To market hot-air balloons is not easy as there are only limited supplies of customers. The different types of customers are,
- Private individuals for who ballooning is a pastime.
- Semi-professional pilots.
- Professional operators who take fare-paying passengers.
- Commercial customers who want special shape balloons.
To buy a balloon is very expensive so they don’t deal with hundreds of clients; they deal with few customers on a more personal basis so they have to be taken care of properly. Most of the customers are ones who have already purchased a balloon and want it to be upgraded, in actual fact it’s about 60-70% of their market.
For Cameron Balloons to be successful, they must carry out extensive market research to identify the consumers’ needs, just like any other firm. This is carried out by the marketing department of the company. Cameron Balloons breaks down its market into different segments so it can market a particular item to a certain segment. For this to be successful, careful observation and listening to consumer requirements needs to take place. The business also needs to consider carefully the marketing mix and the nature of the product.
The condition of the economy in addition affects the market for balloons; changes in the economy will influence both Cameron Balloons and their clientele.
Key Staff Members
The marketing area of Cameron Balloons has two main workers to carry out daily functions; they are Alan Noble who is marketing director and Julia Linfield who is the sales co-ordinator. They work along side several other members who work in the marketing department.
Alan focuses on advertising the balloons, the skills required are.
- An up to date and thorough knowledge of the balloon market and products.
- Good communication skills.
- An aeronautical or ballooning background (being a pilot is also an advantage).
- A skill to maintain a good relationship with all customers as much business is return business.
- Flexibility.
What the Workers Do
Alan and another worker, Nick, spend a lot of their time travelling to ballooning events that are taking place around the world. Cameron Balloons needs to be at these events to promote their business and to see what customers want. It gives them an opportunity to make new clients and maintain relations with old ones.
Also, they spend a lot of time talking to potential customers on the phone. They will phone the firm to tell them what they require.
A small part of time is spent in meetings updating themselves on new technical needs and new additions to the product range.
A larger amount is spent in meetings. Tactical planning is vital to the long-term wellbeing of a company, and the marketing department are a key part of that as they are the ones closest to the customer and the customer's requirements.
Alan and the marketing team are responsible for the internet marketing scheme, this provides information about the balloons to potential customers.
Operations
The operations function in a business is responsible for all the operations that go into making the product.
A number of things go in a cycle of operations takes place and something is made. Every business needs a set of inputs. It is the job of the functional area that covers operations to make sure that there are enough of the inputs, and that they are of adequate quality. Part of the operations function will also be to organise and oversee the actual production process.
Operations produce products by making best use of the various inputs that are needed. These include,
- Land - This includes land that is worked (such as farming land, mines and quarries), the land that is necessary for buildings to stand on, and the buildings themselves. Cameron Balloons has two factory sites, one in the UK and the other in the USA.
- Equipment - Cameron Balloons has computer and design equipment, machines for sewing fabric and high-quality plotting and cutting apparatus.
- Staff- The staff at Cameron Balloons ranges from Don Cameron, to engineers, designers and salespeople.
- Materials - The raw materials needed include the special fabric used to make the balloons, the resources to put the designs on to the material, and the supplies to make the baskets, burners and rigging.
That is why the operations department is divided into
- Purchasing.
- Design &
- Production.
Purchasing
The main functions of the purchasing department are
- Buying.
- Stock control &
- Goods inwards.
This department deals with around 1000 suppliers, the reason there are so many is because there are many parts needed to manufacture a balloon and only a few companies specialise in balloon parts. However, only 12 of the 1000 or so suppliers make up 50% of the purchasing made by Cameron Balloons.
For the time it takes for the order to be put through and for it to be received can be a long time- some parts take up t 3 months to be delivered, this is called lead times.
The stock control is done with a computer system - essential given the complexity of the task faced by the department. The system was written in-house to guarantee that it was modified to the particular requirements of the company.
Key Staff Members
The key staff member involved in the purchasing area is Sue Tatford. She deals with all of the suppliers and millions of pounds worth of stock. To be successful she needs to have the following skills,
- Good negotiation skills.
- Detailed knowledge of the parts required for manufacturing a balloon.
- Good organisational skills
- Willpower.
- A skill to plan in advance &
- Management skills.
Design
The design department of Cameron Balloons is where the balloons are designed.Design is one of the functions that tales place under the general heading of Operations. Here, research and development is also carried out.
There are 8 people involved in the designing of balloons. They are,
4 people work on the canopy and the envelope
2 people work on the design of the rigging and burners
I person draws draught detailed technical drawing of plans
1 person works on the airworthiness certification.
When the envelopes are designed there are two shapes that are designed, they are standard shapes and special shapes.
Production
The final area of the operations department is production; this is where the balloons are manufactured. There are many stages that have to take place before producing a balloon. Firstly, the design team pass on the templates they have made to make the balloon, the templates will be used to cut out the cloth to the recommended size and shape. This is carried out by cutters on a cutting table; the cutting of the material is performed under strong lights so that any mistakes can be spotted before the balloon is in the final stages of production.
