Economics Assignment: Impact of Covid-19 on Business Environment
This coursework comprises TWO 750-word pieces of work.
This economics assignment takes the form of a 750-word newspaper article written for a well-known business journal or newspaper such as The Economist, The Wall Street Journal, The Financial Times or The Guardian based on consumer confidence.
Your task is to write a 750-word article that examines the latest UK consumer confidence data, see https://commonslibrary.parliament.uk/research-briefings/sn02817/ , and identify which business sectors will prosper over the next 12 months and which will struggle. You are to provide a range of firms, maximum six, in different sectors an amateur investor should be looking to invest in as a result of your analysis and guidance.
This assessment is a 750-word email message to a friend who is thinking of starting their own business. Your friend has decided that after they were made redundant as a result of the Covid pandemic that they want to be their own boss and as you are a business school student, they have turned to you for advice and guidance. Their initial idea is to import cheap mobile phones from Taiwan or China and sell them to rural investors in emerging economies who need mobile business communications that is cheap and reliable in order to grow their own business. They specifically want to know about the following topics.
- The pros and cons of different legal structures and which would be best for them?
- How they could measure the competitiveness of the market structure?
Structure your reply as an e-mail message and provide any necessary data and supporting evidence from our own secondary research.
As presented in the economics assignment, world economy has been going through a massive pandemic termed as Covid19. Though it started back in November of 2019, yet, two years after, the situation has not developed much rather deteriorated with detection of mutated and stronger variants of the virus. Through the global impact of the Covid19, modern states like UK have faced good amount of fall in its economic performance that has directly impacted the consumer confidence on the market too. Consumer confidence is an economic indicator that measure the degree of optimism that consumer demonstrates regarding the overall market of economy. As the consumer confidence is a good measure to predict the future demand and propensity to save by the people in market, thus, falling consumer confidence is a negative sign for any market which thrives to expand it.
Figure 1: Consumer confidence score of UK from December 2020 to December 2021
Source: (gfk.com 2021)
Sector that will prosper:
As per the figure 1, it can be seen that consumer confidence of the UK people has been in negative position during the last one year. If, it is compared with figure 2, then it can be seen that till, 2020, though the economy faced falling market confidence during last five years, yet, it was not below -10, which is good for economy as per reuters.com (2021). A slight negative consumer confidence over the market demonstrates that people spend based on day-to-day plans which brings in a balance on consumer expenditure and propensity to save. This way, with a slight negative consumer confidence, savings and investment remained at par with market requirement and the inflation is also controlled in an automatic way. However, beyond 2020, there has been massive dip in the market confidence in the UK market. This has impacted the ability of the market to grow. As per figure 1, during February to August of 2021, there has been a rise in the UK consumer confidence, however, it fell to -13 by September and by December it remained at -15. Though this has been an increase by 11 points since December 2020, however, the consumer confidence level is at alarming situation.
Figure 2: Consumer confidence score of UK during last five years
Source: (tradingeconomics.com 2021)
Underpinning the UK consumer confidence, it can be mentioned that the demand in market is high for the necessary goods, whereas, sales of the luxury goods has been limited. As per the ibisworld.com (2021), there has been 95.4% growth in revenue for the safety equipment and supplies wholesale, 63.2% growth in revenue in telehealth services, 45.1% growth in online food ordering, 42.5% growth in bicycle retailing, 40.2% growth in revenue of e-commerce and 36.6% growth in online stock brokerages in UK. Hence, it is expected that the business associated with the, safety equipment, telehealth services, online food ordering, bicycle industry, e-commerce and online trading is supposed to grow in coming years.
Firms that will struggle:
On the other hand, as per ons.gov.uk (2021), though there has been rise in several necessary sectors due to pandemic, however, there are some sectors like music and video recording, furniture and lighting, sports equipment, camping and tourism industry has faced massive roadblocks. It is expected that in future, these industries will suffer as government is supposed to bring in stringent measure time to time to curb the spread of pandemic until there is a complete cure of the same. Out of all, majorly, pandemic has caused negative impact on the tourism and camping industry. As the international flights are halted due to the rise in pandemic, it has caused fall in the domestic as well as international tourists in UK. Monthly passenger arrival in UK fell by 98.3% during 2021 and room occupancy has become 20% only (ons.gov.uk 2020). As the different variant of the Covid19 is still coming in, it is expected that tourism industry will suffer more in future. With the stringent practice of UK government to control the spread of virus, it is also expected that future tourism will face rapid change in its business nature. It is expected that there will be bio bubble developed for tourists and covid protocol will be implemented at places to control the visiting tourists.
As the working environment has transformed from work from office to work from home due to the pandemic, hence these industries in UK are supposed to rule the next decade with their ability to provide business through online platform. Moreover, safety being the major concern of the UK people in the backdrop of pandemic, safety equipment and health instrument industry medicine industry, will rule the next decade of UK industry. Hence, it is good to assume that firms like Unilever, AstraZeneca, BP, Diageo and new companies like Wysa, AbleTo are expected to grow.
