Economic Factors Affecting Business Operations

The assignment discusses how economic and financial management play a crucial role in every business organization, citing examples from UK businesses such as Brexit's impact on Patisserie Valerie. It also covers various economic theories like inflation, technology, and competition, highlighting their importance in business success or failure.

ECONOMIC AND
FINANCIAL MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1. Identifying and evaluating impact the economy on business organization........................1
2. Appraising and applying economic theory with range of contemporary business.............2
3. Analysing micro and macro economic forces on contemporary business.........................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Economic and financial management are associated in very close aspect where financial
management is laying special emphasis to manage funds for attaining business goals. Economics
is focussing on creation, transport and use of goods. The present report will discuss about
Patisserie Valerie which is a cafe in UK had failed due to various factors. In the similar aspect, it
will determine and evaluate impact on economy on business organization. Further, it will
appraise and apply economic theory with range of contemporary business and analysing micro
and macro economic forces.
1. Identifying and evaluating impact the economy on business organization
In the present scenario, UK had attained growth to be modest in year 2018 at 1.3% and in
2019 at 1.6%. This will directly reflect the drag with context of business investment through
ongoing political and economic uncertainty related to result of negotiations of Brexit. However,
higher government spending along with short term cuts directly announced in budget and had
boosted with growth in year 2019. Economic growth was initiated in year 2018 on a weak
footing followed with slowdown in year 2017. Further, growth is expected for recouping slightly
within second quarter but it remained lacklustre throughout the year. The UK has recouped itself
from financial crisis but its growth was sluggish and dependent on attaining more people into
work instead of increasing productivity. There was 9.7% increase in size of economy as
compared to peak of pre-downturn and annually 2.3% change (The UK economy at a glance,
2019).
The GDP of UK had expanded through 0.6% in quarter July to September along with the
best quarterly growth over past 2 years. The strength in this Q3 attained growth and masks with
loss in momentum of industrial production along with output services. Apart from this, there are
various other factors such as uncertainty on basis of Brexit. Brexit had impacted currency and
stock market on basis of trade position of UK and broaden economic relations. There are various
companies which had global presence and gained benefit through decrement in pound and its
outcome in generating huge revenue when currency is converted into sterling. However, business
who buy most of raw materials overseas have observed significant increment in cost. EasyJet
could face some extra cost of £90 million due to adverse movements in currency and retailers
such as Burberry has produced 85% of sales abroad, has sharp increment in sales (Dan McCrum,
2019).
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The UK's historic low employment contract is led through self employed and part-timers
where growth in employment has widened itself for considering full-time employees. However,
real wages has been initiated for recovering financial crisis and reducing when depreciation of
Sterling after Brexit has fed by consumer prices but there was no growth in nominal wage. In the
similar aspect, low inflation driven by huge reduction in oil prices, price wars of supermarkets
along with strength of sterling was decreased with cost of imports and boon for finances of
household in year 2014 and 2015. On the contrary, there was sharp fall in sterling value after
Brexit vote as imports were highly expensive and inflation rose above 2% target of Bank of
England. Competition and advancement in technology has also impacted business in both
positive aspects and some new entrants will attain competitive advantage with these factors.
Patisserie Valerie has failed in business keep it afloat after company uncovered with potentially
fraudulent irregularities of accounting along with financial black hole in October. There was
presence of stable remarkable where business is very smooth, as weather along with flow of
competition and politics impact as well (Atrill and McLaney, 2017). Further, profit per store
would have made it hard for absorbing inflation in wages or ingredients and rents.
2. Appraising and applying economic theory with range of contemporary business
Inflation theory
The inflation theory reflects extreme end of inflations as it exists even when there is
absence of excess of demand. Further, with reference to imbalance among supply and demand,
then inflation takes place in economy (Gillespie, 2013).
Patisserie Valerie continued to perform well with increment in sales by 15.7% to £40.4m
where sales of other brands such as Philpotts cafe and Druckers Vienna Patisserie increased
through 0.6% in first half. In this context, online sales has also continued growth up by 14.3% to
£1.6m as its membership of group's cake club attained growth by 22000 to 383000 members
with huge proportion at period end. Patisserie was hurt through huge food cost because of
inflationary pressures. As its prices were stabilised with 0.3% along with increment in rent and
high rate of business which is immaterial across estate.
Labour market
The labour market is referred as market where people directly offer skills to item
employers in exchange of salaries, wages along with various other forms of compensation.