The cut out panels are then passed on to a team of sewers, there are 5 team members who make up the sewing team, who have a team leader. Here, the whole of the envelope (the balloon part) will be manufactured. Also, the other parts of the balloon are manufactured, but are made by outside firms and are then passed on to Cameron Balloons to be finished. The art work is put on to the balloon as well; it can be done before or after the balloon is sewed. Finally, when all the parts have been manufactured, they are passed on to engineers who put the parts together. They can be sold on to the customer. (There is an other part that makes up the operations department, however when I try and access the link, it goes to marketing and not the one I need, research and development).
Finance
The final functional area I have decided to investigate is the finance department. Here the accounts are prepared and the bills paid. They also deal with paying people wages. The team consists of just four members who have a different role to play, they are,
Jenny- Wages and various other wages and personnel functions
Stuart- Purchase, ledgers and reception.
Ann- (Head of accounts) accounts, sales and cash.
Melanie- Petty cash, accounts administration, post and reception.
The company also have a team of accountants outside of the company who make the company’s annual accounts. The company’s accounts are done by a unique software system which was designed by Don Cameron. The Managing Director and Production Manager look after the employment of accounts staff. They do the advertising, interviewing and all other selection procedures
Balance Sheets
Cameron Balloons is a limited company which means it has to produce a set of balance sheets annually for its shareholders to see how the company is performing. The balance sheets are divided into two halves, the top halve shoes where the money that is coming in is being used (the net assets). The bottom halve shows how much money is coming into the company (the capital employed). For the company to work efficiently the two halves have to be balanced, hence the name balance sheets. The money invested into the company can be used to buy long-term or short-term assets. The long-term assets are called fixed assets and are things like apparatus, machinery and computers, all of which aren’t used up in the production stage. The short-term assets or current assets are thing that are used up in the production of the balloon, such as stock and cash.
Profit and Loss Accounts
The profit and loss accounts of a business are considerably different to the balance sheets because the balance sheets deal with a certain time and the profit and loss accounts deal with a period of time which can be from 6-12 months. It shows how much the company is making and how much money is being used to make the profit.
Types of accounting
The finance department deal with many types of accounts, these are,
Financial Accounting
Financial accounting looks at the flows of money into and out of the business that have already happened. It gives a picture of how well the business has been doing. The major financial accounting papers are the cash flow statement, the profit and loss account and the balance sheet.
- The cash flow statement shows the cash coming into and going out of the business at a particular moment. It is often called’snapshot’ of the businesses capital.
- The profit and loss account shows the profits and losses made over a space of time.
- The balance sheet shows the key things which the business owes against the main things which it owns.
Limited companies, like Cameron Balloons, must produce a profit and loss account and a balance sheet, by law.
Management Accounting
Management accounting involves the internal financial information of the business and is not made available outside the company. It looks at expenses and revenues, and budgets. Management accounting really looks at the decision-making that takes place using predictions and forecasts. The main documents to help with forecasting are the cash flow forecast and the break-even forecast.
- The cash flow forecast shows the level of money which the business predicts it will use and obtain so that it can plan for the future.
The break-even forecast shows the amount of sales which the business thinks it will have to make in order to make enough sales revenue to cover its costs.
How the 3 Functional Areas work together in order to achieve its activity
The marketing department work together with the operations department in many ways to help achieve the company’s activity. They carry out market research to see what consumers want from a balloon, and then pass on this information to the research and development sector of operations. They then can make changes in the company i.e. in the production area and tell them the types of balloon and balloon related parts the customers require. The marketing and research departments also work together to see how other companies in the same field are working to satisfy their clients. They can take ideas from other companies in order to make themselves work more efficient.
The operations department have to work very closely with the finance department. They have make sure that the money have been given to spend on things like material and buying apparatus and part for a balloon is enough. They in particular work close with the purchasing department who are in charge of buying materials needed to manufacture a balloon. If the finance department consider the purchasing team are spending too much money on inadequate resources they have to figure out a way to cut costs to keep within the expenditure.
The design part of operations also works very close with the marketing department, they need to because market research could reveal that the designs that the design department are coming up with are no longer popular with customers and they need to be changed.
The production team also need to work closely together with the finance team because they might not account for broken machinery and need to work out ways in order to pay for new equipment or to have the machinery repaired.
Evaluating How the 3 Functional Areas work together to achieve the Aims & Objectives
Cameron Balloons obtains the following aims and objectives,
- To make a profit.
- Be a competitor.
- To manufacture balloons to the highest standards.
- To provide an excellent customer service.
The 1st aim to make a profit is the most important aim the company need to keep on achieving. The 3 functional areas work very well together in order to achieve this aim. Firstly, marketing carry out extensive research to see what the customers want from a balloon. They then pass this information on to the operations department who can then make changes to how the balloons are manufactured. If the balloons that they are manufacturing aren’t what their clientele want they can then make adjustments. They work well with the finance department to make sure that the materials and apparatus they are buying aren’t using up too much capital. This makes sure that the company are making a profit.
