Economic environment has vital importance for the businesses. By understanding the fundamentals of economic decision-making helps mangers of the business to increase profit. It also helps those business professional who understands when to introduce new technology, when they need to merge with another organization, what is the suitable time to expand their business, their employment level (Afonso & Sousa, 2012, pp. 4439-4454). By effective decision making strategies these business professionals outclass those business managers who are unable to understand these economic affects entirely. It also helps business for effective financial decision for the business (Ongsotto et al., 2002, pp. 9-10).
Ralph Lauren Corporation which was previously known as Polo Ralph Lauren Corporation is related to fashion industry and involved in the business of marketing, designing, and distribution of premium lifestyle products, and this includes men's, women's and children's clothing, home furnishings, fragrances and accessories(Bachmann et al, 2010, pp.15-25). Branded products of Ralph Lauren is present globally in more than 11000 retail outlets worldwide. Marjory the business operates in Europe, America, and Asia. Ralph Lauren employs more than 25000 employees worldwide at the end of March 2012. Ralph Lauren is headquartered in New York, United States.
At the end of fiscal year 2012, business recorded revenues of $ 6,859.5, which was 21.2% increase as compared to fiscal year 2011. In addition, the operating profit of the Ralph Lauren recorded was $ 1,039.4, 23% increase as compared with previous year.
Task one impact of Economic change on Ralph Lauren
Various factors cause any business to contract or expand. This phenomenon is also known as business cycle. Business cycle is defined as the different recurring levels of fluctuation that any economy experiences over a long period (González et al, 2008, pp. 1917-1936). There are five stages that business experience throughout their business cycle, which are expansion or growth, peak, recession or contraction, through and recovery. Previously it was believed that this business cycle is highly regular in nature, but now days it is greatly believed that business cycle is irregular in nature in terms of its frequency, intensity, and duration of each stage. Explanation of those factors with reference to Ralph Lauren is as follows:
Interest rate - variation in interest rate could have positive or negative impact on the buying or spending behaviour and affect the economic growth. For instance if interest rate is decreased, it ultimately reduces the cost of borrowing for people and in result there is increased volume of disposable income for people to spend(Gregoriou & Ghosh, 2009, pp. 95-102). On the other hand, if interest rate is increased it ultimately increases the cost of borrowing and people invest their money, as there is huge return on their interest. This results in decreased spending and thus slowing down the economy. Similarly, if there is low interest rate than people have more money to spend and they ultimately spend on fashionable products, which increase the business profitability of Ralph Lauren. On the other hand, if interest rate is increased ...