Economic Influences On Emi

4 - Economic Influences

4.1 - Economic Growth

There are many different economic influences that impact upon EMI, these are:

* Economic growth - This refers to an increase in a country's ability to produce goods and/or services.

GDP grew by 2.6% in the second quarter of 2006, which was an increase of 0.7% which was a change from when it fell in 2004 by almost 2%. The decrease is due to lower predictions of government and other services output. The GDP level is now 2.6%, higher than the second quarter of 2005.

Below is a graph showing the rise in economy:

In regards to other countries EMI has an interest in, below is a graph of other countries that EMI would have an interest in:

As shown from the graph the growth rate within the Euro Zone is particularly low compared to others, in the USA it is high with Ireland being the highest out of the countries shown.

Economic growth has also had a major impact in regards to job security at EMI. In 2002, EMI announced 1,900 job losses in order to cut costs by Ј100m. This was followed in 2004 with EMI announcing 1,500 redundancies and a 20% cut in their artists as some were becoming too specialist to market. This however, was in countries where economic growth was particularly low, for example Australia. However there have yet to be any significant job losses within the UK, however the company has not gained any new employment opportunities either. Whilst economic growth could lead to more jobs being created due to companies expanding, with a business that is declining such as the music industry, it can also have major repercussions for those involved in the industry. Growth within the UK however, could see more employment prospects open up.

Higher incomes will affect EMI in different ways. More money should mean that people would have more to spend, which would hopefully lead to a rise in sales. On the contrary it could also lead to people spending more on different resources, more and more people tend to be purchasing broadband Internet that inevitably will lead to illegal downloads, thus costing EMI money. However it may have positive effects with it also no doubt leading to an increase in sales of legal downloads. The IFPI (Worldwide record industry) estimates that the market for worldwide music has fallen by 20% since 2001 due to combined factors of, economic recession (particularly in other countries around the world), physical piracy, illegal downloading and increased competition for discretionary consumer spending and shop shelf space. With economic recession happening, then people will tend to download illegally as they will not have the funds to purchase legal downloads/music.

Economic growth will also lead to a rise in taxes charged by the government. The government will charge more for the public, as the public's income will be higher. Other taxes that will be affected will be value added tax (VAT) and corporation tax, this is where businesses pay to the government a tax on their revenue for the year. This has affected EMI, as they have paid a total of Ј in tax to the government, over the time they have been operating.

Economic growth will lead to greater investment in EMI as there will be more money available, allowing them to spend it on investments in EMI. They may invest in stocks within the company yet also they could invest in individual artists or songwriters. The growth in economy will also lead to improved living standards. This could impact on EMI, as more people will tend to spend more in order to live their life at a higher standard. Due to EMI effectively selling music to the public, people will spend more on their music in order to live a better lifestyle.

However, economic growth can also lead to inflation. Inflation is the general rise in prices of goods, due to people having more money to spend then it is possible this could happen. This will be covered further on in a separate section.

Economic growth can also lead to increased inequalities within a country. There can be more of a social class that develops due to a rise in people's income. This could impact on EMI as they main gain and/or lose customers due to the way they are viewed in the class in society. This can lead to social problems in the consumer society. For example many muggers now target those with white headphones, as these are synonymous with Apple's iPod's. This can affect EMI as music sales may fall due to consumers not wanting to have music that is portable as they could face muggings.

Economic growth can also lead to environment problems. If people have more money to spend then they will undoubtedly spend it on products that are not particularly environmentally friendly, for example Cars and the emissions they cause. EMI originally had a negative impact on the environment, when a probe into the office equipment after hours revealed that:

* 25% of office lights, 11% of hard drives, 47% of screens and 50% of printers were left on;

* 46% of employees had no paper recycling bins;

* Of those that did have them, 11% put non-recyclable waste in them; and

* 58% of employees put recyclable waste in their normal bins.

However, now hazardous waste and CD process scrap have been reduced by over 20% in a four-year period. This has been advanced with EMI now having virtually eliminated the use of CFCs from their business. Over 60% of CD output from the EMI group comes from ISO 14001 or EMAS certified factories. The highlight for the business was in 1994 and 1995 when the EMI group won the 'Best Environmental Report' award from the Chartered Association of Certified Accountants (ACCA).

* Inflation - Economically this is a general increase in prices and fall in the purchasing value of money, an increase in available currency is seen as the cause of this.

From the graph above we can identify that there has been a gradual rise in the consumer inflation rates within the UK. With the inflation target aiming to be 2%, the rate is currently just below 2.5% for the first half of the 2006 year. This