The 2nd aim which the company obtain is be a competitor is also a very important aim. Cameron Balloons have always had competition from balloon manufacturers located in England, USA, Germany and France. To ensure that this aim is met the marketing area investigates what other balloon manufacturers are doing in order to satisfy their customers. They can then make the necessary changes to make sure that they are still being a competitor. They do this very well along side the operations department.
The 3rd aim, to manufacture balloons to the highest standards, is a very important aim to achieve because if they don’t they will loose customers and therefore profit. All 3 functional areas work effectively together in order to achieve this aim. The marketing department work with the operation department to see if they are making the balloons to the highest standards which the customers require. They pass on this information to the finance department and they can see whether the capital provided to do this is being used appropriately.
The final aim, to provide an excellent customer service, an extremely important aim to achieve because if the customer isn’t happy, then they will take their business elsewhere. The marketing department work close with a customer in order to satisfy them. They do this extremely well because they always spend a lot of time with the customer, whether it be on the phone or meeting them. They always go to ballooning events around the world and see how the customers are doing. They work with the other two areas, finance and operations to tell them what they have found out. The marketing department have a motto which is ‘It is cheaper to keep existing customers than to find new ones'.
The objectives Cameron Balloons have set in order to achieve the aims are,
- Sell more balloons than previous years.
- To sell better quality balloons than last year.
The 1st objective, to sell more balloons than the previous year is met very well the 3 functional areas work very well together to achieve this. The marketing area work hard in order to promote Cameron Balloons to sell more balloons than previous years. They appear at ballooning events around the globe to advertise the company. The operations area work hard as well to manufacture the balloons adequately, they take on the advice given by the marketing department and incorporate their finding in making the balloons. The finance department make sure that there is enough capital to fund all the improvements.
The 2nd objective the firm have in order to achieve an aim is to sell better quality balloons than the last year is also met very well by the working together of the 3 functional areas. Cameron Balloons prides itself in manufacturing high quality balloons, the design department keep on improving the way the balloons are planned. The production team improve the way the balloons are manufactured every year by improving the way he balloons are sewed together. They make sure that the designs put on to the balloons are of very high standards. The finance department make sure that they have the money to do so. They make sure that the money is spent appropriately; in addition to that the company is still making a profit.
The 3rd and final objective the company have is to beat its competitor. This I consider an objective which has been met extremely well because their nearest rival is twice as small as Cameron Balloons. Their other rivals who are located around Europe and America have also been competitors but haven’t affected Cameron Balloons that much. This all due the cooperation of the functional areas.
Methods of Communications: Cameron Balloons
The methods of communication used by Cameron Balloons are,
- Internal communication- takes place within the business.
- External communication- takes place with people from outside the business.
- Oral communication-this can be face to face or when having a meeting.
- Written communication- this can be a letter or a notice on the notice board.
Th types used at Cameron Balloons are,
- Telephone.
- Email.
- Written.
- Notices.
- Oral.
- Video links.
- Fax.
There are four main stages involved when sending a type of message to a person. They are the sender, the type used, the message and the receiver. When sending a message the sender needs to decide which method would be most suitable they need to ask themselves does it need to be,
- Fast?
- Concealed from other people?
- Inexpensive>
- To be replied to?
- Exact?
- Need to be recorded?
- Sent to more than one person?
- Formal?
- Informal?
For example, if a person needed to send a message to the whole of their team, telling them by telephone wouldn’t be appropriate because it would waste time; expensive and time consuming. The best way would either be by arranging a meeting with the staff to tell them there; sending all the staff email or putting the message on the notice board. The disadvantage with sending the staff e-mail would be that some staff might not have Internet access. The disadvantage of arranging a meeting would be some of the staff might be absent on that day. The disadvantages of putting up a notice on the notice board would be staff might not see it, or it could get covered up, or even there might not be a notice board.
The telephone would be most appropriate when a conversation between two people needs to take place. The advantages of using telephone are, it’s quick, it can be inexpensive and it can be private. The disadvantages of using telephone are that it can be tapped; it could cost a lot if the person who needs to be contacted is in a different country.
Using email would be most appropriate say if a contract needed to be sent to a person who was in Tokyo. The advantages are its quick, inexpensive and don’t take time. The disadvantages would be the person in Tokyo might not have access to a computer; the email could not reach its destination and it’s not secure. Cameron Balloons use email as way of informal communication but they also say that it has a disadvantage of not being secure.
A letter would a formal way of addressing somebody, it would be best used either in dismissing a person or sending out an enquiry about something. The advantages are it can be recorded whereas telling somebody face to face a record may not be able to be kept. It is more likely to be remembered if it is written down. Cameron Balloons use written communication as a formal way of contacting a person.
