Business Scenario – TVR
The engineering company TVR Ltd produces high quality performance cars in the UK. They employ a total of around 1400 people at four separate plants in the Midlands. But lately the economy in countries across Europe has hit a downturn and the economic growth is slowing. This is a worry for TVR, especially as the economy in America is also in recession.
The first influence on TVR in America is the interest rates. The interest rates at the moment in America are at a major low due to September the 11th. Low interest rates would be quite a helpful influence for TVR because consumers will spend more when interest rates are low. For example, if consumers borrow more because of low interest rates, they are likely to spend more and if rates are really low, then more cars will be sold.
Unemployment in America is not a big threat for TVR because it is not a major problem in America. If there was a high rate of unemployment in America, then TVR would have a problem because less people would want to buy products and spend money. People would be wary of losing their jobs and so would be more likely to save because of an unsure future. So TVR shouldn’t really look into unemployment too much, but should be aware of any significant changes that could affect consumer confidence.
Inflation in America at the moment for cars has stayed relatively the same for a while since September 11th. But there was, however a major decrease in value of products of cars and motoring products as a whole. Inflation on petrol could soon rise because of America going to war with Iraq. This external influence is very important for TVR because if petrol prices rise considerably, then less people are going to be looking for a high performance car. Cars made from companies such as TVR, however would be renowned for being high performance and have a high petrol consumption. TVR would also be aiming at a rich market, high up in the socio-economic ladder. So although inflation would be an important factor, customers that TVR are aiming at wouldn’t necessarily be affected as much because of the income they have.
Exchange rates are the most important external factor for TVR. This is because if TVR are exporting cars to America, the strength of the dollar or pound could affect how much profit TVR make on each car. For example, for every pound, you get around $1.67. This means that if TVR exported 1,000 Tuscans to America at a value of £28,000, then their total value in America would be around £5,2360,000. This is a value of around $52,360 per car. The strong pound means that exporting goods is a worry
for TVR, but some parts for their cars are imported from countries such as Germany and Italy. This is a benefit for TVR because it is good to import when the exchange rates are high in your country. The drawbacks of high exchange rates in England for TVR are that Americans wanting to buy a TVR Tuscan would have to pay around $52,000 for one.
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