Boots Economic Conditions.

D3 : Boots Economic Conditions

In this piece of work I am going to suggest and justify ways in which Boots could respond to the changes D2 in relation to economic conditions.

Economic Conditions come under four areas: -

Inflation
Interest Rates
Exchange Rates
Government Policy

I will start of by suggesting and justifying ways in which Boots could respond to Inflation. If Inflation rose Boots would start to loose money and their profits would go down along with their thousands and thousands of shares. To respond to Inflation rising Boots could do a number of things. Firstly Boot’s could start new and more direct advertising campaigns to get more customers in. This would bring more customers in and more customers means more profit which would help Boots to deal with Inflation rising. If better more direct advertising campaigns didn’t work Boots could try and increase the number of services (Cafes, More Wellbeing Services or Selling CD’s, video’s, video games) they offer to get more custom into their store. By getting more custom into their store they would be making more profit which would keep their shares steady. If none of the above work Boots would be forced to take a slightly more direct approach of increasing their prices. Boots may loose some custom by doing this but it would be their only choice if they wanted to beat inflation rising. Finally if rising their prices didn’t help Boots they would have to think about cutting back on staff. Or sacking the majority of the older staff on higher wages and bringing in 16 year olds on minimum wage. This would obviously be Boot’s last choice but it would be all they could do if they wanted to break even as inflation rose.

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Secondly I will suggest and justify ways in which Boots could respond to Interest Rates(I.R.) rising. Interest Rates(I.R.) rising would be a good thing for Boots as they would be bringing in more money and paying out less money. If Interest Rates (I.R.) rose Boots could completely pay of their mortgages on their stores and factories around the country. Boots could also pay of their loans on things like machinery and vehicles. This would benefit Boots because it would help them out in times on trouble e.g. Inflation Rising. If Interest Rates(I.R.) rose Boots could save more of their profits. This is because they would be getting a greater rate of interest on their profits which would increase them. This would increase their share prices because the market would see Boots have money to spare. Finally if Interest Rates(I.R.) rose Boots would have more money to spare so they could look at offering alternative services. This would benefit Boots because it would bring in more custom and interest into Boots, which would increase their profits.

Thirdly I will suggest and justify ways in which Boots could respond to Exchange Rates changing. Boots import and export products around the world and have stores in European countries like Italy and have stores in Japan and the Far East. With Boots doing so much business abroad Exchange Rates and a key factor in Boots breaking even. Currently the Pound £ is stronger than the Euro so it is a good time for Boots to look at bringing in more products/raw materials from countries that have the Euro as their main currency. This would be an advantage to Boots because they would be making more of a profit because they would be getting more for their money. More profits means a better share price and that is one of the things Boots are aiming for. When the pound is stronger than the Euro it is not a good time for Euro currency countries to buy from Boots. In response to this Boots could do more advertising in these countries and do special offers on bulk buying. This would spread the Boots name and increase their profits and dividends for their shareholders, keeping everyone happy☺.

Finally I will suggest and justify ways in which Boots could respond to Government Policy. Government Policies mainly have a bad impact on Boots apart from when Boots are offered money to set up in areas on high unemployment. This benefits Boots because it spreads there name for a smaller amount of money and increases their profits. When Government Policies have a bad impact on Boot’s profits, Boots are forced to find ways to bring more customers into their stores. Boots could try better, more direct advertising campaigns. This would bring in more custom which means profit and that is what Boots needs to respond to government policy. If that didn’t work Boots could try putting special offers on which would bring more custom into the store and would make up for the profit lost by changes in government policy.

Paul Allen 10C