McDonald's warns of revenue drop

McDonald's`s--one of my favorite fast-food brand,which I know big mac meal is 3.89 with large coke,large fries and a big mac burger.

Even though the whole world economy downturn,but MC does`t be affected that much.Because they have lower price and good market share and market size all over the world.

MC is elastic,it has more competitors, KFC is a good example,so if their price is lower than KFC,they will gain more.People are likely to buy cheaper goods during the crisis when the two fast-food companys produced same food.

But from the latest figure shows that there is 1.4% sales rise in FEB 2009 but compared with an increase of 11.7% in February 2008,it may tell us something.....

Experts said as the US currency is stronger and the commodity costs will squeeze its first-quarter,so we know there is a little rise in FEB 2009 but can`t compared with 2008...

After all,MC still is one of the famous brands is the world,we can image MC will do a good work during downturn when other brands have financial problems

EURO......same conclusion

The European Central Bank (ECB) has cut its key interest rate to 1.5% from 2.0%, the lowest since it started setting euro rates in January 1999.

As US and UK...Euro zone has also be affected by whole world economy crisis,as we can see from he chart,the interest rate of Euro zone has fallen down to 1.5%.It looks probably different from UK,but essentially,they are same....

1999,when Euro interest rate started setting to 2000,the interest rate has moved up from 2.5-4.5%,this situation might tell us that Euro is stronger that US dollar....Euros become more competitive.It has positive circumstance.

And from the start of the 2006 to end of the 2007 the interest rate had increase again...from 2-4%(SAME AS UK)

But from 2008-2009, it had jumped rapidly and incredibly....the economy crisis became more dangerous for a country`s economy...especially for capitalist countries and developed countries...

"Reduce interest rate"more and more countries which has been impacted by economy crisis and credit crunch is using this economy policy to help native economy and hope it will gradually recover ...but it`s not depends on the government, UK has published the policy before EURO ZONE,but it`s not efficient...more people are still waiting for what will happen next....

Fortunately,the economist said that such problems will be come over,moreover,the economy will recover and increase....

Canada 0.5%

Canada's central bank has cut its key interest rate from 1% to 0.5%, a record low.

Incredible......I even can`t believe it.Before I saw this news,I knew than UK economy has been impacted deeply,and in order to recover from economy crisis,and to encourage demand, government published more and more acceptable policy...one of those is to dercease the interest rate to 1%.

But Canada government published this policy,so what might happen in the future?

Demand:as the interest rate goes down to 1%,it is more likely to encourage consumers to expend more money on goods and services.Furthermore lower interest rate might also encourage people to take a short or long-loan to start a business(might not )or pay for the mortgage.In conslusion,the aggregate demand will shift to the right....

EXCHANGE RATE:the main key point---exchange rate, the related to the interest rate,if the interest rate goes down, the exchange rate might fall,therefore it is cheaper for the exporters and more expensive to the importers,it may have a balance of payment surplus(if other factors are equal,the GDP will increase???maybe ...we will talk about it later...)

I/X:as for the import and export.Firstly let`s think about import,because of the low interest rate,people are more likely to buy....but we don`t know whether it is made in China or someoneelse...

G.S:reducing interest rate also will affect the government spending to increase the financial support like subsidy to the small businesses,help car industry or nationalise the bank...(like Uk)

TAXATION:the VAT tax will fall ....encourage consumers...and tariffe,another kind of tax,might reduce...to fit for the demand...

SAVING:definitely will goes down...

AFTER ALL...let`s think about GDP?will it increase?

IF interest rate...fallen,

government spending increase(if others keep equal):GDP increase

consumption increase(if others kep equal):GDP increase

investment increase(.....):GDP increase

export>import(...):GDP increase

BUT!

IF interest rate ...fallen

the taxation decrease,government gain less from tax,the government spending decrease(...):GDP decrease

investment might not support the CAN`s economy because it`s risky,and can even get profit...

investment fallen(...):GDP decrease

HSBC announced 12bn share sale

Europe`s biggest bank-HSBC announced to have 12bn share sale

Why HSBC made this decision?

As the whole world economy downturn...some of the banks have suffered from it,and it`s prolonged problem.More banks found out more ways to solve it,such as got subsidy from the government,sold share to the government and may bought it back after the crisis or merge...

But in this case,HSBC asked to sale shares which might not happen in other banks .The reason is HSBC is Europe`s biggest bank,it has basic number of people who has account in HSBC which might deteminate HSBC made this decision.After HSBC start to sell its shares, more and more people might buy it rapidly and buy as much as they can afford,therefore HSBC can get more financial support and be in an positive circumstance.

Also,get more financial support means become competitive,therefore it has more possibility to resist suck economy crisis

So....it might be a good decision....

Northern Rock

Rock to revive mortgage lending.....
which might be a good news to UK economy.
In order to get extra money from the taxpayer,Rock has revived the mortgage lending.
Rock also published the 1.4bn loss for 2008.

