risk unleashing an unwelcome price war (which damages profit margins) and overly-aggressive discounting can ultimately damage the brand.
There is a bit more on pricing do’s and don’ts in a recession here
A cluster of profit warnings
Rarely a day goes by without one or more household names in the world of business, finance and commerce releasing a profit warning to the city. Listed companies are required to do so - releasing information that might materially affect the market value of their business - but the rash of profit warnings from different sectors of the economy is a reflection of the demand and cost pressures facing private sector companies. The squeeze is on and it will be interesting to see how corporate Britain reacts and responds to these challenging times.
Parcel problems ruffle Rentokil
Starbucks reports falling profits
Bovis sets out new profits warning
Downturn sparks Electrolux loss
Has competition in postal services delivered?
Two years on from the liberalisation of the postal services industry, has this supply-side policy to make the market more contestable made any noticeable difference to the quality of service, prices and investment in delivery? A new report casts doubt on the changes to the industry since the market opened up to competition at the start of 2006 to businesses such as UK Mail. Robert Peston reports for the BBC in this video clip. His feature asks whether the universal service provision is a millstone round the neck of the Royal Mail which remains in deep financial trouble.
Farewell Microhoo, we never knew you…
After three months of tight negotiations, it has finally been announced that Microsoft will walk away from its bid for Yahoo because the two cannot agree on an acceptable sale price. The whole world has been watching this proposed merger intently, as it may have been the deal to change the plate tectonics of the technology age.
Organic growth for Costa
It is early days yet, but the new Costa Coffee store on my local high street seems to be bedding in nicely. The passing trade has been boosted by providing free wifi access in store (I am sat here now enjoying a small latte writing this blog article) and there is a really nice open patio area behind the building for coffee-lovers to sit watching the Thames go by. The Starbucks over Windsir Bridge is fast becoming a distant memory.
Whitbread, the owners of Costa Coffee and Premier Travel Inn has announced plans today for a very large organic growth of their business - the number of Costa stores worldwide is set to double and the room capacity of their budget hotel business may grow by 50% over the next five years. How recession-proof are these businesses? Despite the increasingly congested markets for retail coffee sales (McDonald’s is making a strong pitch for some of the action) I reckon they are a decent bet providing Whitbread can keep their costs under tight control and limit price rises on the high street. With a weakening pound against the Euro, many more people are likely to holiday at home this year and next boosting the demand for good value budget hotel accommodation en route or at chosen destinations.
Haulier closes down
This ninety second video clip from BBC news is a short but powerful clip to show when discussing the effects of rising fuel prices on the profitability of a business - no bells and whistles, just a face to face interview with the owner of a haulage firm who has decided to quite because of the cost of diesel and his inability to pass on costs to consumers, the result, 21 redundancies and a firesale of the assets of the business.
Yes sir, yes sir, 20,000 bags full.
They’d be in Milan too. Following on from the Terminal 5 fiasco, the Competition Commission has been triggered to publish a damning “emerging thinking” report on the (in)competence of BAA’s airport monopoly. It criticises them for “failing airlines and customers” and may eventually lead to the forced sale of several airports.
read more...»Amazon’s new warehouse
The leading online retailer has opened a distribution centre in Swansea Bay, which will create 1,200 jobs - this BBC news video is a great clip to show to demonstrate some of the economies of scale that Amazon is able to exploit when building a warehouse of such enormous size and students can also get a feel for some of the local and regional multiplier effects from the investment and the importance attached to such inward investment for the Welsh economy. The evaluation in discussion could be broadened to include the widening range of products that Amazon is now stocking and selling together with the fact that the majority of products in the warehouse have been imported.
Revision: Stakeholders
Introducing the concept of stakeholders can add greatly to the quality of your economic evaluation in answers to essay and data response questions. This revision note looks briefly at the stakeholder concept and some of the issues where it might be relevant in AS and A2 economics questions.
Revision note
Revision_Stakeholders.pdf
“Benign”, eh?
Today the Office of Fair Trading has filed a press release accusing 112 construction companies of price-fixing. Estimated to be hundreds of millions of pounds, this will dwarf the previous record fine of £121.5m on BA last year and the £116m penalty on supermarket milk price-fixing. Some of the biggest names such as Balfour Beatty and Carillion have been accused, and shares in the construction sector generally dipped in London today.
read more...»
