In this report I am going to describe the way that Cadbury are affected by different economic factors.
To: Ann Warren
Date: 24th November 2010
Subject: A report to describe how economic factors affect Cadbury and the Association For Organics Recycling.
In this report I am going to describe the way that Cadbury are affected by different economic factors. I will describe the influence of two contrasting economic environments on the business activities within the organisations. I will then compare the challenges to selected business activities within the organisations, in two different economic environments.
Recession is when the GDP (Gross Domestic Product) falls and goes negative. The GDP represents the wealth of the economy. When there is a recession there is a decline in business activity, over more than a few months. Employment rates, household income, business profits and investment spending all decrease while unemployment rates and the amount of bankruptcies rise because people begin to be more careful with their money and are less prepared to buy high priced items, for example cars and houses. People tend to take less risks when investing their money and companies also cannot really afford to be employing as many people and this is how the unemployment rates increase.
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The affect of recession on ‘Cadbury’
Recession will affect Cadbury but not too drastically. The reasons for this are that people will still continue to buy Cadbury products because they are a low priced product and still affordable to many people. The sales for Cadbury may even increase during a recession because people may fall into comfort eating over the recession which would result in increased sales for Cadbury. More expensive products, for example Cadbury gift boxes and celebration cakes however, will decrease in demand and sales for these products will fall fairly drastically because they are higher priced than single bars so less people will be prepared to spend that amount of money in a time of recession. This will however increase the sale of small, individual bars. In a recession Cadbury will easily be able to recruit people. This is because a higher percentage of people would have been made redundant from their previous jobs and so they will be happy just doing a job until they find something better. They will not be as bothered if the pay rate isn’t as high or if they don’t receive any benefits, they will just be happy about earning money again. Therefore in recession recruitment for Cadbury would be an easy process as a large amount of people will be looking for work. Cadbury would also be able to pay a reduced wage to new employees.
Economic Growth is where the wealth of the increases, this can be measured by looking at the GDP (Gross Domestic Product.) As the wealth of the economy is growing there is a higher demand for a business’s products or services. When there is an economic growth, people tend to feel more safe about their jobs, their sense of job security increases and they therefore feel more comfortable about spending out larger amounts of their money. It is during a time of economic growth that people will be more likely to take out a loan with a bank or buy a high priced item, for example a car because they will be confident in knowing they will be in their job further down the line.
The affect of economic growth on ‘Cadbury’
When the economy is growing, Cadbury will see an increased demand for their products because more people will be happier spending their money. The sale of larger, more expensive Cadbury products will also increase because people wont mind paying out more money for these, unlike they would if there was a recession. Cadbury will have more employees during this time because they will need to keep up with the demand. Recruitment however, will be a much slower process than it would in a time of recession. It will be a slow process because people are already likely to be in a job working so it will take a longer time for Cadbury to gain workers. Cadbury would then have to offer a higher rate of pay than other companies in order to get people to want to work for them. Most people would stay with their current job if the pay is similar. This could be costly for Cadbury as they will have to offer as much as they can afford in order to attract people.