Macro And Micro Environmental Analysis Of Leisure Industry Economics Essay

Government intercession has a immense influence on the ordinance of houses runing in the leisure goods industry, and on the disbursement power of consumers and other concerns.

The authorities needs to reform the UK revenue enhancement system to do it more competitory, simpler, greener and fairer. Major revenue enhancement reform is necessary to heighten the international fight of the leisure goods industry and the UK in general. Reforms to the corporate revenue enhancement government set out in the Budget will partially accomplish this. Besides, better revenue enhancement policy doing demands to be underpinned by greater transparence, a cardinal subject in the Coalition Programme for Government. These reforms will reconstruct the UK revenue enhancement system ‘s repute for predictability, stableness and simpleness and so do the leisure goods industry internationally more competitory.

The houses runing in the leisure goods industry are paying corporate revenue enhancement for the twelvemonth 2010-2011 at the rate of 28 % . This is non really competitory compared to other states such as Ireland 12.5 % or Montenegro 9 % .

As from 4th of January 2011 the new standard VAT rate for the UK will be 20 % . This 2.5 % addition from the old 17.5 % could impact gross revenues and grosss in the leisure goods industry. This addition could besides fuel rising prices which will furthermore impact the industry. The impact on the overall industry will be that they will necessitate to happen new cost effectual schemes in order to keep their low monetary values.

Economic factors:

The leisure goods industry was an early casualty of the planetary economic recession. The demand for these merchandises has decreased in the past two old ages because disbursement on leisure goods is discretional.

The Bank of England ‘s Monetary Policy Committee voted on the 10th of February 2011 to keep the official Bank Rate paid on commercial bank militias at 0.5 % for the 23rd month since March 2009 despite force per unit areas of rising prices.

The UK rate of rising prices is now at 4 % . Two chief grounds for this are the rise in VAT and the continued addition in rough oil monetary values. Both of these factors are impacting negatively on the fight of the leisure goods industry as it now faces higher costs. This rush in rising prices could besides arouse higher pay demands from employees. This rate is good above the involvement rate which means that consumers have decreased disbursement power. This will hold inauspicious effects on the leisure goods sector ensuing in reduced demand for leisure goods.

A bold pecuniary policy that balances rising prices and involvement rates is needed to let medium-term growing in the leisure goods industry and in the overall economic system and to guarantee borrowers ‘ fundss are sustainable.

The rate of unemployment in the UK in 2011 is 7.9 % but for 16 to 24 twelvemonth olds it is 20.3 % . This means that general consumer incomes are low and demand for leisure goods is besides low.

Social factors:

Changes in societal tendencies can impact on the demand for a house ‘s merchandises and the handiness and willingness of persons to work.

In the UK the population has been ageing. This signifies falling demand for leisure goods such as playthings. Besides, houses will confront increased costs if they are committed to pension payments for their employees because their staff are populating longer.

The UK leisure goods industry has an advantage internationally through the English linguistic communication. It facilitates the diffusion of the leisure goods onto new markets and can pull gross from abroad.

Technological factors:

New engineerings create new merchandises and new procedures.

The plaything industry is presently seeking to maintain gait with the development of childs ‘ universes. Merchandises like ‘Tween Electronics ‘ are so new that retail merchants are altering trading schemes to suit these new and popular merchandises. Such developments require everyone in the industry to rethink elements of their concern from the land up. The handiness of new engineering means that toys make more and are cheaper to bring forth as the cost of the new engineering is now spread over a larger end product. Higher consumer outlooks force houses in the leisure goods industry to include modern engineerings into their new merchandises eg. MGA ‘s Bratz Video Cam.

The leisure goods industry has improved ways of making concern as a consequence of better engineering such as online shopping, saloon cryptography and computing machine aided design. Technology helps houses to be cost-efficient, better quality and lead to invention.

Micro Environmental Analysis

What is the Leisure Industry?

Over clip, people have found that they have more free clip on their custodies due to working hours diminishing. The leisure industry has benefited enormously from this as it makes money on those who want “ something to make ” . There are many Fieldss within this industry such as: eating houses, theaters, bet oning Centres, hotels and featuring spheres. Anything that is made to busy 1s leisure hours and is gratifying is basically portion of the leisure industry.

Imports for this industry include edifice stuffs for building of new premises or extensions, equipment for gyms or hotels and nutrient and drink for eating houses and hotels.

Exports from this industry are chiefly tourers coming into the state. However this benefits all other sectors of the industry as they will pass money on these as good.

The leisure industry is portion of the third sector of the economic system as it offers service to clients in return for money and this where the bulk of the income comes from. The chief outgo is on employee rewards and stuffs for the running of the houses.

This industry was turning quickly from 2000 to 2006 as disposable income was really high among the labour force. However since the recession there has been a diminution in this industry as it depends on discretional disbursement which is non high as these times.

Reasons for Growth:

Increased leisure clip: over the old ages working hours have reduced and flexible working hours are available which has led to people holding free clip and making more leisure activities.

