Economic Environment of Business

Managing firms throughout the business cycle

and periods of relative stagnation or decline (recession). .Stages of business cycle .  high levels of employment. BOOM  full order books for production.boom. recession & recovery economy-wide fluctuations in production or economic activity over several months or years. involve shifts over time between periods of relatively rapid economic growth (boom).  sales and profits are high.

. falls. investment spending.  Production.RECESSION-two quarters in a row the value ` of all the goods sold in an economy falls.  bankruptcies and the unemployment rate rise. and inflation all fall. household incomes.  occur when there is a widespread drop in spending. as measured by gross domestic product (GDP). business profits.  a general slowdown in economic activity. capacity utilization. often following an adverse supply shock.  employment.

.  Companies and people have more disposable income.  demand for goods and services grows  more prospects of employment.RECOVERY-takes place after a recession when for two successive quarters demand starts to pick up again.  there is more money in the economy.

increase the proportions of goods supplied from such cheaper sources. 2.Davis minimized the negative impact of the recession  cutting back on products and services that are not performing well1. manufacturing companies require fewer work clothes. workers’ overalls for industrial companies.  Textiles like bed linen (for a hotel or hospital) are bought continuously throughout the year. . to consider outsourcing their requirements. 3. manage textile needs within the business.

It also puts aside other plants or production lines when demand is less.  borrowing money from banks to finance some of its activities. .  it empowers managers in local operations to make decisions for themselves. It continually re-allocates production between its plants to make best use of resources.  needs to keep its shareholders happy.  At a central level financial experts at the company consider how best to deal with changes in interest rates and exchange rates.

g. 3. Preparing for recovery- 1. Investing in new plant where there are clear Opportunities. by sourcing of textiles from China. . Operating existing plant more efficiently 2. Reducing costs to increase profits e.

 implementing computerized systems in more outlets that allow restaurants to adjust prices based on customer demand. .  putting more emphasis on creating and marketing lower-priced items. adjusting prices and keeping down costs  pruning gas-guzzling cars from the company fleet.McDonald's Seeks Way to Keep Sizzling  improving restaurant operations.  pressing media buyers to negotiate lower advertising rates  putting the brakes on building new outlets on street corners where nearby development shows signs of weakness.

running more advertisements for its Little Tasters menu. which includes a small burger on a ciabatta bun. and those that already had them must pay a higher personal-usage fee. an increased focus on examining reams of customer data measuring . Employees who get company cars could no longer select gas-guzzling vehicles. price items more in line with demand cut the price of certain combo meals at lunch by as much as one-third. told workers to cut travel and instead hold meetings at        the company's Hamburger University in suburban Chicago. stores will reduce staffing so much that they will end up being understaffed for peak periods. no restaurants shrank the size of products in order to cut costs.

.  adding features that will increase drinks that compete with Starbucks and improved drivethrough windows that increase sales and efficiency. By placing a self-service kiosk where customers can place orders electronically.Plans for recovery  overseeing big investments in the most promising aspects of McDonald's business -.