Marketing And The Business Environment

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The business cycle is the name that is given to the pattern of changes in national income. Generally it is recognised that it is a result of variation in the total amount of spending in the economy or the quantity that is demanded. The spending in the economy changes for a few reasons. One is that alterations in Economic policy can cause swings in spending within the economy. Another is that the performance and confidence of financial markets can suddenly change from the lively to the depressed, meaning that consumer spending and savings suffer.

Using appropriate data (Office Of National Statistics)(2001) I have created a graph and table showing the GDP and percentage growth of British Economy from 1980 to 2001. As both clearly show, the GDP has been fluctuating since 1980 and has been through a number of slumps and recoveries. Around 1980 -1981 when the data starts, it’s apparent that the economy is experiencing a recession and slump.

However around 1983 to 1988 a recovery begins and continues, creating an economic boom in 1989 and 1990. During the boom, the economy experienced high output and low unemployment but this also comes with high inflation. As often happens in the business cycle, this high inflation led to another recession in the early 90’s. This recession then brought another slump, however it did not last for long and was followed with a long spell of recovery from 1993 to 2001. Using the data till 2001 and the knowledge that the business cycle repeats itself, it appears that soon after 2001 there would be a potential boom.

Knowledge of the business cycle in invaluable within a business organisation, this is because businesses have to alter their marketing mix as a reaction to it. If the business cycle were going through a boom then a business would take some steps to try and maximise the potential that it provided and ‘ride the wave’. If the business had an established brand then they may try to launch a product into a whole new category. By trying to create strong brand extensions they would try to play on the established brands high quality and current public awareness. An example of this is the Internet trading company Amazon who started selling books as their only product but followed up success by starting to sell CD’s and DVD’s. They used their good image to sell more products. A variation of brand extensions is line extensions where a company may add new flavours or pack sizes etc to their range to expand the choice available to customers.

Another step that a business may take in reaction to the changes in the business cycle would be to change the place that their products were being sold. Such as trying to offer their goods on the World Wide Web to customers or altering the shops that their product is being sold in. By doing this, the company would hope to sell their product to a different market than it was currently being sold in, by getting it in different locations and maintaining a bigger coverage. While doing this they would increase convenience to customers. This would help to boost sales and widen their appeal to a bigger variation of customers.

Promotion is another tool that a business organisation would use to try to bolster sales, and target new customers. The business would be most likely to do this while the business cycle was going through a recovery period, as that is when consumer spending increases and more goods are sold. They would do this by spending money on advertising campaigns to tell customers about the company and it’s products. Another promotional means that a business could possibly use is to offer promotions to customers who purchase their product. Such as buy one get one free or a free gift when they purchased a certain amount. Many businesses products are also suitable for personal selling, for example a car manufacturer who would have dealership salespeople that try to convince customers that this is the car they want. All of this leads to greater publicity and awareness of the business organisation, and the products that they sell.

If the business cycle were going through a recession then a business organisation would have to change it prices etc. They would have to lower the retail price of their product so that they can still sell to the same customers. This is because in a recession people don’t have as much money and so therefore look to pay less for what they buy. It would level out though as the business would be paying less for the goods that they use to produce their product(s). During a recession the business would also be less likely to give good credit terms to any customers who had an agreement with them, as it there would be more chance of the customer not being able to pay.

Bibliography

Kotler, P. Armstrong, G. Saunders, J. Wong, V. (2002) Principles Of Marketing, 3rd European Edition. Essex, Pearson Education. Worthington, I. Britton, C. (2003) The Business Environment, 4th Edition. Essex, Pearson Education.

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