A fax would be used say if an important documentation needed to be sent to somebody quickly. For example at Cameron Balloons say if somebody in the USA factory needed a diagram of a part of a balloon, fax would be the best method. It is inexpensive and takes little time to do.
At Cameron Balloons video links are used sometimes to present a meeting to a group of people even if some of the people aren’t in the same place.
The main things to take into account when giving a presentation are to:
- Make sure that the audience can understand the language used.
- Make notes and use prompt cards to help with the presentation.
- Have a clear and easy to follow structure to your presentation.
- Use neat, clear and colourful images to add to your presentation.
- Use information technology applications to make your points more clearly.
- Check thoroughly to make sure that everything is working and that all equipment are ready.
- Be on time, relaxed, confident in your preparation.
Disadvantages of video links are that a number of technical faults can occur, i.e. no sound, no picture or a blank screen all together.
Oral communication is best used when giving somebody an instruction to do something. At Cameron Balloons, oral communication can be used when a conversation between 2 or more people takes. It is best used within a functional area. A disadvantage of oral communication is that it isn’t formal and can be forgotten.
There is no evidence to support that Cameron Balloons use memos, however they use written communication so a memo could be included. A memo would be best used when handing a notice within the structure of the business. However, it might not reach its destination. Nowadays, an email would be more appropriate.
Cameron Balloons use notices on a notice board to inform members of staff about something, like when the Christmas party is. The advantages of a notice are that it’s cheap and doesn’t consume much time. The disadvantages of a notice are that something else could cover it up, and a record would be able to be kept unlike if a letter was sent.
C2
Communications take place inside and between the functional areas of Cameron Balloons; Cameron Balloons call these formal and informal channels.
-
Formal channels will take place within a structure that has already been laid down and a record of the communication is expected to be taken.
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Informal channels can take place at any time and more or less anywhere. They may be oral or written channels or even use information technology to send, for example, graphs or pictures.
In the production area at Cameron Balloons the head of the team has to be able to communicate with all members of his team. This is usually done by oral communication. This is because it’s the fastest way to receive a response from the person.
He also needs to be able to communicate with members of other functional areas like the finance department. He needs to communicate with them to see if they have enough money to spend on production of balloons. This is usually done over the telephone, as it’s the quickest way to get a response from the person on the other line. Sending an email wouldn’t be appropriate because an immediate response wouldn’t be able to be given.
Also, the design department has to send images of products the production team to show them designs of latest balloon drawings. These usually done through email as it is the most appropriate because it is fast and inexpensive.
The marketing team needs to communicate with other departments such as the purchasing team tell them what new buy want. Sometimes market researchers can be in different countries so the means of communication are usually going to be through email as it is inexpensive and quick.
Cameron Balloons, either often practice external communication between people outside of the business with suppliers or clientele. When communicating with suppliers the means of communication are usually over the phone or in arranged meetings and sometimes a letter is written to them. It is essential that Cameron Balloons doesn’t use informal methods to communicate with suppliers and customers. They need to be able to receive a response from the customer or supplier, which is why email wouldn’t be appropriate. Also, the clientele might feel offended if an email was sent telling them about their product. Good communication is just as important as customer service, if it is not dealt with properly; the customer could go elsewhere.
C3
Even though the communication between the functional areas at Cameron Balloons is good it could be improved. Most of the communication is done on the spot between two people, if it was done more formally say in a staff briefing before the work was started, the information may be remembered more. Also, there is no evidence to support that staff are given praise for their good work or given counselling for bad work. The head of each department should consider such meetings as this form of more formal one to one communication could have a positive affect on both staff and business.
The communication between functional areas again is good but they depend too much on information technology to go about communicate with each other. If they take IT too much for granted, one day when there is a power cut, for example they will need to enforce methods of communication which don’t involve the use of IT. Communications such as memos and daily meetings with the entire team. They need to go back to old-fashioned means of communicating with each other, such as having a system where the message can reach the required person quickly.
At present I don’t think any changes need to be made to the communication with people outside of the business as I feel it is carried out in the appropriate manner. Firstly the initial communication is done over the phone in an informal way. Later on when the deal starts to become more formal when the two parties meet in official meetings.
External Influences
Businesses are faced with three main constraints. These are business competitor, environmental constrains and economical conditions.
The Business Competitor
A business will aim to sell more products or services to as many customers as its rivals do. These competitors may be local, national or international; this will depend on the size and the type of business. In the past the only competitors businesses had would have been local or if the firm was big, national. However in this day and age communications and infrastructure enables competitors from around the world to compete with businesses from all around the world. Businesses compete on six main areas:
- Price competition
- Non-price competition
- Branding
- Market segmentation
- Quality
- Availability
Price competition
In setting a price for a product the business will certainly want to include its costs and make a profit to. Businesses have to decide whether to have:
- A low price is put in place to attract customers to a business
- An average price, this means they’ll have to compete with rivals by other methods, for example, quality, better advertising.
