Welcome to Business Studies A Level. We look forward to you studying the subject and joining in September. The subject is a highly successful A Level, with excellent results over many years and students progressing into various business-related fields.
The Getting Ahead work that we have set you will help you get to grips with some of the key concepts involved in this course and the business environment we live in. Building these foundations now will put you in good stead when you begin the course in September. We have linked the activities to the current Coronavirus pandemic to allow you to identify how the external environment (factors outside of businesses control) can have either a positive or negative impact on how a business operates. We have identified three activities and would like you to undertake any two of your choosing.
In March 2020, as the COVID-19 crisis became established in the UK and consumers were forced to change their shopping habits, online supermarkets were overwhelmed with people desperate to book a delivery of the goods that they need for daily life. The change to online shopping in the UK was already well underway and has been partly responsible for the closure or severe retrenchment of a large number of high street chains in 2019, from Debenhams to LK Bennett and Mothercare to Jamie Oliver’s restaurant chains.
Statista is a database company that collates and reports on data collected by market and opinion research institutes and data derived from the economic sector and official statistics. In May 2019, Statista found that online grocery shopping in the United Kingdom was the fastest-growing purchase channel, both in terms of value and growth, according to retail analysts IGD. The average value of weekly online sales in predominantly food stores more than doubled between 2010 and 2016, reaching £141.9 million in 2016. With the introduction of online grocery shopping, home delivery and click & collect in the nineties, the market was initially made up of the four major players on the British grocery scene: Sainsbury’s, Asda, Morrisons and Tesco. With the introduction of new players, such as purely online retailers Ocado and AmazonFresh, the online grocery market share has changed with Tesco, Asda and Ocado the leading online grocery retailers in terms of edible grocery sales.
Use these and other resources to research the market for online retailing in the UK, and write a response to the question “Who benefits most from online retailing – consumers or retailers?”. You might also find some of the resources from this search on the Tutor2u website helpful: Online Retailing.
For top-flight football clubs, TV broadcasting deals make up around 60% of their annual revenue. In the 2019-20 season, the English Premier League clubs were set to receive £1.665bn for domestic broadcasting, of which Sky and BT committed to £1.575bn to show 180 matches live and Amazon a further £90m for 20 matches. However, the postponement of the season due to COVID-19 meant that there were no matches to broadcast and the clubs stood to lose out on up to £762m from the broadcasters, with a further £338m from lost ticket sales. The result was that many clubs, like any other business, feared bankruptcy. At the start of April 2020, Burnley FC warned that they faced a potential loss of £50m and that for some clubs, it could be as much as £100m in lost revenue.
This meant potential bankruptcy for many clubs, at all levels and risked the jobs of all their non-playing staff, including groundsmen, maintenance staff, cleaners and restaurant staff and thousands of jobs at the third-party suppliers in the local economy – with the risk of wide-ranging negative externalities. A number of top clubs announced that they were going to furlough their relatively low-paid non-playing staff, but not the players whose salaries range from £25,000 to £400,000 per week, and received a great deal of negative publicity because of it. By 15 April 2020, Liverpool, Tottenham and Bournemouth had all reversed earlier decisions to furlough staff members.
Professional footballers also faced a great deal of criticism when they were asked to take a 30% pay cut for the season in order to protect the financial position of their clubs; the players responded by launching an initiative ‘Players Together’ which enables them to donate cash to a group of charities called NHS Together.
The impact of losses for the Premier League would have been felt throughout the sport, as income filters down from the top league to lower Football League clubs and beyond, to grassroots amateur football. At all levels, clubs were/are at risk of going under. There are further worries about the charity work that all Premier League clubs do through their community organisations, which rely on TV revenue to run free football sessions and mentoring for young people and teenagers, football themed academic support for pupils in local schools, football sessions for people with a wide range of disability and programmes aimed at helping people of all ages stay active. While they might, for example, create online tutorials to help local people with cancer to stay active during and after treatment throughout this crisis, most of their programmes to support the community were/are suspended. There are many examples of clubs using their facilities to help the community during the crisis.
Nevertheless, there are real concerns about how, or even whether, the sports industry can survive the effects of the pandemic.
The following links will help you to gain a better insight into how the season was impacted:
Use these and other resources to research the impact of financial loss being experienced by football clubs throughout the economy in the UK and write a response to the question “What is the potential economic impact of the shutdown of the English football season?”
Since the onset of the Coronavirus and the UK lockdown, one topic that has affected businesses more than any other is cash flow.
With all but essential retailers closed, most firms have seen the taps turn off overnight and revenue from cash sales plummet, putting extreme demands on cash reserves and creating liquidity pressures. Those that are reliant on cash sales and those who have money tied up in inventory and receivables no doubt felt the pinch quickly. Firms with an online presence will have clearly benefitted but the sudden increase in demand that some have seen has resulted in websites only offering sales for limited hours in a day or even implementing queuing systems to manage demand due to a lack of capacity. This still creates a cash flow issue. We have also seen firms cancel dividend payments to shareholders to preserve working capital.
The impact on high street names
High street retailers were already struggling prior to the crisis. A report by the British Retail Consortium suggested that 2019 was the worse year for retailers in 25 years. Therefore, in a sector that was already struggling, the crisis couldn’t have come at a worse time. According to an article in The Times on 10 April 2020, Callum Jones wrote that the projected cash flow of 34 leading retailers was set to fall into negative territory. Some of these retailers include high street names such as JD Sport, Dixons, Carphone Warehouse and Pets at Home. This was based on modelling from a consultancy firm that forecasted a 70% fall in sales. Post-crisis, what will the high street look like? For those that survive, how will their operations be affected by the lack of cash?
Planes and Automobiles
Airports and airlines have also been some of the hardest hit. As countries closed their borders, fleets of planes were grounded and along with that, revenue streams. In an article in the Economist, it was put forward that three quarters of airlines couldn’t cover costs beyond three months. Some of the biggest airlines have managed to secure credit lines from banks to support their working capital and strengthen their liquidity positions. This still begs the question, what will the competitive landscape look like in six months’ time? Will we see state aid as in the case of the USA.
The unprecedented fiscal interventions by the government aim to prevent industrial scarring and the furloughing of workers via the job retention scheme. This will no doubt prove to be extremely beneficial, but some firms will still suffer. Car manufacturers face significant fixed costs which must still be paid regardless of production. One UK firm which has been reportedly ‘scrambling’ to save cash is Jaguar Land Rover. A report in the April 5th edition of the Sunday Times stated that the shutdown of UK operations was estimated to cost £1bn a month. JLR is known for its R&D and has expanded its operations in the UK to support electric car development, fitting with changing market conditions and external pressures.
The new Jaguar XJ is the company’s latest addition to its electric vehicle (EV) portfolio and it is touted as the rival to the Tesla Model S. “When Jaguar’s production facilities reopen, do they continue development of the car, ready for a launch in 2021”? Write a response to the question.
The current Coronavirus pandemic has hit the economy and UK business extremely hard, however, whilst some businesses have suffered significantly, some businesses have benefitted as a result. The activity below gives you an insight into how these businesses have been impacted because of the pandemic, who are the ‘winners’ and ‘losers’.
Read Coronavirus Impact on Businesses
Using the information provided, produce a report on how different businesses/industries have been positively and negatively affected by the Coronavirus pandemic and the ways in which businesses have responded.
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