How has the British economy changed over the last year? and Ansoff's Matrix

In recent times, it has been rather concerning for the British and Global economy, most economist find it hard to predict future outcomes of the economy. In particular to the past, it has been very difficult to view the state of the economy simply because the country and the world were amidst being in and out of a recession.

In 2010, the government had to make many decisions due to the recessions in terms of cut backs in various departments involving their budget. For the start of the year VAT had been significantly decreased by 2.5% to 15% but at the beginning of 2010 these tax rates went back up again. This VAT decrease was to encourage people to buy more products in the market as they would benefit by having slightly more to spend with lower markets and this would hopefully encourage growth in the market. This caused the market to make significant progress and begin to recover as around the third-quarter in the year Britain came out of a recession. However, on 4^th January 2011 the government announce that there would be a future 2.5% increase in VAT from 17.5% to 20%. This would have bad impact on the economy a BBC report showed that George Osborne predicted it will add an extra £13 billion to government spending. However, in my opinion it will make people less likely to spend in the current climate because some people don’t have a lot of money to spend whilst the British economy’s growth is slow. A report by Kelkoo showed that they predicted a £2.2 billion decrease in the number of sales revenue due to the VAT increase. 

Another important factor in terms of the economy is the average GDP per person. This is value that is the average amount of income for the average person in the country, the higher the average earner the more the person will spend in the market. In 2010, the estimated GDP for the average person in Great Britain was $36,000 which was the 26^th highest at the time in comparison to other countries. Currently the average GDP stands at $39,604 giving Great Britain a ranking of 17^th in the world. In comparison to one another it shows that the average earner in Britain earns slightly more in comparison to the previous year. This is positive signs for the economy because people will earn slightly more on average their average spending should also increase. In addition, it means that they are more likely to have more money to save which could be beneficial with bank interest on a yearly basis. Finally, it can benefit the economy because when people spend more due to higher incomes with a VAT increase it means that the government have more money saved in case of another recession. On the other hand, the higher salaries could be due to inflation, this would have a negative impact on the economy because when inflation occurs, prices of normal standard of livings increases.

Finally a key measure of change in the British economy comes solely down to the amount of inflation that occurs, normally over a certain period of time the inflation continues to rise. In 2010, the economy saw an increase of a 0.6% increase of inflation from 2.9% to 3.5%. Since these figures in 2011 the economy saw a sharp rise of 1.7% from 3.5 to 5.2% inflation. This means that the economy may suffer because of these increases in inflations because consumers have to pay more for essentials in the market. In addition, it means that the country may suffer from exporting fewer goods abroad because businesses may struggle to manufacture goods for the same price of other demanding neighbouring countries.

The ansoff’s matrix

The ansoff’s matrix is four types of marketing strategies used to determine the stages and a product can go through. The four categories are market development, new product development and diversification.

Market penetration- Trying to gain more of your market e.g. cutting prices of launching a new advertisement campaign.

Marketing development- Sell your existing products in a new market e.g. new segment of the market- Johnson’s talcum powder for babies + Adults.

New product development- Pursuing a strategy of development new products to sell to existing customers (Modification).

Diversifications- Offer new products in a new market, this has high risks attached to it but can pay its dividends e.g. CAT products industrial employment + clothes.