- A higher price can be charged if the product is considered to be better than the competition.
Non-price Competition
This is when a business competes with its competitors in areas such as customer services. They may offer rewards such as free gifts with a purchase. Loyalty cards may also be handed out to regular customers. Vouchers and tokens are also used to lure customers. However, what the customers don’t realise is that they are paying additional costs for these extra services.
Branding
This is when a product has an easy recognisable name or logo. An example of a top brand product is Pepsi. The reason it is so popular amongst people is that it has a unique taste, logo and stands out from other cola companies.
Some brands are also used to sell products which are irrelevant to the product. An example of this is the Lord of The Ring trilogy. It has been used to sell a wide range of merchandise which is unrelated to the books.
Market segmentation
Businesses need to know how they are targeting their product or service to. A market segment is a group of people who share the same interests. If the company have correctly identified their market segment they can specifically market the product or service to that segment. This in turn will increase sales as they will have an advantage over the competition. For example products or services aimed at teenagers will attract more sales if it was advertised during The Simpsons, whereas cosmetics aimed at women would attract more customers if it was advertised during Trisha. Other factors to take into account are,
Age
Young adults and teenagers are likely to acquire different tastes compared to old people. Young adult are more likely to purchase a CD by Usher and older people to purchase one by Frank Sinatra.
Gender
Men and women do not have the same tastes. Women are more likely to purchase cleaning products than men. With men more likely to purchase car magazines.
Social class
Different social classes will have varying needs for all products, for example people in A and B are more likely to buy luxury overseas holidays. The following classes are identified by government statisticians:
A - Higher professionals, e.g., doctors, lawyers.
B - Middle professionals, e.g., teachers, bank managers.
C1 - administrative and junior management, e.g., bank clerks, nurses.
C2 - Skilled manual employees, e.g., electricians, plumbers.
D - Semi and amateurish worker, e.g., labourers.
E - Pensioner, least paid workers or unemployed.
Area
People in the north of the country are likely to have different tastes to people in the south of the country.
Ethnic, cultural and religious groups
Tastes differ between different groups of people.
Life style
It is also possible to identify peoples’ like styles. Such as single people will have different likes to married couples.
Quality
Other businesses may compete on the basis of quality. A higher priced product may not always be of a higher quality. A high quality product is one which meets the customers’ satisfaction. For example if a Morrisons own brand can of beans may be cheap, however, if it satisfies the customer it is a quality product.
Availability
It is vital that a product or service is always available at the right time, place and quantity. If it is not, the customer will go to the competition.
Environmental constraint
When a company produces a product or service, all of the internal costs can be added up; examples of these internal costs are,
- Labour costs
- He cost of raw goods
- Marketing costs
- Transportation costs
- Administration costs
External costs sometimes arise due to the internal costs. These don’t have to paid for by the company, however, they have effects on the public. These are otherwise known as externalities, examples of these are,
- Air pollution - some businesses discharge harmful gases into the atmosphere. People argue that air pollution causes damage to the ozone layer and leads to an increase in the amount of children with asthma;
- Noise pollution - produced by manufacturing goods, production of buildings and the transporting of goods can disrupt peoples lives who have to cope with the noise;
- Water pollution - businesses that drain waste into streams, canals, rivers and the sea can harm the organisms living in them.
- Traffic congestion - businesses transporting goods add to the degree of traffic on roads and motorways, this increases the level of traffic jams.
- Safety hazards - some businesses produce or use materials that are highly poisonous and as a result dangerous to the neighbouring population;
- Inefficient uses of resources - businesses that use raw materials in a wasteful way prevent others from using them.
Some companies try to reduce the cost of externalities as they feel that they have responsibility to the local community to behave in a moral fashion. This increases publicity, therefore increase sales. Examples of these are that a company may only use paper which has been recycled or recycle their waste.
However, some companies don’t act in the same way; as a result it has damaging effects on the environment. To try and stop this from happening the government has passed laws which include taxes on petrol use and taxes on dumping waste in land fills.
The min issue the government has emphasised on is global warming, and its affects to the atmosphere. The targets the government has set include,
-
Hopefully by 2010 the government hope that businesses will use more renewable sources of energy. This in turn would mean less emissions of CO2 into the air.
- A climate change charge has been introduced in the hope that businesses will use energy more economically, as the more energy they misuse, the more money they have to pay.
- More money is being given to energy efficiency programmes which attempt to reduce energy use in the home.
- The 10 year plan aims to change the UK's infrastructure by reducing congestion and pollution.
- Taxes to persuade methods of transport which don't create as much carbon dioxide, e.g., lower car tax will be charged for cars with smaller engines.
- Car manufacturers in Europe, Japan and Korea have decided to try to improve car fuel effectiveness by at least 25% by 2008. This will hopefully reduce the amount of carbon dioxide created by cars.
