So if both my businesses, The Body Shop and GUCCI were to borrow money at a high interest rate then they would have a problem because it interest rate would be very expensive and this could cause the business to loose profit.
3) What is the exchange rate? Describe how a strong £ affects businesses that trade with companies overseas for materials, employees, premises, etc.
the exchange rate is the conversion rate from one currency to another. The £ is very strong comparing to the other overseas currencies. E.g. £1.00=$1.83 (US), and £1.00=72.07 THB. By having a strong currency over the overseas currency, businesses in the UK is able to save in buying things abroad and bring them back to the UK and sell them at substantial price to make a profit.
The Body Shop in the UK exchanges the £ in overseas countries such as Africa and India; by going to countries with a low currency The Body Shop is able to make a substantial amount of profit.
4) Define inflation. If prices raised sharply what effect does this have on your business profit? Give examples from your business
INFLATION- a wide spread rise in the level of prices across the economy.
LEVEL OF INFLATION- it is measured in percentages, which indicates the amount by which price increase over a year.
If there is a high inflation the profit of both The Body Shop and GUCCI would have a decrease. If inflation is high the businesses would be affected in numerous ways.
Some of these ways are:
- Future money values become very uncertain
- Planning decision becomes very uncertain
- Price list keeps changing
- Interest rates would be high so borrowing would be expensive
Examples of what could be affected with high rates of inflation:
The Body Shop and GUCCI
- The making of the product would become very expensive because it would cost a lot more to buy the machineries
- The ingredient would also become expensive and with expensive ingredient that will make the business loose money.
ENVIRONMENTAL CONSTRAINTS
Environmental laws for your businesses
Waste duty of care
The duty of care is a law says that ‘you must take all reasonable steps to keep waste safe. If you give waste to someone else, you must be sure they are authorised to take it and can transport, recycle or dispose of it safely’.
If you break this law, you can be fined an unlimited amount
The Body Shop is ensuring that the environment is kept clean. They ensure that our social, environmental and animal protection principles integral to their business management procedures and practiced constantly throughout their operations.
The body shop is known for their exquisite ways for caring for our environment. At the body shop, they focus mainly on the following environmental issues. They are:
- Emission of greenhouse gases
- Waste
- Supply chain
- Product design
The body shop has also done numerous amounts of campaigns to help business to try and protect our environment.
GUCCI
For GUCCI the same rules apply jus t has the one for The Body Shop. GUCCI Group is known for the way they extract the raw materials for their products. GUCCI Group has also in the past had made campaigns for the environment.
COMPETITION
Between GUCCI and Prada I don’t really see any difference. Both businesses sell the same kind of products. Examples: clothes, handbags, shoes etc.
The brands GUCCI and Prada are both well known, especially in the eyes of celebrities. The prices for both companies are quite similar, bur Prada is known for their steep prices in their bags.
The qualities of both businesses are really high. They have to be high because of the price range of their products. With a high price rate the product is expected to be best in quality by everyone.
Because of the success of both these companies their products aren’t available to everyone. If you have a lot of money then you are expected to have at least one of each of these brands. The companies are both top of the line when it comes to clothes. If their products were available to everyone then all those celebrities would not be caught in them. Celebrities are the main targets for both of these companies. If celebrities are in these designers then people will try their best to save so that they too can buy a little luxury.
As I said before I haven’t found any differences but the one thing that I think will affect both GUCCI and Prada customers are the prices. I think that if both companies would at least make some products, which are less expensive, they would attract even more customers. It is known that some
