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External Influences on Business Activity.

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Introduction

External Influences on Business Activity Market Competition Products are made competitive in many different ways. Some businesses make a product competitive by lowering the price to equal or beat a main competitor e.g. Sainsburys lowering the price of baked beans to make them cheaper than Tesco or ASDA. Wight Mountain would try to lower the price of a specific bike to make it cheaper than Halfords. Businesses also make a product competitive by increasing the quality and the range of product, e.g. asking their own customers what they can do to improve a product. Wight Mountain could bring in another range of a particular bike, e.g. different suspension. Some businesses try to expand their customer service, e.g. at Sainsburys, the staff try to make the customers feel valued by the business so customers are happy shopping at Sainsburys. Target Customers Age: Popular music is usually bought by young people so music companies such as EMI take advantage by advertising in magazines because most young people read magazines. Coach holidays are most popular with older people, and so would be promoted to this age group. Sainsburys cater for all age groups as they have CDs for teenagers, dolls and action figures for the younger children, sainsburys have older CDs for adults to remember the past. Gender: Women are important customers for mail order businesses, so companies such as Freeman's design their catalogues to attract women. ...read more.

Middle

During a 'boom', the spending power of their customers will be increased, inflation rates will be lower and exchange rates stable. This maximises the potential for profit. The one benefit Sainsburys have (as opposed to Wight Mountain) is that they supply food, a basic necessity and this is the one area that feels the impact of recession least. However Sainsburys are at the top end of the market and therefore they may experience significant competition from supermarkets that focus more on 'cheap and cheerful' like ASDA and Tesco. High interest rates would however affect Sainsburys ability to acquire new sites and provide capital investment (due to the high cost of loans). During the eighties at a time of economic slump several supermarket chains suffered since they had already embarked upon large capital investment programmes with a high level of loaning. Wight Mountain Wight Mountain operates in a market that would be highly sensitive to the economy. As a small company, they will feel the impact of recession since they will find it hard to receive loans for repayments, as interest rates rise and their market share will be reduced since cycles are seen as a luxury item. As a small company Wight Mountain may have only limited reserves and there will be few opportunities for them to reduce costs. Local council business rates may also rise forcing them to close their business. ...read more.

Conclusion

2) With increasing mergers and acquisitions Sainsbury's must ensure they do not over stretch themselves and make themselves 'vulnerable to being taken over. 3) There is increasing competition from 'low cost' supermarkets such as ALDI - these types of supermarkets will do particularly well in times of economic decline. Wight Mountain Strengths: 1) They promote an environmentally friendly form of transport and one that also has an impact on health. Weaknesses: 1) They are a small company and therefore very vulnerable to potential competition from larger stores. For this reason they need to concentrate on 'niche market' products and avoid competing with companies such as Halfords. 2) As a small company they have only small reserves and are very vulnerable during times of economic slump. They have recently expanded and this could place them under pressure if interest rates rise. 3) They will be unable to afford rises in environment charges such as those levied by local authorities for waste disposal. Opportunities: 1) The market they are in is highly specialised and demand is rising given the increase in healthy living awareness and pressure on the public to use environmentally friendly forms of transport. Threats: 1) Bicycles are still viewed as luxury items and in an economic slump; Wight Mountain may find its sales falling dramatically. 2) Without the purchasing power of Sainsbury's they will be unable to reduce costs significantly during an economic slump. ...read more.

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