Economic Conditions
Economic conditions include factors such as
- Recession
- Boom
- The Rate of Interest
- The Price in the Economy
- Exchange Rate
Recession
Recession is the period of time when people are buying fewer goods or services. This is a bad period for both businesses and workers, as consumers are buying fewer products which leads to a drop in sales. Employees are affected by recession as companies do not need as many to work for them; it is the period when they are most likely to be made redundant. The government is trying its best to help businesses during this period by putting a lot of money into finding a buyer for their goods. It could also lead to a fall in taxes.
Boom
During this period customers are spending more money on goods and services. Throughout the boom period businesses are employing more workers in order to cope with the demand for products and services. Plus, businesses will increase prices to make up for the fall in sales during recession. However, the set back for consumers is the rise in taxes.
The Rate of Interest
The rate of interest is decides by The Bank of England and is when a company or person borrows money from a bank and has to pay an extra fee on top of what they have borrowed. For example, if a company borrowed £3000 to buy parts for machinery and the rate of interest were 10%, they would have to pay back £3300. If the rates of interest increases companies have to pay back more money on top of what the borrowed. On the other hand it can benefit companies when the rate of interest falls. Consumers are also affected by the rate of interest, when a person takes out a mortgage to pay for a house they will cut back on their expenditure on products and services. This will mean a fall in sale made by the business.
The Price in the Economy
The price rise on services and goods in the UK has been given the name inflation. It is measured by the Retail Price Index (RPI) and includes up to 600 items which represents the average family buys per week. Inflation can have bad affects on a business, these include,
- The cost will rise as they are having to pay more for goods
- Their sales will fall as consumers will spend less as the price has risen.
It is possible that several businesses will profit from inflation as consumers carry on buying their good or service at the higher cost. This will lead to an increase the business' takings.
The Exchange Rate
This is when a UK business import or export goods that come from outside of the UK, they are affected by the exchange rate. This is the price or rate at which one currency can be changed into another.
If there is a fall in the exchange rate the cost of buying goods from abroad could go up. This would mean fewer goods being bought from abroad.
If the exchange rate rises more goods could be bought from abroad.
The Business Competitor: Cameron Balloons
Cameron Balloons mainly competes with its competitors on price, quality and market segmentation; out of the three, quality plays the biggest role.
Price
The cost of a balloon is very expensive, so Cameron Balloons tries to offer its clientele the best offer around. An average balloon can cost as much as £30,000 so only a limited amount of customers are available. If Cameron Balloons’ competitor decides to lower its price it could have damaging affects on the company’s profits. The competition is all around Europe with its biggest competitor located within a few miles of the business.
They have to keep up to date with what the competition are doing and have to respond very quickly to the changes.
Quality
I consider quality to be the biggest factor on which Cameron Balloons competes against as a customer is only satisfied if they are pleased with the quality of the balloon. Cameron Balloons could be charging £2,000 lower than the competition; however, if the quality isn’t up to standard the company could lose potential clientele, therefore profit.
That is why Cameron Balloons have made quality one of its key aims and strives to achieve it in all aspects.
Market Segmentation
Cameron Balloons have correctly identified their market segment as to be A and B class. This has worked as an advantage for the company as they have saved money on advertisement. If a business has correctly acknowledged their market segment, they can advertise directly at them people and not waste time, effort and money on people who will not be able to afford a balloon.
They can’t just advertise during commercial breaks on a TV programme, they have to advertise directly at the people who are interested. They not only have to advertise in England but in mainland Europe and America as well.
The Business Competitor: T. K. Maxx
T. K. Maxx face competition from all over the town centre and from department store’s around the rest of Walsall and Birmingham. They compete with the competition on the basis of price, quality, availability and a little on market segmentation.
Price
Price is the biggest factor on which T. K. Maxx competes with its competitors on, one of its main aims to keep all designer goods 60% below the RRP. The other big advantage T. K. Maxx has is that on some days it has a day called the ‘Scamping Hour’; this is when selected items in the store are lowered by 10 or 20% each hour. This has proved effective with customers and their profits on these days considerably rise as people believe that all items are lowered and buy more than usual.
Quality
The next factor on which T. K. Maxx competes with its competition is the quality of its product. They have to maintain the quality of their product or else customers will go elsewhere. To ensure that all customers are satisfied with the quality of the product purchased they have mystery shoppers, these people come into the store and check how they are dealt with if a product isn’t up to their standards. The store is informed of the visit after the person has finished their investigation.
Availability
T. K. Maxx has to make sure that they have a full rang of stock and the items which a customer wants, when they want. To ensure that they always have a the store full, they have a team of workers who work in the processing room tagging all new items and putting them out onto the shop floor. If the customer can’t have what they want, when they want then they will go to a place where they have it. This will result in bad customer relations and potentially loose profits.
Market Segmentation
T. K. Maxx tries to appeal to customers of all ages, gender and cultural background, which has proved effective in gaining sales as they don’t have to be careful to who they market their products to. Some of their competition only appeals to teenagers or middle-aged people; this gives them an advantage as they attract more customers.
