Question

An independent report has predicted that economic growth in the UK will slow and even become negative by the third quarter of 2020, resulting in high unemployment levels and lower investment within the UK economy. Higher oil prices are also predicted which will have a knock-on effect of a general and persistent increase in prices (inflation). The report has urged the UK government to engage more with non-European markets which it says will result in more trade, more foreign investment and more knowledge transfer and sustained economic growth. a. The management of Ace Body Gyms has asked you to evaluate the effects of the predicted changes in the UK economy outlined above on the performance of the company. Specifically, you should write an essay to address the effects of the independent report on the performance of Ace Body gyms. Performance should include, but is not limited to, the effects on price, cost, demand, investment opportunities, profits etc. (40 marks) b. Your report should also include recommendations as to how Ace Body Gyms could maintain a solid performance despite the predicted economic downturn. (40 marks)

Answer 1

The research says that the current situation of the UK economy will be slow by the 3rd quarters of 2020. so that will have a negative impact on the economy with the high oil prices, high inflation. so the suggestion been made by the report is to increase trade with non- Europian countries to gain from trade and investment and that can give a boom to economic growth.

If we want to prepare the report on ACe Body Gym performance in this crucial situation then we need to start with the structure of the gym. now the basic customer of the gym is higher middle class to high-class people. so when there is an increase in oil price that will automatically hit the market in terms of other consumption (direct effect) high transportation cost to reach the gym (indirect effect). so it will increase the cost as the gym is highly affiliated to fixed cost. So if the inflation will be high then the gym subscription will also increase that maybe hit some of the lower leveled customers and they may think to quit. In this situation renovation /new addition of advanced equipment also very costly so it has a direct and indirect impact on the profit of the gym. so in that way investment in the gym also declines. so in an overall manner it will hamper the business.

b) In this crucial situation my suggestion to the gym manager to find out different schemes to attract the customer. the package should be fitted to their budget. there should not be any heavy investment. the gym also thinks of side businesses like refreshments games and another verity of engagement which may create more interest in the customer. so gym should wait to the crisis to over so that the business can expanded.