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Unit 38 - Assignment 1 (P1 P2 P3 M1)

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Arsen Alaguzov

on 26 March 2015

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Transcript of Unit 38 - Assignment 1 (P1 P2 P3 M1)

Unit 38 - Assignment 1 (P1 P2 P3 M1)
Arup Group LTD
The Arup Group are an independent firm of designers, planners, engineers, consultants and technical specialists offering a broad range of professional services. The Arup Group does work on a huge scale on all the different continents, undertaking massive projects that take many years to complete.Through their work, they make a positive difference in the world. The UK’s first international high speed railway, High Speed 1, also known as the Channel Tunnel Rail Link, is just one example – completed on time and on budget. Arup’s business report shows a very good performance in the last year (2013) with continued growth and strengthening profitability. The firm’s turnover reached £1,048.3m, generating positive pre-tax profits of £40.4m. The results reflect a positive performance in Asia, America and Europe.

Business cycle
Business cycle - When GDP rises, economic activity is increasing. This is called economic growth. The level of activity fluctuates over time. Periods of high growth are followed by periods of slow growth. Sometimes the economy experiences negative growth where there is a fall in Gross Domestic Product. These fluctuations are known as the business cycle.
Boom
This is when the economy grows quickly. Demand is high as consumers have enough money to pay for the products/services. Supply and production is also high because of high demand.
During this stage Arup Group can increase building designers who are very creative and innovative who will design new projects and buildings.

Downturn
Growth starts to slow down. Consumer spending decreases and businesses invest less in capital equipment.
During this stage Arup Group will make some workers redundant as Arup Group will find it problematic to pay salaries while consumer spending are decreasing.
Recession
If downturn last for a long time it can lead to a recession. Supply and demand is low as consumers don’t have much money to spend, recession can seriously harm some businesses.
This is a worth part because demand on Arup Group as investors don't want to lose their money which means that Arup Group projects will be slow downed during this stage. Apart from low demand, Arup Group will also have to pay taxes which are quite high in the UK.
Recovery
- GDP starts to rise again as consumer spending increases and business produce more goods and services.
During recovery stage the economy growth stabilizes which means supply&demand increases again. At this stage Arup Group will increase employees again to ensure that all planned projects have been started. Arup Group will increase sales as well as investors are ready to invest.

The changing levels of Demand across the cycle
Arup Group can be affected by the different cycle stages. During the Boom, Arup Group will increase their demand by planning more building designs, economics planning, infrastructure and etc, as a people, organizations or even governments have enough money to afford Arup’s services. During the Downturn, Arup’s Group demand will be decreased as consumers spend less. Throughout the time, downturn will lead to Recession, Arup can be seriously harmed because their services are very expensive and during the recession fewer and fewer
organizations are ready to spend large amounts of money. The final stage is Recovery, Arup Group’s sales will be increased again as GDP and firms spending increase again.

Ripple Effects


Unemployment - could cause some serious problems for Arup Group. The reason is that during the recession caused by the banks in 2009. Some governments and organizations cannot afford Arups services which cause employment problems for Arup as they have to cut down wages and make workers like architectures redundant.

Unemployment


Unemployment
Indicators of Recovery
The leading indicators goes after recession which means GDP increases, Arup Group will be able to design new private houses or office buildings because demand will grow again, it means that people will have money to spend again as their salaries grow. Aron Group may also be able to afford new plant and equipment to design buildings or infrastructures. Aron group could also employ more workers in different regions as the demand could also grow after recession in specific regions.

How the changing employment levels at the stages will affect the firm

Arup Group will employ more people who specialize and have academic knowledge in engineering area. More regions will have money to invest into infrastructure, building design and culturally-appropriate businesses. To do these Arup will need more employees who can plan and structure offered services well.

The likely impact of periods of high and low inflation

If the actual inflation is higher than the target rate of 2%, it is high inflation, below 2% is low inflation.

During the low inflation, Arup Group may predict the future of economy, thus providing a climate that is more favourable to sound, sustained economic growth and job creation. Arup Group can make long-range plans because they know that the purchasing power of their money will hold and will not be steadily eroded after year.

However, high inflation is less beneficial. High inflation can cause the population’s confidence in their own currency and economy to decline. High inflation therefore often has a harmful effect on economic growth. If inflation gets too high, Arup Group will have to increase prices on services they offer to maintain profit margin.


Policies

Industrial Policy - This is a policy which helps guide the total strategic effort of the country. It influences the development of different sectors and it also helps create a stronger portfolio of national industry. Overall, Industrial Policy is about building the country’s future and is done by creating new jobs and new industries. Arup Group can help to plan infrastructure, or they can also help to design new manufacturing factories and etc.

Regional Policy - The UK Government split the UK into a number of different regions to develop policies for their different needs. In 2004 a guide known as the Regional Spatial Strategy was contracted and contained 3 main sections. Phase 1 consisted of the development of a long term strategy for the Black Country. Phase 2 consisted of developing housing, employment land, urban capacity, transport and waste, and water policies, together with overcharging policies relating to climate change and sustainable development. Phase 3 consisted of the development of rural services, gypsies, travellers and travelling, show-people, culture, sport and tourism, the environment and minerals.

