Explain the effects, of changes in the economic environment on Wimpey Homes.

by yasmin93 (student)

Yasmin Akhtar

P1: explain the effects, of changes in the economic environment on a selected business:

The name of the company that I will be using for this assignment is Wimpey Homes.

This graph bellow shows the business cycle:

Slump is a period when output slows down due to a reduction in demand this may because less people may want to build new houses so Wimpy homes will not have many homes to build so sales will decrease and confidence may begin to suffer

Recession is when wimpy homes have made less from their money that they had in their base year which was their closing balance from the year before this is because economic levels slows down and the level of output may actually decrease. Unemployment is likely to increase. Firms may lose confidence and reduce investment. Individuals may save rather than spend.

Recovery is a period when the economy moves between recession and a boom. The sales starts to increase and the employment levels start to rise.

Boom is a period when the economics is growing and it grows very fast and the employment levels are very high and the unemployment levels are low. The business confidence become high and they may lead to increased investment. The consumer confidence may lead to extra sending on luxury items.

Growth is a period of improving economic circumstances more than the recovery. For example when wimpy homes make more money from sales from the base year which is money that they already have in their account which is the closing balance of the year before.

How the business cycle affects George wimpy:

The changing levels of demand across the business cycle will affect George Wimpey homes in a number of ways.

The way that Wimpey homes will be affected in the boom period are there will be higher demand as more people would want new houses built or buildings as they will have the money to spend on. This is because the levels of unemployment will be low and people will have jobs and get paid a lot of, money therefore they will have the money to buy property and they will also feel comfortable as they will have a good financial stability spend their money on luxury items. Banks are also more confident in lending the money in the boom period as they will be sure that they will get the money paid back.

The way that Wimpey homes will be affected in the slump period is that they will suffer because of a decrease in the demand for new buildings as people will not have enough money to spend on or taking loans out form banks because of high numbers of unemployment levels. Business confidence will begin to suffer as people will not be willing to buy large items such as houses as they will not be able afford them.

The way that Wimpey homes would be affected in the recession period is that there would be less demand for houses and new buildings to ...

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The way that Wimpey homes would be affected in the recession period is that there would be less demand for houses and new buildings to be built. This is due to employment levels increasing and business confidence would get low and individuals would be less likely to purchase anything due the less money they would have to spend on such large items. In this period business cut back on production as they are not confident enough that they will make high number of sales which will lead to a loss for them and some business may go bankrupt and individuals may loose their jobs.

The way that Wimpey homes are affected in the recovery period are that they may have demands for wider ranges of products and services. They would also increase the amount of production as sales are increasing as more people are getting their jobs back and they will also need new workers because of the higher demands and the recruitment agencies may see an increase in demand for the temporary workers.

The Ripple Effect:

2) The ripple effect has a negative knock on effect in the economy. Wimpy homes would be affected by the ripple effect in the recession period as banks will not be providing mortgages and loans to people so they will find it difficult to purchase properties. This is because the banks more cautious about the people who are taking out the loan and think whether they would be able to pay it back or not. This will affect Wimpey homes as many home buyers will not be able to afford purchasing their own property and they will consider renting a house or even down sizing their property then would be able to pay less. This will lead them to be forced to build les houses and this will also reduce the demand of building materials from suppliers such as brick merchants, concrete suppliers etc. This would also affect these suppliers as they will be making less sales as they will have less demands form Wimpey homes to build the house as many people will not be buying new house because of him unemployment.

3) The managers of Wimpey homes should look out for is the trade surplus to see the economic recovery. This is when goods are exported more than goods imported. This means the country does not need to look for cheaper goods from foreign markets. The GDP is also a good way of indicating whether the economy is recovering from a recession as it is a measure of the national income and output for a given country’s economy. The GDP can be measured through the expenditure method:

GDP = consumption + + + ( − ).

The GDP is the value of goods and services produced in a country within one year. Economic growth refers to the increase in GDP which leads to the improvement in the standard of living for the citizens of a country. Steady growth in the GDP leads to additional earned income which leads to buyers of homes which is beneficial to Wimpey homes. The increased share prices and firms declaring profits is a good indicator.

4) In the boom period it is harder to find the right person for a new job at Wimpey homes. This is because it difficult to find the right applicants who meet the criteria of the job as most of the people who are qualified and skilled is already in employment. This leads to having to employ people who do not have the relevant skills of the job and the qualifications.

In the boom period Wimpey homes will be more likely to complete buildings on time as they will have to availability of all the materials on time and they will have more employees working for them so customers would be satisfied. This will lead to higher sales as more customers will be interested in purchasing new homes and they will have higher profits and the business confidence will grow so they may choose to expand and make the business bigger.

The ability to fill in vacancies for Wimpey Homes and applicants who have the correct skills and qualifications will be more likely to increase in the slump period. This is because of the high numbers of people who are unemployed and they will be looking for jobs. Many people do not have jobs as business confidence may have fallen and they have made their employees redundant form their jobs. Wimpey homes would find it difficult in meeting orders from customers to get the building completed on times. This will lead to projects have a big fall and they will not be able to sell many homes due to financial reasons such as banks not giving people loans and mortgages. The sales and profits may fall due to banks rejecting to give out loans and mortgages form people.

In the recession period the ability to fill in vacancies for Wimpey homes will be less difficult and be very easy. This is because the unemployment levels would be very high and many people will be Appling for jobs and there will be many people who are skilled and qualified for the job and they will be able to meet the criteria for the job. the ability to meet orders from customers to construct the buildings on time will be less likely as the sales will be very low in the economic cycle due to banks not giving out loans or mortgages as they are very cautious to who they lend money to and whether they would be able to pay the money back or not.

Wimpey homes will have no competition at this stage as they will have less work done and no one will be buying the houses as they are unemployed and they will not be able to afford buying homes. This is also because Wimpey homes will be attempting to survive and break-even.

In the recovery period Wimpey homes will have a steady increase in the sales of houses. They will also have less qualified applicants who are applying for the jobs as employment levels increase do there will be less demands for jobs. There will also be less confidence for the business as other companies will also have a high business confidence and there will be competition with other building companies such as barrat homes etc. The sales will be higher and they will also be able to complete more buildings on time and meet the deadlines of completion form the customers and the consumer confidence will grow and also form banks. They will be more confidence giving out loans for there would be a high demand for consumers purchasing homes. The competition is increasing with overseas companies but building companies are still wary of the economic situation.

Input costs are the cost of direct material, labor and other overhead items for the production of houses and other properties produced by Wimpey homes. The input costs will affect the business from high and low period s of inflation. The input costs for Wimpey homes would be very high as buying the building materials to build the houses will be expensive and the costs of wages would rise. In the low periods of the inflation the input costs would be low as the building materials would be cheaper to buy and the wages for the employees would be less or just the average amount of money that they should get paid.

There would be an increase in the sales of good and services in the periods of low inflation as the business and the consumer confidence is high. However the sales of goods and services would increase in the periods of high inflations. This is because consumers will not be able to purchase house as they may not be able to afford it and will refuse to take out loans and mortgages because they may not be able to pay the money back. The ability to expand will be present during low inflation as profits will be very good for Wimpey homes and they can expand into more regional areas or on a global scale. Whereas, the ability to expand during a high inflation period will not be present and will not be very good as the cost would be higher than it normally is.

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