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Patisserie Valerie has provided flexibility and rigidity which leads to issues regarding
employment like staff wages, ease where competitors fire and hire employees along with length
of probation period. In this organization, as financial saviour has turned for sake of around 3000
jobs (Sloman and et.al.,2016). However, there was reason that why would usual price related to
current worth of organization which does not guarantee to stay in business and even there is no
estimation of sixe of fraudulent accounting irregularities.
Technological change
Technology plays very important role in economics along with theory of growth and
development and resource allocation as well. It helps in stating explanation about factors which
shape technological innovation and direct impact on culture and society. It helps in emphasizing
important role that cultural values and social networks plays for purpose of shaping
technological artifacts (Arnold, 2012).
Patisserie Valerie varies sharply in methodology and size with different industrial
factories producing breads and many other material. The organization was fully embraced with
technology with context of its potential for creating improvements in bottom line but there was
lack of up-gradation and benefit and issues related to fraudulent was giving direct impact on each
aspect of business unit.
Competition theory
This is a condition where various economic firms seeks for purpose of obtaining share of
limited good through varying elements related to appropriate marketing mix. In the same series,
there is evolution along with concept of ecological niche. Furthermore, it is typically opposing
multiple forces of inter and intraspecific competition required to be considered on simultaneous
aspect with balancing it in large part for identifying niche boundaries.
Patisserie Valerie's business was smooth along with flow of competition and politics such
as impact of Brexit. Its rivals in this cake business were attaining huge margin along with sales
as well. In simple words, consumers were gaining benefit through this competition as it is impact
of technology and financial black hole in this business unit.
3. Analysing micro and macro economic forces on contemporary business
Micro forces
These forces deal with economic behaviour of decision making units of every individual
specially households, firms, individual prices, wages along with individual industries and
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commodities. It comprises set of condition and forces which directly originate through suppliers,
customers, competitors, creditors, shareholders along with community where business operates.
These forces directly impact on ability of organization for gaining input and discharge of its
output. These factors give direct impact on demand and supply of Patisserie Valerie and some
specific groups will affect ability of firm or manager for purpose on decision making.
Suppliers who provide or supply with different inputs like raw materials required for
purpose of production. It is essential for manager to ensure about reliable supply of its input
resources. The supply system's effectiveness helps in identifying long term survival and growth
of business unit. In the similar aspect, competitors are replicated as businesses which generates
services and goods with particular organisation. Rivalry among competitors are very threatening
force which are dealt with managers and huge level of rivalry provides outcome related to price
competition and falling prices with access to lower margin along with resources (Dyson, 2010).
Macroeconomic Forces
These forces deal with big and total aggregate like national income, output, total
consumption and employment at general level of prices. In this aspect various forces impact
conditions related to buying and sales market and during period with context of unhealthy
economic growth occasioned with factors like inflation, increasing unemployment, huge taxes
among others where various individuals and business have numerous issues (Bamber and Parry,
2014).
With context of legal and political forces are directly paralleled with social environment
due to ordinary laws passed with social problems and pressures. There are various legislation
such as equal employment opportunity, law of collective bargaining and contract of employment
influence business operations either negatively or positively.
CONCLUSION
On basis of above report it could be concluded that economics and financial management
plays very important role in every business organization whether it is small or big. It has shown
that UK economy was highly impacted and it had given direct effect on multiple business
organization such as Patisserie Valerie such as Brexit and so on. In the similar aspect, there are
multiple economic theories such as inflation, technology and competition has played crucial role
for this business failure and most important concern is related to financial black hole (accounting
irregularities).
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REFERENCES
Books and Journals
Arnold, G. (2012) Corporate Financial Management. 5th edn. Harlow: Pearson
Atrill, P. and McLaney, E. (2017) Accounting and Finance for Non-Specialists. 10th edn.
Harlow: Pearson
Bamber, M. and Parry, S. (2014) Accounting and Finance for Managers: a Decision-Making
Approach. London: Kogan Page
Dyson, J. (2010) Accounting for Non-Accounting Students. 8th edn. Harlow: Prentice Hal
Gillespie, A. (2013) Business Economics. 2nd Edn. Oxford: Oxford University Pres
Sloman, J., Garratt, D., Guest, J. and Jones, E. (2016) Economics for Business. 7th edn. Harlow:
Pearson
Online
Dan McCrum. 2019. Too smooth: the red flag at Patisserie Valerie which was missed. [Online].
Available through <https://ftalphaville.ft.com/2018/10/16/1539662400000/Too-smooth--
the-red-flag-at-Patisserie-Valerie-which-was-missed/>.
The UK economy at a glance. 2019. [Online]. Available through
<https://ig.ft.com/sites/numbers/economies/uk/>.
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