Transport Policy - This policy covers many different areas and links with not just economic policy but also links with environmental policy. The areas that the policy covers are; road, air, train and shipping. These all affect the levels of crime, taxation and congestion. this ensures that they can operate as effectively and efficiently as possible, this is why it is considered at a national and regional level so goods and people can be transported easily. It;s important for Arup Group that transport links are good in the UK because Arup needs to be supplied with a different goods. In case, of poor transport links Arup Group will not be able to operate as efficient and effective as possible.

Competition Policy - This policy puts businesses under constant pressure to offer the best possible range of goods at the best possible prices, because if they don't, consumers have the choice to buy elsewhere. The Government regulate competition because it makes good use of the economy’s resources through enterprise and efficiency and good performance on pricing, quality and choice. They also make sure that one of two businesses are not dominating the market. Competition policy let smaller business to operate in the same market as Arup does. However, this policy tells that bigger companies cannot takeover smaller ones. Competition policy also benefits Arup Group because they can offer many different services which can be different from the rest.

Educational Policy - The government policy on education has a very large impact on the way that businesses operate and the level of skills in the population. Education and training is linked with industrial policy to make sure that people are being trained for employment in areas that will help the economy. Education policy dictates the type of qualifications that are studied and which qualifications money is invested in. It also supports different types of training, such as literacy and numeracy skills as well as funding for students wanting to study in higher education.

Environmental Policy - Government policy with regards to the environment is closely linked with transport and industry policy because these areas need to complement one another. Environmental policy is led by the Department for Energy and Climate Change (DECC). The Act’s targets are that a UK-wide climate change risk assessment must be completed every five years, a programme must be put in place to reduce climate change risk, public authorities and some companies must report on what they are doing to reduce climate change risk and a climate strategy has to be established. Environmental policy impacts on Arup Group by telling them that Arup Group should produce minimum pollution as it harms environment and people national habitats. Pollution also contrubites to global warming which is another impact covered by this policy.

Social Policy - This policy means that the UK government put in place welfare and social protection. It relates to social services and the welfare state. It directly links to the economic environment because it relates to issues such as health, employment, community care, housing, crime and social disadvantage. Social policy affects businesses that are given to people, whether they are means-tested or universal (given to everyone), such as hospitals, and investment in programmes for housing and crime prevention. Social policy affects businesses because it ensures that employees are treated equally in terms of their age, gender, race, sexual orientation, disability, religion or belief. The National Minimum Wage is part of social policy and it sets the minimum levels at which employees must be paid. Arup Group must ensure that employees are fairly paid, no discrimination is allowed and etc.


Multiplier Effect

Arup Group offer services which benefits government because they work on infrastructures, economics and plannings, building designs and etc. Basically, Arup Group offer services which are there to sustain economy and increase GDP. The United Kingdom has enough funds to invest them into different areas. For example, the UK Government and Arup Group are planning to build high-speed rail line between London and the West Midlands. The route is expected to be 400kph high-speed line which would be designed to international standards. High-speed offers a sustainable, progressive means of managing the economic and environmental cost of road and air travel, as well as offering fast connectivity and a positive passenger experience. If government finally decide to build an HS2 there, employment rate will be increased the country because people will be given jobs around the UK. Government will be able to increase money from HS2 as people will have to pay for using HS2 service.


Two Government Policies

Arup Group Ltd has been impacted by the Transport Policy. This is because it covers many different areas and links to economic policy and the environmental policy. Transport policy covers the road, train, air and shipping. The Arup Groups have to consider the transport policy at a national and regional level to ensure that the UK has good transport systems that help businesses to operate as efficiently and effectively as possible. Arup Group have responded to this by creating innovative solutions and having a good technical understanding of their engineering field. Arup Group needs good and reliable transport links which can be found in the UK. The UK has good economic situation, nevertheless, Government is still considering HS2 which can be found in the most developed countries in Europe such as: France and Germany. However, it will take time and money as well. Some farmers might lose their land as HS2 requires it. Government has to consider all the pros and cons before starting the project. Nevertheless, If government wants to cooperate with Arup, it will certainly benefit them as they will improve relations with the UK government by building HS2 links across the country. It also means that government will invest money which will increase productivity of Arup Group. As productivity increases, Arup will employ more workers which will then lead to an expansion.

Arup Group has also been impacted by the Competition Policy. The UK has quite a lot of organizations which are there to offer same or at least similar range of services. The UK government to encourage businesses to improve the quality of the services, if services are not good enough. Competition gives a choice for government and investors, Arup Group will have to make their services different from the rest to out stand from the competitors. If competition is high, there is a possibility that Arup Group might reduce a price to win the competition. Arup Group has responded by increasing range of services to ensure that only them can offer the service for an optimum price. Competition policy gives a chance for Arup Group to out stand from other competitors or organizations which offer similar services. However, there might be more innovative firms which offer better services than Arup Group which means Arup is going to lose sales. This policy decreases Arup's sales as there are many firms which offer similar services.
Decreased sales will make some employees redundant as Arup will not be able to pay wages and salaries. Furthermore, reduced sales will block a chance for expansion. Arup Group is dominating the market as they are monopoly and have over 25% of the market, the competition policy stop them and gives a chance for a smaller firms which might find it hard to compete with an organization like Arup Group.


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