Economic Conditions: Cameron Balloons
Cameron Balloons are affected by the change in the economy. When interest rates rise Cameron Balloons see a fall in profits. Also, they have to pay more interest back on money they have borrowed from the bank, if they do so.
On the other hand, when interest rates fall they get more customers than usual. Although, the people who purchase a balloon are not ordinary people as they are rich and the change in interest rates doesn’t really affect them.
During the boom period Cameron Balloons sees a rise in customers interested in buying a balloon. This means that they are able to raise the prices a little to make up for the business that was lost during dry spells. On the other hand it can be bad for Cameron Balloons as taxes sometimes rise.
During recession Cameron balloons sees a drop in potential customers as the rate of interest has risen, which means customers are spending less. However, it can also benefit the company as taxes may be lowered.
A balloon isn’t something which an average family owns so it isn’t included in the RPI. However, Cameron Balloons are affected by inflation as people are spending less.
Cameron Balloons are also affected by changes in the exchange rate. If the rate falls they are less likely to buy and sell goods from abroad. However, if the opposite happens they are more likely to buy and sell goods from abroad.
Economic Conditions: T. K. Maxx
When the rate of interest rises T. K. Maxx is affected in several ways. They will see a fall in profits as people are spending less, this leads to T. K. Maxx having to lower the price of products to try and attract customers.
However, when the rate of interest falls, T. K. Maxx takes full advantage and increases the price of products to make up for the drier spells in the year. However, it can also have a reverse affect on the company as taxes may rise.
During the boom period, T. K. Maxx can make up for the profit they have lost during recession. This gives them the opportunity to raise the price of goods as customers are spending more. They can also employ more people as there would a higher amount of people wanting to be employed.
However, during recession they may have to make people redundant to in an effort to try and save money. They may also have lower prices to try and attract customers.
Inflation can have bad and affects on T. K. Maxx but the majority is bad effects. When it happens they may have to increase the price of goods. This will mean a fall in customers, therefore a fall in profit. However, other customers will carry on buying the products at the increased value.
T. K. Maxx is also affected by the change in the exchange rate. If the rate falls the company is less likely to import and export goods from abroad. If the opposite happens they are probably more likely to export and import goods.
Environmental Constraints: T. K. Maxx
T. K. Maxx tries to act in an ethical way and try their best to help the environment and keep the local area clean. For example they will encourage staff members to recycle waste materials.
They always make sure that any waste products are disposed of in the most moral way. They always use recycled paper whenever it may be needed to be used. Also they sought out rubbish into categories such as paper, cans etc.
They also try and recycle things such as hangers and faulty goods that have been returned to the store.
When transportation needs to be used they use Lorries which run on energy efficient fuel, to cut down on the amount of harmful fuels put into the atmosphere.
The Clean Air Act 1956 makes sure that T. K. Maxx doesn’t release harmful gases into the atmosphere, which could be potentially dangerous towards the habitants of the local area.
Also any toxic chemical, for example bleach, which is used to clean the building, has to be disposed in the correct way.
Other laws which have been implemented by the government such as Environmental Protection Act 1991 and the Pollution Preventions and Control Act 2000 also prevent damage caused by businesses to the environment.
Environmental Constraints: Cameron Balloons
Cameron Balloons’ just like T. K. Maxx are affected by a number of laws which prevents them from harming the atmosphere. But Cameron Balloons’ also manufacture goods which mean they make a lot of noise, which could disrupt local residents. They have to try and find away of reducing the noise they also manufacture.
They also deal with a lot of customers who live around the United Kingdome and the rest of the world. This means they cause a lot of traffic congestion and air pollution. This also results indirectly to noise pollution as vehicles make excessive amounts of noise.
They also use materials such as plastic which is harmful to the environment and is hard to decompose. Also when Cameron Balloons’ uses water at some stage in their production, they have to dispose of that water in a way which isn’t harmful to the environment.
This can all lead to benefits such as if the company behave in a moral way it can lead to increased profits, as customers like companies who behave in an ethical manner.
Like T. K. Maxx Cameron Balloons’ are affected by laws such as, Environmental Protection Act 1991 and the Pollution Preventions and Control Act 2000 prevent damage caused by businesses to the environment.
Changes in External Influences: T. K. Maxx: Competition
In this section, d2, I will be investigating the changes in the three external influences. They include competition, environmental constraints and economic changes.
The change in competition could potentially have two affects on T. K. Maxx, if the competition increased their prices then T. K. Maxx could gain customers, and therefore profit.
However, the most likely change competition is going to do is to lower the price of their goods. If the competition makes their prices more competitive, T. K. Maxx could potentially lose customers and therefore revenues.
T. K. Maxx’s competitors could also enhance the quality of their goods. Customers buy a product depending on whether the purchase is of a high quality. If they do so T. K. Maxx could also loose profits there.
