Business+Cycle

=The Business Cycle=

The Business Cycle
http://www.bized.co.uk/educators/level2/external/activity/context12.htm

Product Life Cycle
Follow the link to an [|exercise]on the product life cycle. The Boston Matrix classifies products according to their place in the product life cycle:
 * 1) Star -- a product that a large market share in an expanding market. //Example: iPad//
 * 2) Cash Cow -- a product with a large market share in a mature (stable, established) market. //Example: Colgate toothpaste//
 * 3) Problem Child -- a product with poor performance in an expanding market. The Problem Child is losing market share to its competitors -- it risks becoming a Dog. //Example: Aniseed sweets, Salted liquorice//
 * 4) Dog -- a product with a small share of a slow-growing or contracting market. Without radical change, a Dog can be the cause of business failure. //Example: Brylcreem, Asafoetida.//

Renewal: MySpace
14-2-2012 It appears that [|MySpace may be on the way back up], with 40,000 new users a month, after Facebook drove it and other competitors into the dust. This is an interesting case study in business renewal: repositioning with a new product or in a new market.
 * 1) What product/services have been MySpace's core business?
 * 2) According to the article, what are the reasons for MySpace's decline?
 * 3) How is MySpace trying to renew or regenerate its business, ie bring itself out of decline?

Decline -- Billabong
December 2012 has proven to be [|a horror month for Billabong], with a near-50% fall in share prices.
 * 1) What products/services make up Billabong's core business?
 * 2) According to the article, what are the reasons for Billabong's decline?
 * 3) For each of the reasons given in 2., suggest something that Billabong could do to improve their situation.
 * 4) Why does the article say that Billabong is "a victim of its own success"?

Maturity -- Cochlear
The Australian bionic ear company recently recalled its Nucleus 5 implant because of deficiencies in the manufacturing process. [|This article]illustrates the challenges faced by a dominant company trying to maintain its position in the market.

Housing prices
The price of housing gives us an indication of the health of the economy: in good times, people feel confident that they can afford a large (usually credit) purchase that will take years to pay off. Home prices are flat at times when buyers are more reluctant. [|Australian home prices flatline] 31-3-2011

The first prices to fall are the most expensive, as relatively wealthy individuals turn to more affordable alternatives. [|Ritzy Melbourne suburbs post big price drops] 31-3-2011

The Business Cycle: Definitions and diagrams
The theory of the business cycle is discussed in several resources linked from[| this page at economics.about.com]

[|Recession? Depression? What's the difference?] by Mike Moffatt According to Mike Moffatt, what are the defining characteristics of: 1. Recession? 2. Depression?

A more formal definition of Depression is:
 * a severe decline in economic growth lasting more than a year, including
 * a simultaneous period of **deflation** (situation where money is more valuable next year than this year)

Moffatt does not include this second issue of deflation.

An economy will recover naturally from a recession. As unemployment increases, and as land and equipment is unused, it becomes cheaper to employ people, land and equipment to make profits. Typically this leads to a turnaround in the economy's fortunes.

Getting out of a depression, however, may be a lot harder. The dangers of deflation are far from obvious, but relate to the amount of income that is taken out of the economy in the form of savings. If a dollar will be worth more next year than this year, there is a strong incentive to save disposable income; this means less income is available in the circular flow of income; which leads to a spiral of further falls in income and further deflation.

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The Business Cycle: Leading Economic Indicators
When you're speeding (legally) down the highway, your dashboard tells you a number of things about your car: your speed, revs of the engine, fuel remaining, indicator lights and so on. Economists maintain a statistical "dashboard" that gives some indications of the health of the economy. The [|Key National Indicators], prepared by the Australian Bureau of Statistics (ABS), provide a 'snapshot' of the Australian economy.


 * 1) On the "discussion" tab for this page, and using the above link and the notes below, tell a "story" about the current state of the Australian economy.
 * 2) I have given a starting example on the discussion tab.


 * **Gross Domestic Product (GDP)** -- the value of production within Australia. This indicates how well the economy turns resources into finished products and services.
 * **Balance on current accounts** -- value of exports minus value of imports. Typically negative in Australia (we import more than we export). A positive trend (% change) indicates an increase in exports, a decrease in imports, or both.
 * **Net debt** -- if negative, debt is reducing.
 * **Consumption and investment** indicators display the tendency of Australians to spend. Flat growth (near 0%) may indicate the economy is at a "turning point" where growth will flip from positive to negative or vice versa.
 * **Prices** give the growth in cost to a consumer or producer of the items they demand. Declining prices may indicate deflation -- a symptom of a recession or, at the extreme, a depression.
 * **Labour force and demography** conditions for workers (over/under employed).
 * **Incomes** should ideally be growing. A decline may indicate an approaching recession.
 * **Housing Finance** shows the willingness of households in entering long-term debt (mortgages on property). Housing Finance indicates consumer confidence in their economic future.