Improved conveyance: conveyance has improved tremendously late and is now faster, cheaper and easier to utilize. This means people can acquire to leisure activities without any problem and can travel on more vacations abroad.

Wider pick: the sum of leisure activities available to the populace is an eternal list so it is easy for people to happen something that they enjoy.

Health witting society: in today ‘s society being healthy is really of import to most people. Taking portion in leisure activities is a great manner to remain in form and have fun at the same clip.

Factors impacting growing:

Less disposable income: a figure of old ages ago disposable income was high among working people. However due to the recession this is no longer the instance and leisure activities is non low-cost for some people as they have no money for discretional disbursement.

Main Sectors in the Leisure Industry

Bet oning: This sector employs around 30000 people in the UK in developers, publishing houses and retail merchants. There are 250 games studios in the UK and it is the biggest development community in Europe. This sector is the fastest growth in Entertainment media in the UK.

Tourism: There are over 100000 people employed in this sector in England. It generates a batch of money and visitants for the state. This sector benefits many other sectors as tourers will pass money in these excessively.

Gambling: In England there are about 73000 employees in this sector. Although there are non a batch of people working in the gaming sector, it is monolithic online and generates tremendous sums of money.

Sports: There are over 375000 people employed in England in the athleticss sector in Fieldss such as fittingness, wellness, diversion and out-of-door activities. This sector has the largest Numberss of people involved in it in relation to engagement as there are 1000s of nines and societies across each state.

An designation of the major companies and their market portion

Please happen attached a spreadsheet analysis of the major companies in this industry, their one-year gross revenues gross for 2010 and my estimation of their per centum market portion in the Global Leisure Goods Market.

I prepared this spreadsheet holding researched on the cyberspace, estimations of the size of the market ( see beginnings on spreadsheet ) and by researching the top 10 companies ‘ one-year studies.

I note that the estimations of the size of the industry are lower than what I would hold expected given the gross revenues figures for the top 10 companies. While this is a market dominated by big companies I was surprised to get at a figure of about 75 % of the market being supplied by the top 10 companies. I would surmise that a proportion of each companies gross revenues falls outside the range of this peculiar market but I was unable to obtain any comparable dislocation of appropriate gross revenues from the one-year studies of these companies.

While the figures presented may non hence be wholly accurate, it gives a good representation of the comparative importance of the top 10 companies and their comparative importance to the industry as a whole.

Can the footing for competition in the industry be identified?

This is a really competitory and dynamic industry where merchandise development is a of all time present factor in competition and technological progresss mean that merchandise monetary value decreases are really frequent.

With mention to Porters Five Forces of Competition:

Menace of Entry of new rivals

This industry is extremely regulated with strong barriers to entry in footings of patent protection and legal rights to rational belongings. As can be seen from the old subdivision of this study, the industry is dominated by a figure of really large companies with the fiscal musculus to protect their rational belongings. The graduated table of the bing market leaders are besides such that new entry companies can be bought out at an early phase of development by the big if they pose any menace. E.G. Microsoft purchase of Winternals package in 2006.

However, the planetary meeting of merchandise capablenesss means that companies which antecedently might non hold competed Begin to finish because of the add-on of capablenesss to a peculiar merchandise e.g. Email, Phone and TV response on iPhones. So switching costs can be low in certain fortunes.

Intensity of Competitive Rivalry

The competition between the large participants in this industry is legendary. HP and Dell have been intense challengers for most of their being. Similarly Apple came from behind to spectacularly overtake Nokia in the nomadic phone market.

Apples competitory advantage was won through invention in footings of the service bringing and easiness of usage of its merchandises. I.e. the debut of apps.

Advertising spend in the industry is high as a proportion of gross revenues and signifiers portion of expansive competitory strategic programs.

Menace of replacement merchandises or services

The menace of replacement merchandises or services is vastly of import to this market. E.G. Sony and Amazon Kindle book readers are now likely to come in a serious falling gross revenues period as their usage has been mostly substituted by the apple iPad and other such devices.

Dickering Power of Suppliers

At times e.g. Intel providing computing machine micro chips certain providers in this industry are in a strong bargaining place. However the graduated table and strength of competition in the industry means that normally other providers rapidly come in to vie. The Intel illustration is unusual where it took many old ages for AMD and others to efficaciously vie with them.

Dickering Power of Buyers

The ratio between purchasers i.e. consumers and the figure of providers i.e. big makers is really high. Therefore while it is a really competitory industry as discussed above the grounds are due to exchanging ability etc. non to the bargaining power of purchasers.

Degree of concentration/Fragmentation

This peculiar industry, Leisure goods was a changeless turning 1. As a consequence of the increased wealth among people around the universe and so Ireland and Great Britain this industry has flourished in recent old ages. “ The UK market in this sector is good developed and turning strongly. The outgrowth of the in-between categories in India, China, Russia and South East Asia has created a demand for high-end merchandises and luxury goods. ”

However now as markets take a downswing the one time concentrated industry that allowed consumer pick is now fighting to maintain natation. The money is non available any longer to back up the smaller leisure goods and merely the 1s that have fiscal backup will be able to sit this recession moving ridge. “ Spending on diversion and leisure is discretional, changing in line with disposable income, and the sector reacts fast to recessive force per unit areas. For this ground, outgo in the sector is highest where consumers have clip and money to give to leisure ” . As a consequence in an educated sentiment from analyzing the industry, this industry is traveling from one of utmost concentration to one that is more disconnected.

