Impact of Economy on Business Organizations: Toy R US Case Study

This report evaluates the impact of the economy on business organizations, using Toy R US as a case study. It discusses the principles of supply and demand, analysis of micro factors, and macro factors that contributed to the company's failure. It also explores the application of economic theories to contemporary business contexts.

Economics
&
Financial Management

Table of Contents
INTRODUCTION...........................................................................................................................3
Overview of company......................................................................................................................3
TASK...............................................................................................................................................3
Identify and evaluate the impact the economy has on business organisations:...........................3
Appraise and apply economic theory to a range of contemporary business contexts:................5
CONCLUSION................................................................................................................................6
RECOMMENDATIONS.................................................................................................................6
REFERENCES ...............................................................................................................................7

INTRODUCTION
Economics and financial concepts are inter linked with each other that have equal
influence on one another. On the other side finance is related with managing of financial sources
and factors that help company to reach the desired results (Penner, 2016). To better understand
the concept of economics and finance Toy R US is selected.
In this report, evaluation and determination of impact of economy is discussed. In
addition, economic theories that are applied and appraised to range of contemporary business
situation are also elaborated in this report.
Overview of company
The Toy “R” Us was established in 1948 April with its headquarter in Wayne, New
Jersey in the New york. The corporation has been in the toy industry for even more than 65 year,
running about 800 shops in the united state and about 800 beyond the U.S, but with time both
figures have also been dropping steadily. There are have number of products that are provided by
company such as L.O.L. Surprise! Winter Disco Chalet Doll House, Juno My Baby Elephant and
LEGO Star Wars Resistance Y-Wing Star fighter which are main attraction for children. Due to
rising of operating cost and additional expenses the company is not able to maintain any profit
since 2013 (About Toy “R” Us, 2020).
TASK
Identify and evaluate the impact the economy has on business organisations:
Supply and Demand of Goods: Principle of supply and demand-
Demand- In the economics, demand is the amount of a good that customers are ready and willing
to buy at different prices over a given time period. It is based on certain principles which are
mentioned below in such manner that are as follows:
 If quantity of products will decrease if prices raise.
 As well as demand of products will increase in the case when prices decrease.
These are the key principle of demand which are applicable for all nations' economy. Such as in
the above Toy “R” company, their products' demand can increase if they decrease prices.

Supply- In economics, supply is the volume of a commodity that businesses, manufacturers,
labourers, financial asset suppliers or other market participants are ready and able to do so on the
market or direct to the next business agent (Bascom, 2016). Herein, underneath some principles
of supply are mentioned that are as follows:
 If price of goods and services will increase then supply of products will also increase. If price of goods and services will decrease then supply of products will also decrease.
Elasticity of supply- This can be defined as % change in the quantity supplied which is divided
from % change in the price. Such as in the above company, supply elasticity can be calculated if
their supply and price changes.
Elasticity of demand- Price elasticity of demand is a concept used in economies to demonstrate
the flexibility or elasticity of a product or service's requested volume to raise its price since
nothing but the rate changes (Mills and Broughton, 2016).
Analysis of micro factors: There are different types of factors which are included under micro
factors such as:
 Impact of customers -The most important microeconomic effect on a business is to
consumers. Customers' motivations for buying the item will play a significant role in how
the company handle the advertising of goods and services.
 Suppliers- The suppliers also play a key role in order to impact company's performance.
This is so because if suppliers will offer goods at lower cost then it may be beneficial for
companies (Frankfurter and McGoun, 2018).
 Competition- It is also an important factor which can hamper companies' performance.
This is so because if there is lower level of competition then it will be easier for
companies to sustain.
 General public- If a company is not paying its responsibilities towards society then this
may become difficult to companies to attract more number of customers. Such as for
above company, it is essential for them to complete their responsibilities towards society.
Value of marginal product:
Marginal product- The marginal product or marginal functional efficiency of an object is a shift
in output resulted from the use of one additional unit of a particular input, such that the quantity
of other input is kept unchanged. Such as in the above company the marginal product can be
understood as production of an additional toy which may change overall volume of production.