Is it effective and efficient?we don`t know, but it is a part of the government policy
It might be a good news to consumers recovering from crisis especially,Northern Rock`s consumers.
But the treasury also need to provide an extra 10bn in taxpayer money to the bank...

Deep recession

"The governor of the Bank of England, Mervyn King, has warned that the UK is "in a deep recession" in 2009 and said rate cuts may no longer work"

The governor of the Bank of England ,MERVYN KING today said the UK is in a deep recession...
Which is a big hurt to UK businesses.....

In my opinion,it is a even worse news compared with interest rate declined to 1%....
From the chart we can see that 2009 is the worst year,because in this year output might touch the lowest point(-6%)...which means this year for UK economy is the most difficult year ever...

So,what will it impact business...
During the recession,some business might merge,because they strong company has more probability to keep alive...but it doesn`t fit for small businesses..some of the small businesses might bankrupt...therefore powerful company may merge small businesses as they want get benefit from it...for instance,they might consider that merge a small business might reduce their raw material or have good business idea and feature produts.

The structure of the organization might be recombined:they might have
-tall structure with a narrow span of control:the advantage of using this structure is subordinates might be more promotional...the productivity might increase

-flat structure with a wide span of control: the advantage are it will reduce overhead costs(total cost)and there will be more delegation and more responsibility it also is good for the company in such awful conditions

Even the unemployment rate is high,but I think it should be a good opportunity to big company,because they can employ some workers with low salary,so it also causes reducing total cost

Government support:In this situation,government may not help any of the small businesses,it`s risky,however the banks might be asked to sell shares to the government,it is a way government support the banks

Shareholders:shareholds might get loss ....

tourism:people may stay at home instead of going abroad....

X/M:import might expensive,export might cheap....

But the forcast said that this situation will recover from 2010....is it ture?....

Interest Rate:1%

Yesterday, Bank of England published the latest Interest Rate....cut 0.5% to 1%.

It reveals UK is suffering the deeply strike from RECESSION....

From the chart we can see that 1% is the lowest point ever since 1951.Interest Rate never below than 2%.But because of the recession,credit crunch,high rate of unemployment and economy crisis,UK economy become depressed...

That also affects consumers confidence.As credit crunch,people lose their confidence to borrow money,small business can`t get loan from the bank,some of them bankrupted for can`t can finance immediately....Big celebrated companies have to close a few of their multiple shops in order to reduce the fixed cost,and keep gain profit.Some of them,such as BMW,Starbucks reduce their workers to decrease the costs....

It is risky to bank to borrow money to some business firms ....

Now,the interest rate has fallen again to 1%,government want to increase consumer`s confidence,house price increase...people might gain confidence to UK economy..but not as much as before...VAT has decrease to 15% aims to want people take out the money from the bank,to expend...encourage people to buy in order to help UK economy...but now inflation is 3.3%,Which exceeded 2%.People can`t get confidence from the government policies....these policies are not really successful, people still looking on what will happen...

Business article (M1)

I have read this business article:http://www.guardian.co.uk/business/2009/jan/03/small-business-government-loan-guarantee-scheme
It is about the difficulty to borrow money from the bank,also as the interest rate is rising thus the new entrepreneurs are worried to borrow money from the bank to establish the small business.
Another reason is government support.....It is hard to borrow from the bank if there is not government support
So,banks are not always being gentle to you.......are not always suit for you

NEWS:VAT to be cut by 2.5%

A talk with MR brown
As we know,the VAT used to be 17.5%.but recently,aimed at kick-starting the economy.government want to cut VAT by 2.5% to 15%.

WHY IS THAT?
In my opinions:because of the recession.People get less money than before.so people won`t buy more products...adding the "economy emergency"has impack whole world.It hits consumers` confident indeed!And "credit crunch"for instance harder to borrow from the bank.so the bank gets less interest rate!!!It lend to bankrupt.......

So what is VAT?
I think it`s a type of tax included the products.Such as food meat....etc...
Government uses that tax to improve produce merit goods.New equipments and health care.
And some of taxes are used to improve public goods!(road,motoway,road sign)

Why government cuts VAT?
The main point is to increase expenditure!If you bought a bottle of milk was 2.35pounds(2pounds for sale,0.35pound for 17.5%VAT)and you buy it now should pay2.3pounds(2pounds sale,0.3pound for 15%VAT)you save 5pence!That just a example to show how the VAT impack real life.That means people pay less on the products even if the price of the product doesn`t change before the tax.

But if cut the VAT,goverment will loss more taxes to improve merit goods!
Why?>..........
Is it really influence the damand and supply?
As we know food and meat are inelastic!That means if price goes down,the quantity of the good won`t change alot!It doesn`t really affect people to consume....It doesn`t make a big difference!

mortgage problem and job problem can be solved out!
Because of the price of the house is decreasing!People can not pay back!If VAT cut down,people have more money in pocket!It will slowdown the problem.......

How about job problem?
To be continued................................

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