Businesses in other industries

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Estate agents are agents who trade houses. The success of them depends on the demand for housing. In a recession, house price may fall, which lead to the wealth effect, people wealth begins to fall as well, so demand falls. There are also other factors too, for example, firms would like to cut costs too, so they will lower the wages, and even make employees redundant. The chain effect which makes people have less disposable income or even unemployed. The stock market would also be collapsed.

As people have less income (money), a reduction in confidence and credit become less affordable (interest sensitive, loans are harder to obtain), so people will spend less. According to the income elasticity of demand of housing, as housing are luxury goods, the fall in income leads the quantity demand of housing decrease as well. These all mean that the estate agents will lose income from commissions due to the fall in housing demand, so may lead to branches closure and redundancies of agents.

The success of the estate agents can also depend on the availability of housing. In a recession, seller would rather to wait until the house price recover to a certain price, so that the selling price will be increased too. The higher the house price, the better the deal, so the greater the deal, the more the commission the agents may get for return. The estate agents may diversify in order to be more success in a competitive market, instead of selling the houses, it can rent them in a lower price to attract more customers, so they can have a stable cash flow.

On the other hand, we can argued that the success other industries determine by the macroeconomic factor further more. For example, motor trade (car industry). The car sales slumped, due to people spend less on purchasing cars, the reduction in sales lead to supply exceed demand, this force the major companies such as Honda to close down their production lines in the 2009 as they would like to cut costs. The success of the car industry certainly depends on the consumption and the investment of the car firms, or sometimes government subsidies.

If both consumers and firms have less confidence as there are less cash flow into the businesses, the stocks (cars) aren’t able to sell out, so low liquidity, they will fail to success, even the estate agents are better than them where estate agents can diversify (at least) where car firms do not like to become a car borrowing firms where revenue will be low.. Hotel industry which similar to the car industry, may even worse than the two as mentioned.

Most of the big hotels are chained, like Hilton. They promote themselves through advertisement, but as people have less disposable income, they travel less, certainly the sales of the hotels will fall too. It is different compared to the estate agents, as hotels have a lot of capacity which is not fully in used, they can’t rent the rooms, as it will total change the business structure. As they are not utilizing fully, costs will increase, where effects will be much bigger than them.

In conclusion, I do not agree that the macroeconomics factors determine the success of estate agents in the UK far more than they determine the success of business in other industries. Most success of the businesses, which are determined by the macroeconomics factors, are cyclical business, including those mentioned before. The culture of the business is a factor as well which can’t be ignored. As different cultures have different targets, which set to achieve the success.

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