The impact of the economic environment
Supply
Companies and businesses exist to supply goods and services to their customers in order to make a profit. But they can only do this they need to get the necessary raw materials and right labour to turn those materials into goods and services. A company needs to consider a few things when obtaining the materials and labour. The company needs to be able to transport the raw materials from their source, it needs to be able to produce the goods and services at a profit and there could be government help them do this.
Supply of raw materials varies from industry to industry. For example, raw materials for the food industry would include things such as crops and farm produce whereas raw materials for Easyjet would include airplane parts and oil for fuel. Businesses need supplies of raw materials in order to operate but sometimes the supply can be low so they have to charge more for the goods and services to compensate. For example, Easyjet may have to pay more for oil because the supply is low and more expensive and will therefore in turn charge more for tickets. But it also works vice versa, if the price of oil declines then Easyjet can afford to lower ticket prices which will increase demand. This occurred quite recently as referenced in my bibliography.
Just like raw materials, companies also need labour to operate. This labour can be within the production stage of the raw materials or the provision of services to customers. The bigger the company, the more employees and labour is needed. The supply of labour refers to the number of hours employees are willing to work at a given wage. Low skilled jobs such as labour are usually at a very good supply of workers during periods of recession because more people become unemployed and seek jobs. Wages at this point will be low but they can’t drop below minimum wage which is dictated by the government. During periods of growth, it can be quite difficult to recruit low skilled workers so the businesses often pay more than the minimum wage to get them to work. In 200, the number of employed people within the UK reached a record high of 28 million people with just 1.6 million classified as unemployed. Easyjet need a high demand of skilled workers because engineering for building planes is quite specific and difficult and plane pilots are also very skilled and high paid workers. Not just anyone can fly a plane, it takes a lot of skill and flight school education.
Labour is affected by wages offered by the business in comparison to its competitors because usually people would rather work for the higher wage. Another factor is how wages are so high that the employees choose to work less hours because they will receive a similar wage than they would have.
Supply is mainly dependent on demand. Because when there is a high demand for products, then the supply has to be high aswell. This is for maximum profit. This is the same for when demand is low; as the supply must be low aswell otherwise the products that aren't sold will cost the company money. This is because the products are expensive to make so if no one buys them then no profit is made.
Other factors that affect supply:
-Taxation
-Aim of Business
-Demand of goods
-Number of producers
Economic Boom 1995-2008
During the economic boom, demand was at a high for vacations. In order to take advantage, it meant that supply was at a high aswell. This was good for EasyJet because it meant that they had many customers to supply too. An example of activity that EasyJet used to supply was how they have purchased 200 new planes since 1995 to fit more passengers. Employment was also at a record high in the year 2000, this meant that Easyjet had plenty of employees to help buid their planes and to fly them.
Economic Slump 2008-2010
During the economic slump period, the demand for vacations was quite low because it wasn't a nessessity. However, since EasyJet is a low budget airline then the supply wouldn't be as low as thought because those who still go on holiday will use EasyJet. This is evident from the fact that EasyJets monthly passenger report of July 2009 was an increase from 2008. This shows that their customers had increased by 4.9% for that year because people going on holiday have gone for the cheaper option. This in fact therefore means that Strategically EasyJet had used their prices to advantage of the economic period.
A volcanic ash cloud also halted the supply of Easyjet providing a service because all flights were grounded. This meant that their service had temporarily halted due to the volvanic eruption. This caused customer disatisfaction due to the hastle.
During this recession period, Easyjet ended up with a recordded 8000 employees which is half the amount that they had during the period of growth in 1995-2008. This clearly indicates that the supply of labour is a lot lower during the time of recession.