Issues or challenges confronting the industry

At one point the major issue confronting this industry was impregnation as so many companies were puting up to gain from the intensely turning industry but now the chief menace is the Recession. It is widely believed that at this clip the industry is badly under menace. Consumers merely do n’t hold the money they used to hold to pass on leisure goods. While it can be argued that it is in difficult times that people increase their disbursement on leisure goods to raise morale it is non traveling to be adequate to salvage the sector. Large companies such as Ryanair, while enduring some minor net income beads will be ok as they have the fundss to protect themselves. It is smaller companies such as athleticss training and video games that will be hit the hardest. In relation to investing, money can be made greatly in this sector but one needs to be intelligent about where s/he invests. This position is seen by Lisa Smith, an writer of an article about this peculiar job: “ Leisure and luxury are ever in demand. Although non everyone will drive a Bentley or book a penthouse suite at the Ritz, most of us can grate together adequate hard currency to imbibe an alien microbrew, indulge in a particular aroma, splurge on a luxury pocketbook, or merely eat at a fast-food eating house. While the lower terminal of the luxury graduated table can look mundane to those populating in developed states, the gap of fast-food mercantile establishments in emerging-market states is a large trade to those planetary citizens acquiring their first gustatory sensation of what many think of as “ the good life. ” While economic rhythms come and travel, and the lower terminal of the leisure market suffers from people holding less money for merriment when times are tough, the chase of a good clip and the good life are cosmopolitan ends. As globalisation continues to distribute capitalist economy around the universe, the appetency for luxury goods and entertainmentA is about surely traveling to spread out and non traveling to vanish. Equally long as consumer demand creates a market for merriment, fund directors will happen a manner to put in it.

hypertext transfer protocol: //www.investopedia.com/articles/mutualfund/08/leisure-funds.asp

hypertext transfer protocol: //www.investopedia.com/articles/mutualfund/08/leisure-funds.asp

Recommendations

Secure Sectors/Investment:

As you can see from the appendices of this study, the ten largest companies are really strong and go on to spread out at a steady rate. These companies, hence, should supply a good return on your investing.

Hazardous Sectors/Investment:

There are many start up houses in this industry, and although in some instances they grow into really successful companies, there are many instances where the life rhythm is short and they dissolve really rapidly. This is normally due to no benefits originating from investings in R & A ; D. So continue with cautiousness when make up one’s minding to put in these smaller start-up houses.

As most of the ingestion of leisure goods and services is discretional disbursement, the industry is really sensitive to economic alterations. Soon, as the economic system is in recession, the industry as a whole is being hit hard. Merely the largest companies are seeing growing in their grosss, and even that growing is little.

Decision

The chief sectors in this industry are bet oning, touristry, electronic goods, gaming, athletics and diversion. The industry is dominated by a few, really big participants in these sectors. Competition between these immense houses is prevailing, and it is about impossible for new houses to vie at the same degree, so it could be seen as a two tier industry in footings of company size. Growth is mostly linked with disposable income, and investing is hazardous

Appendixs

Global Leisure Goods Market

Estimate of Market Size – 2010

Consumer Electronicss Companies

$ 681,000,000,000

From US Consumer Electronics Assoc.

Toy and Recreational Products Companies

$ 80,000,000,000

From Market Research.com

Luxury Consumer Leisure Goods

$ 168,000,000,000

From Peoples Daily.com

Entire

$ 929,000,000,000

2010 Gross saless

% Market Share

1

Hewlett Packard

$ 126,000,000,000

13.56 %

2

Panasonic

$ 84,000,000,000

9.04 %

3

Sony

$ 78,000,000,000

8.40 %

4

Toshiba

$ 76,000,000,000

8.18 %

5

Apple

$ 65,230,000,000

7.02 %

6

LG

$ 60,000,000,000

6.46 %

7

Nokia

$ 56,404,000,000

6.07 %

8

Dell

$ 52,902,000,000

5.69 %

9

Microsoft

$ 51,238,000,000

5.52 %

10

Samsung

$ 46,522,000,000

5.01 %

Top Ten Companies

$ 696,296,000,000

74.95 %

Other Leisure Product Companies:

1

Canon

$ 28,014,250,000

2

Mattel

$ 5,856,200,000

3

Harley Davidson

$ 4,859,000,000

4

Hasbro

$ 4,002,160,000

5

Bandai Namco

$ 3,889,310,000

6

Brunswick Corporation

$ 3,403,300,000

7

Tiger Corporation

$ 3,008,250,000

8

Tomy Corporation

$ 2,150,000,000

9

Pool Corporation

$ 1,539,790,000

10

Lego

$ 1,421,000,000

$ 58,143,260,000

6.26 %

Leave a Reply

Your email address will not be published. Required fields are marked *