Availability is also a major factor to investigate, if T. K. Maxx doesn’t have the product when the customer wants it they could lose the customer to a competitor who does have the product when the customer wants it. T. K. Maxx needs to have the product at all times.
Plus, the competition could improve their competitiveness on another level like non-price competition. They could offer other products with a purchase, for example gift vouchers or a courtesy card.
Branding is the next issue to investigate. T. K. Maxx prides them on selling branded items at a lower price than other mainstream stores. If another store started to sell the same products at a lower price than T. K. Maxx would have to respond in some way.
Finally market segmentation plays a role as well. T. K. Maxx appeals to people of all cultures, genders and age groups and social classes. However, if one of T. K. Maxx’s competitors started to sell products for these categories, then T. K. Maxx would have to respond in some way.
Changes in External Influences: Cameron Balloons: Competition
The second business to look at is Cameron Balloons; I’ll also be investigating changes in competition as well.
Firstly changes in price could have two affects on Cameron Balloons. The first affect and most probable affect is if the competition lower the price of their balloons could mean Cameron Balloons losing profits.
But it could have a positive affect on Cameron Balloons, if the competition decides to increase their price; customers could turn to Cameron Balloons for a cheaper balloon.
Cameron Balloons also competes on the basis of quality, even more so than price as a customer will keep on coming back to Cameron Balloons if they think the quality is sufficient. If a businesses who also manufactures balloons improves the quality of their balloons then Cameron Balloons would have to respond in some way.
The next factor to look at; availability. If Cameron Balloons isn’t able to provide the product when the customer wants to purchase it they could go to a company who does. Although making a balloon does take time, but another balloon manufacturer who could manufacture a balloon faster, and keeping with quality could take customers away form Cameron Balloons.
A competitor could improve on non- price competition. They could offer additional products when purchasing a balloon. For example, they could offer discounts when a next purchase is made.
Market segmentation plays a role as well, Cameron Balloons appeal mainly to the higher classes in the social hierarchy, which include A and B. if a competitor gave the customers something extra, like money off the next purchase, they are more likely to keep on going back to the competition.
Changes in Environmental Constraints: T. K. Maxx
Change to the laws which affect T. K. Maxx could have good or bad affects on the business. More laws could be introduced, which for example could mean that T. K. Maxx would have to pay more taxes on petrol.
Also, the government may introduce laws which mean that T. K. Maxx would only be able to use a limited amount of non-renewable fuels. This could lead to T. K. Maxx having to use more friendly sources of fuel.
T. K. Maxx use bleach or bleach based products to clean the store; the government could say that T. K. Maxx have to dispose of these in an isolated area where its affects can’t damage wildlife.
When T. K. Maxx has a delivery, it is usually done early in the morning or late at night. The noise caused by the Lorries can disrupt the local community; the local council if they believe it is causing too much noise pollution could force T. K. Maxx to have the deliveries delayed to the afternoon.
Changes in Environmental Constraints: Cameron Balloons’
Cameron Balloons’ as we have discovered are a manufacturing business which means they emit more pollution than T. K. Maxx. They will therefore be affected more by changes in environmental constraints.
They emit pollution such as noise, air and water during the manufacture of their products. Firstly noise pollution which is emitted throughout the production of balloons, if the local council decide that the noise is too disruptive Cameron Balloons would be forced to make changes somewhere.
Secondly the air pollution caused whilst the production, delivery of products to make the balloon and delivering the balloon to the client. The pollution is bad for the environment, the fumes emitted such as methane and carbon dioxide add to the greenhouse effect.
When Cameron Balloons manufacture a balloon they use water, the water may be contaminated and has to be disposed of so it doesn’t effect the environment. The water can’t be disposed of in a river, stream or canal.
Economic Conditions: T. K. Maxx
Changes in the exchange rate for T. K. Maxx could have a good effect on the business or a bad effect. If the exchange rate increased it could allow T. K. Maxx to import more goods into the country at a cheaper price. But if the exchange rate was to fall it would make it more expensive for T. K. Maxx to import goods.
The interest rate is altered by the Bank of England to help sustain the financial system. Alterations in interest rates have good and bad effects on both businesses and consumers. Lowering and raising the interest rate might have bad effects at the time, but in the future it will have a better outcome.
Economic Conditions: Cameron Balloons’
Cameron Balloons’ deal with a lot of overseas customers so changes in the exchange rate affect them a lot. Plus, changes in interest rates also have effects on the business.
If the exchange rate was strong, it would enable Cameron Balloons’ to buy cheaper raw materials. This could mean them saving a lot of money, plus selling the balloons at a more competitive rate. But if the exchange wasn’t in favour of Cameron Balloons’ it would mean raw materials from overseas would be more expensive.
The interest rate will also affect the business whether it rises or falls. If the interest rate rises it makes it more expensive for Cameron Balloons’ to borrow money from a bank. If the rate falls it is cheaper to borrow money.
