Interest rates are the rates set by the Bank of England; they are also known as base rates. At the moment the current base rate is at 0. 5%. The Bank of England sets the base rates and interest rates taking in account the current state of the UK's economy. They look at how many people are borrowing money at the time and they base the new base rate depending on these factors. If inflation rates, interest rates and exchange rates are low then it would mean that the UK would be in a "boom" this is when the economy is at its best position.
This is what the UK's target is instead of its negative situations such as recession of going into "bust" this is when the economy is at its worst position. Jaguar: Interest rates have a major affect on businesses throughout the world, they either have benefits on they affect them in a negative way. Jaguar was recently brought out by TATA motors, before this they were owned by ford which failed to brings them a profit for 19 years. This would have created problems for Jaguar and put them in major debt. However since being bought out by TATA motors they may not have been affected much by this as TATA may have paid some of there debts off.
Interest rates have many negative affects on Jaguar and there performance. Similarly to inflation rates interest rates also affect how people buy there cars. Some customers take out a loan in order to buy a car, however if interest rates are high then they will hesitate as it may mean that they will not be able to pay back the full amount of money that they owe. Because of this Jaguar will be losing out on potential customers, this will mean that they will be losing out on profit because less people are buying there cars.
Also as the car market is constantly developing as the level of technology is getting better and better it may encourage Jaguar to do more market research and develop new cars in order for them to keep up with the new trends. However in order for Jaguar to do this they may have to take out a loan because of the vast amount of money needed to do this, if the interest tares are high then it would be a bad idea for them to do so because they may not be able to pay the money back as quickly as possible. This will lead to them having a large debt that they are unable to pay back.
However interest rates can also benefit Jaguar. If the interest rates were low then it would mean that customers who take out loans can do so and they can buy jaguars without hesitating. This would mean that the amount of jaguars sold will increase and they will be making more profit as well as increasing there share in the UK luxury car market. Another benefit that low interest rates brings them is that they can take out loans and use this to do the necessary research which will allow them to develop new cars.
By doing this it would help them meet their aims of delivering exciting new products, keeping customers satisfied and also maximising their profits. Marriott: Marriott were previously owned by Whitbread and recently they were brought out by Marriott international. They were bought out by taking out loans, this meant that the business were immediately put into a difficult position as they had many loans to pay back. The negative effect that it had on the Marriott is that the higher the interest rates were the more difficult it was for them to pay back as it meant that they would be paying a lot more.
Another negative impact that it has on the Marriott is that approximately 70% of the population in the UK has debt due to credit card or mortgage costs. This means that if interest rates were high then the disposable income would be decrease meaning that people would be spending less as they will not be paying there debts off. This would affect the Marriott as it would mean that they will not be coming at the Marriott to stay there because they will be finding it difficult to find the money that they require to stay there.
This affects the Marriott as it means that they are losing customers and this would mean that they will not be making that much profit. Low interest rates also have a positive impact on the Marriott's performance. If the interest rates were low then it would mean that the Marriott could pay back there debts a lot easier meaning that they will be making more profit as they will not be paying of their debts. This would help the Marriott achieve their aim of profitability. Conclusion:
I think that in terms of interest rates Jaguar are affected more because they will lose out on customers more then the Marriott. This is because a majority of them will have to take out a loan in order to buy a car however at the Marriott they are not paying as much money as buying a car so taking out a loan is not a factor. If interest rates were high then it would mean that these people would not be taking out a loan so Jaguar would be losing out on all these customers however the Marriott wont as there customers would not be taking a loan out.
Another reason is that as 80% of the Marriott's customers are business customers they will not be worrying about the high interest rates because the company that they work for would be paying for it. But because most of jaguar's customers are buying the cars for themselves they may find it difficult. If interest rates were high then it would increase jaguars costs because they have been out by TATA which means that they still have some debts to pay, but if interest rates are high it would be hard for them to do so because it would mean that there costs would be significantly higher.
This would prevent them from their aim of keeping there overall cost down to a 2004 level. Also the higher their costs are the lower their profit margin would be because they are spending more, this would affect there aim of profitability. Interest rates would also affect the Marriott as their leisure customers would be coming less to the hotel, this would mean that the Marriott would be losing customers and potential profit. However the Marriott will not be as affected as Jaguar as they won't lose that much of their sales as most of their customers are business customers.
Exchange rates: Exchange rates constantly change; exchange rates are how much of a currency you can buy with their own currency. Exchange rates are vital when people go abroad and business purposes, the reason why they are vital is because one type of currency may not be the same as another currency so they need to be exchanged in order for you to receive the type of money in that country. For example if a British person was to go abroad to America they would have to change their pound to dollars because they do not accept pounds in America.
The strength of the pound depends on the prices of the market at the time, at the moment the current strength of the pound is i?? 1- $1. 4. Jaguar The different exchange rates would have a variety of affects on Jaguar. As 75% of their cars are sold abroad it means that they are dependent on the exchange rate. 50% of this goes to America; this means that they need the exchange rate to be going there way in order for them to get the maximum customers in order to make profit. At the moment the current exchange rate is i?? 1- $1. 4 before this the pound was worth $2.