10 Downing Street
It’s been long time since we visited each other; I’m fine, hope you are well too. I am very happy to know that you are doing well and expecting to open a business of mobile phone sales and service. To answer your queries, I would breakdown the mail into two parts, whereas first part will answer your query of legal pros and cons of the future business endeavour and the later part would guide you to understand the competitiveness of the market.
For starting business in UK, you first need EORI number and then need to check whether your license allow you to import and do business permanently in Britain. Next, ensure that your exporter is allowed to export mobile in UK. Next, you need to hire expert who can deal with custom and transportation of goods from foreign country to UK (Gov.uk 2021). Apart from this, you need to comply with Mobile Telephones Act license to do business in UK. Also, you need to ensure you have proper waste plan to recycle batteries. While retailing imported products, you need to focus on consumer interest. As the major pros of the UK legal system of importing and trading mobile is that you have to maintain quality; it will enhance your business. However, this is a major con as well as failing to match required quality of product and service may lead to closing down or even cancelling of business.
As per my understanding, you first need to apply for the EORI number as it is the basic requirement of importing mobile and starting business in UK. Without this number, you are not entitled to import any commercial products in UK and without this you cannot make a sustainable supply chain in UK. Apart from this, you need to look into the Mobile Telephones Act license. This will allow you to comply with the local law of UK to start your retail mobile business. You will comply with the law that no change in IMEI number will take place and you will not disintegrate parts and resale them separately. This will allow you to ensure good quality products and maintain serviceability of the same.
John, when it comes to measuring the competitiveness of the market, then I would suggest you to consider the Porter’s Five Force model. As per my knowledge and understanding, UK market is a competitive market, where firms like Apple, Samsung, Huawei, Motorola, Xiaomi, Google, Sonly and OnePlus operates. Apple alone here has 50.16% market share followed by Samsung with 28.97% market share, 7.65% market share by Huawei and so on (Gs.statcounter.com 2021). Thus, the market is flooded with quality brand mobile, whereas, cheap mobiles from Xiaomi, OnePlus has only 3.31% market share together. Hence, firstly, it is important to understand that UK consumer of mobile prefer quality and consumer support rather than price and affordability of the mobile (Gs.statcounter.com 2021). Now, coming to the perspective of the producer, UK market is also competitive in nature. Though the consumer has enough information readily available in the market, however, price charged by the producers is decided by them only and it cannot be influenced by the consumers. Hence, bargaining power of the producer is high here, whereas, bargaining power of the consumer is very low. On the positive side, as the market already has many competitors, hence, threat from new entrant is low as it does not influence the market demand situation. Thus, the barrier to entry and exit is low in the UK market, however, in terms of license, you need to follow the certain rule as mentioned above (Gs.statcounter.com 2021). Market is not influenced by the new entrants, and it is not influenced by the substitutes too.
To conclude, John, I would like to suggest you to focus majorly on the quality of the product and ensure you can provide good post sales service to your consumers in order to achieve success in your future endeavour. Moreover, there will be VAT, custom duty and excise duty on your imports. This much information I can share today; hope to hear from you soon.
Date: yours’ loving friend
Place: Pablo Escobar
Gfk.com 2021. Pre-Christmas Consumer Confidence falls one point to -15 in UK. https://www.gfk.com/en-gb/press/Pre-Christmas-consumer-confidence-falls-one-point-in-December-in-UK
Gov.uk 2021. Import goods into the UK: step by step - GOV.UK. https://www.gov.uk/import-goods-into-uk
Gs.statcounter.com 2021. Mobile Vendor Market Share United Kingdom | economics assignment Statcounter Global Stats. https://gs.statcounter.com/vendor-market-share/mobile/united-kingdom
Ibisworld.com 2021. IBISWorld - Industry Market Research, Reports, and Statistics. https://www.ibisworld.com/united-kingdom/industry-trends/fastest-growing-industries/
Ons.gov.uk 2020. Coronavirus and the impact on the UK travel and tourism industry - Office for National Statistics. https://www.ons.gov.uk/businessindustryandtrade/tourismindustry/articles/coronavirusandtheimpactonthe uktravelandtourismindustry/2021-02-15
Ons.gov.uk 2021. The impact of the coronavirus so far: the industries that struggled or recovered - Office for National Statistics. https://www.ons.gov.uk/economy/economicoutputandproductivity/output/articles/theimpactofthecoronaviruss ofartheindustriesthatstruggledorrecovered/2020-12-09
Reuters.com 2021. UK consumers turn more confident despite inflation worries. https://www.reuters.com/markets/europe/uk-consumers-turn-more-confident-despite-inflation-worries-2021-11-19/
Tradingeconomics.com 2021. United Kingdom Consumer Confidence | 2021 Data | 2022 Forecast | 1981-2020 Historical. https://tradingeconomics.com/united-kingdom/consumer-confidence