With reference to organisations or industries that you know, to what extent do you think that recent changes in the UK economy will have inevitably damaged the long-term profits of businesses that operate in this country? (40 marks)
The UK had recently emerged from the recession 2007-2009, the economy is now recovering. During the recession, many businesses had struggled to survive. The strategies that businesses had taken during recession may affect their long-term profits. For example, as people spend less during the recession, businesses try to reduce their costs and reduce prices in order to encourage customers to buy their product e.g. Primark, M&S etc and many businesses have also closed down branches in order to maintain their cash-flow. This may be necessary for some businesses in the short term but however in the long-term when there is an economic boom and demands are high, firms may find themselves with shortage of capacity.
One reason that the recent recession will have inevitably damaged the long-term profits of businesses that operate in this country is that because of the recession, consumer confidence falls and so people spend less therefore many businesses reduce their prices to attract more customers. For example, M&S had suffered during the recession, losing share in fashion and food to cheaper rivals. Shoppers seeking bargains amid the economic downturn means Asda’s George and discount clothing retailer Primark are the nation’s first and second favourite clothes shops. Therefore in response M&S had introduced promotional offers such as the ‘One day Christmas Spectaculars’,’ dress for less’ and ‘dine for 2’ with 'unprecedented' price cuts on food to attract cash-strapped shoppers. This strategy can attract customers in the short term but however in the long-term customers may expect more offers: lower prices with maintained quality so when M&S ends its offer and charge higher prices then it may risk the chance of losing out customers....
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