Unit 1 Task 2
How have the external environmental factors affected the ability of Nando’s to achieve its aims and objectives? Economic Factors
Businesses are affected by the economy and sometimes the economy can have a dramatic drop in countries causing issues for some business mainly due to 4 factors. These factors are inflation, Economic growth, Exchange rates and unemployment. Firstly Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability. Inflation can either be negative or positive; it could mean making products more expensive. There are a number of effects of inflation that can create problems for Nando’s. It’s important for the owner of Nando’s to know the effects of inflation. As this will help protect the business during inflationary periods. Secondly Economic growth is simply the increase in the amount of the goods and services produced by an economy over time. Economic growth depends on productivity and investment. If Nando’s is Successful in this process it means they can generates increased incomes which then fuel demand and encourage further economic growth. This cycle can, however, work in the reverse direction, as falling demand may lead to under-used resources and investment cutbacks meaning for Nando’s there fresh chicken may not be used. In comes may then fall further giving a huge effect on Nando’s. Thirdly Exchange rates is the price of one country's currency expressed in another country's currency .Exchange rates have a significant effect on companies like Nando’s that do business globally. When Nando’s exchange products or services across borders causing two or more currencies to become involved, fluctuation in exchange rates can lead to gains or losses for the business. Lastly unemployment is when a person who is searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy. The most frequently cited measure of unemployment is the unemployment rate. This is the number of unemployed people divided by the number of people in the labour force. Unemployment could affect Nando’s in a variety of ways depending on whether unemployment is high or low, and rising or falling. Some business showing signs of rising high unemployment include: • Lower consumer spending = lower demand for income-elastic products • Demand for inferior goods (lower price, quality) may increase • Greater supply of labour – potentially lower wage/salary levels • Unemployment creates insecurity in the workforce; potentially a cause of lower morale and de-motivation Some business showing signs of falling low unemployment:
• Consumers have more income = higher demand for income elastic goods • Labour market “tightens” – increased upward pressure on wages / salaries • Harder to recruit or expand without offering better worker packages – potentially affects ability to increase capacity • Greater sense of job security and motivation in the workforce if the business is doing well
Economic factors could affect Nando’s aim of maximizing profit, as if there was a recession then people will not often dine out as they won’t have as much money. For people who ate in more expensive restaurants might down grade to a cheaper restaurant like Nando’s. So in a way recession could either bring lots of money in to Nando’s or not a lot. However during a recession Nando’s will defiantly not maximize profit as their objective is to do small discounts like coupons to attract loads of customers. This is because during recession its mostly likely that all restaurant’s around the Nando’s franchises will be doing the exact same to their customers as not as much money is coming in. Inflation could also affect Nando’s as the prices of chicken could rise for example making it harder to gain profit as outcome is rising. Unemployment can greatly affect...
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