Economic Factors and Variables
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Institutional affiliation
I would start a fast-food restaurant. I would choose this type of business because it has undergone massive growth throughout the years, and it will be worth 223 billion USD by the end of 2020(lamacro,2018). There are several economic variables likely to be experienced in the fast-food business. One of these variables includes the cost of labor. In the first food industry employee’s method of payment is on an hourly basis, and the rates are equal to or a bit higher than the minimum wage. There is a persistent push by human rights activists to have the minimum wage raised as they argue that it is not sufficient because thee cost of living is becoming higher and higher. If this push succeeds, the profits will be reduced as the cost of production will be more(lamacro,2018). To address this problem, I will have to pass the cost to the consumer by raising the menu prices, or alternatively, I will reduce the number of workers.
Another economic variable is the cost of fuel. This affects the business in that high prices raise the cost of supplies transportation. Suppliers are likely to make their services costlier to cover for the money lost in transportation. In the case of this problem, I will also have to raise menu prices.
The price of commodities is another economic variable in the fast-food industry. When the prices of ingredients go high, the restaurant will absorb the cost because fluctuations in ingredient prices are not long term. The profits will be lower, but this can be managed if its for a short period. I will, however, be forced to increase the menu prices if the high ingredients cost persists for a long time, then the cost will have to be passed to the customer to sustain the business.
Another economic variable is economic upturns. In the case of economic upturns, consumers are no longer on the lookout for fast foods, which are known to be cheap(lamacro,2018). To curb this problem, I would provide a wider variety of items to cater to the changes in customer’s preferences. I could incorporate additional items guided by research on what items are popular at that moment in the market. In the case of economic downturns, the fast-food industry is affected in the long run since most people start preferring to buy their own ingredients and cooking at home. In this case, I will invest more in advertising and branding to attract more customer
taxes
Technological factors political factors
Business
Credit markets Stock markets Economic factors
Inflation rates
Value of the dollar Money market rates
Price increase
Oversea profits Money equity