Because of this it is beneficial to Jaguar as it means that more customers would be buying there cars abroad, this is because it would work out cheaper for them as it costs them i?? 1. 4 for every pound appose to $2. Similarly throughout the world if the pound continues to decrease then it would mean that other countries would also find it cheaper to buy the cars. If this happens then it would mean that jaguars sales would be going up. However although it brings Jaguar some benefit it also has a drawback, this is that Jaguar may find it difficult as their costs would be rising as they buy the components of their cars from abroad.
This means that if the strength of the pound was weak it would mean that they would be spending more but if the strength of the pound was high then it would mean that they are spending less. However if the pounds strength was higher it could decrease the number of customers abroad as it would be more expensive for them to buy. Marriott: The exchange rates also affect the Marriott but not as much as Jaguar. Just like Jaguar does the Marriott also purchases their supplies from abroad.
If the strength of the pound it high then it would mean that they can buy the supplies for cheaper. However if the strength of the pound was weak then it would mean that it would be more expensive for them, if this was to happen then it would mean that they will be making less of a profit as their costs will be going considerably up. In terms of the customers the Marriott would not be as affected as Jaguar as most of their customers are business related; this means that the business would be paying for them so the exchange rate would not be much of an issue.
Conclusion: The change of exchange rates would have different effects on the Marriott and Jaguar. Depending on the exchange rates it either helps them meet their aims and objectives or prevents them from doing so. Firstly if the strength of the pound was high then it would help Jaguar meet their aim of keeping their overall costs to the 2004 level because it would mean that they will be buying the goods for cheaper, thus saving them money.
However if the strength of the pound was low then it would mean that they will be spending more stopping them from achieving their aim of keeping their costs low to the 2004 level, this may mean that they will have to find a supplier in a country where the strength of the pound was high so that they can buy it for cheap. However when doing this Jaguar need to ensure that they find a supplier that is giving them good quality materials otherwise it would stop them meeting their aim of improving the quality of their cars.
In relation to the Marriott hotel if the value of the pound was high it would mean that when they buy their products from abroad it would be cheaper for them to do so helping them meet there aim of profitability. However if the strength of the pound was low it would mean that they would be paying more for the goods and this would mean that they would be making less of a profit as there costs will be going up, this would also mean that they cannot give there shareholders big dividends.
However if the strength of the pound is low then it would mean that it would be expensive for them to be buying abroad and this would mean a reduction in the profits because of the high costs. However if the exchange rates are low it also brings a benefit to the Marriott as it means that the customers coming from abroad will increase because of the fact that it would be cheaper for them to stay at the hotel. I think that Jaguar is more vulnerable to exchange rates because they are more dependent on their sales coming from abroad and also more dependent on the supplies that they buy from abroad.
As they sell 75% of their cars abroad if the strength of the pound was high it would mean that less customers would be buying jaguars as it would be more expensive for them. However it does not affect the Marriott that much as most of their customers are business customers so the business would be paying for them so money is not that much of an issue. Also as both businesses buy their supplies from abroad if the exchange rates go up it would have more of an effect on Jaguar as it would be harder for them to change their suppliers as there materials are not as easily found as that of the Marriott's.
at the Marriott hotel however if they had to change their suppliers it would be easier as they only buy smaller produce that is more easily found. Overall vulnerability: Overall I think that Jaguar is more vulnerable to external influences then the Marriott is. Jaguar is more vulnerable in terms of environmental constraints as there are always new laws being added to help protect the environment.
These laws would affect Jaguar more as they produce cars, this contributes to global warming more then what the Marriott does which is to provide hotel rooms. In terms of market competition Jaguar are again more vulnerable because of the fact that the market is constantly changing so it means that Jaguar would have to do all the research needed for them to keep up with the market, this would cost them a lot of money and this would mean that they will not be achieving their aim of keeping their costs low to the 2004 level.
However at the Marriott it is easier to keep up with market competition because all they have to do is make slight changes such as change the price according to what the other hotels are offering their customers. Lastly in terms of economical conditions I again think that Jaguar are effected more than the Marriott, this is because as they were recently bought out by TATA motors and before this they were own by ford. Whilst owned by ford they failed to make a profit in 10 years, this means that if they are taking out loans etc it would be difficult for them if interest rates are high.
In terms of inflation rates again Jaguar are more affected as it would cost them more to produce and this would mean that they will have to raise the prices of their cars, if this happens then it would mean that they would have less customers as it would mean that they may not be able to afford the cars itself. It does not affect the Marriott that much as the room prices are fairly low so customers would not struggle as much to pay for the cars.
Also the Marriott would not struggle as much because most of their customers are business customers meaning that they would not be worried as much about the price of the service. Jaguar is also far more reliant upon exchange rates than the Marriott is. As Jaguar buy there supplied from abroad they will need the strength of the pound to be high so that they keep their costs low, however if it is high then it would mean that they will be spending more and it would decrease their profits.
Also as most of their customers buy from abroad they would want the exchange rate to be fairly high so that they do not have to spend that much but they would also want it to be fairly low so that customers abroad can still afford it, because of the fact that they are not in control it makes it a lot harder for them. Whereas the Marriott also buy their supplies from abroad they are minor supplies and they can find another supplier easier then the Marriott can as there product are more easily found then that of Jaguar. In conclusion Jaguar is more vulnerable to external influences.