Macro factors that contributed towards the company failure: In the economy of nation, there
are different types of macro factors which can affect to performance of companies. Herein,
underneath some factors are mentioned that are as follows:
 Unemployment- If in a country, there is higher rate of unemployment then this may put
negative impact on companies performance. This is so because of lower income per
capital. Such as in the aspect of United kingdom, it can be find out that their
unemployment rates are fluctuating year by year. Like in year 2009, it was of 7.6% which
raised in year 2010 till 7.9%. While in year 2013 it decreased. As a result above
company's performance effected negatively.
Appraise and apply economic theory to a range of contemporary business contexts:
Rational philosophy of choice claims that people use logical judgements to make
intelligent decisions and deliver results consistent to their main long term goals. Using the
principle of moral choice is associated with an increase in outcomes that give these people the
greatest advantage and happiness with the options which are available (Vogel, 2016). It is also
observed that rational choice philosophy have agents that are defined by their UN-modifying
series of preferences that are across the conceivable international results. Reliability relationships
between choices over results were indicated in mathematical propositions; a reasonable agent for
whom the decisions represent logical consistency required by rational choice hypotheses.
Although the concept of rational choice is reasonable and easily understood, it's often
undermined with the help of real world example. Political forces in support of the Brexit
referendum conducted on 24 June 2016 utilized strategies based on feelings instead of rational
analysis. Both movements culminated in the completely non-shocking and unpredictable
outcome of the vote, when the UK formally chose to leave the EU. As calculated by the CBOE
Volatility Index (VIX), the stock markets then reacted to everything with surprise, dramatically
that brief-term uncertainty (Rational choice theory, 2020).
Behavioural Economics
Behavioural Economics is really the analysis of behaviour because it applies to human
and social financial judgement making systems. This gives rise to two most significant question
such as:
 Are every economists have the same assumption of utility or they are focused towards
profit maximization?

 Does every individual are centred towards the maximum subjective expected utility?
In such an ideal scenario, individuals will always create optimum choices which would
give them the maximum benefit and happiness. Throughout economics, the principle of rational
choice claims that when people are confronted with different options within scarcity
circumstances they choose the alternative that increases their personal fulfilment. Economics has
traditionally distinguished from many other theories in its belief that almost all, if not all, of
human psychology could be easily described by believing that our interests are very well-defined
and constant over period and are reasonable (Earl and Potts, 2016). In the present time, it has
been determined that most of the people are not attached with toys as they feel that children from
their early age must be sharp and smart. In the context of Toy “R” Us the main reason for
declining sales and diminishing profit is that customer behaviour and preferences for buying toys
for children have totally changed. Most of the customer are attached towards buying smart
phones and software games as they found these stuff to be more entertaining for their children.
CONCLUSION
In the end of report, it is elaborated that economic mainly focus on wider picture like the
country actual status, performance of market, government policies etc. It is observed that several
mainstream economic biases and philosophy are depended on rational choice theory those are
related with rational factors, the logicality hypothesis, self interest etc. Such findings are also
related to the best-interests of a person.
RECOMMENDATIONS
 The above company should make policies and strategies in accordance of micro & macro
environmental factors. If they will do so then their demand of products will increase.
 As well as the company must consider different rules and laws of demand & supply so
that they can beat to competitors.

REFERENCES
Books and Journals:
Penner, S. J., 2016. Economics and financial management for nurses and nurse leaders. Springer
Publishing Company.
Bascom, W. O., 2016. The economics of financial reform in developing countries. Springer.
Mills, J. and Broughton, V., 2016. Bliss Bibliographic Classification: Class T: Economics
Management of Economic Enterprises. Elsevier.
Vogel, H. L., 2016. Travel industry economics: A guide for financial analysis. Springer.
Earl, P. E. and Potts, J., 2016. The management of creative vision and the economics of creative
cycles. Managerial and Decision Economics. 37(7). pp.474-484.
Frankfurter, G. M. and McGoun, E. G., 2018. From individualism to the individual: Ideology
and inquiry in financial economics. Routledge.
Online
About Toy “R” Us. 2020. [Online] Available Through:
<https://www.toysrus.com/>
Rational choice theory. 2020. [Online] Available Through:
<https://www.britannica.com/topic/rational-choice-theory>.