International Olympic Committee
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Now a day, to present and promote the national identity and cultures on a global scale, hosting the international games is the one of the greatest way. On 6 July 2005 the International Olympic Committee has given the right to stage the 2012 summer Olympic and Paralympics' Games to London. Now it's necessary to find out whether it's good the Economy of UK or what affects will be on the UK.
The pros and cons of the London 2012:
As London is going to host the 2012 Olympic Games, we have to find out some advantages and disadvantages of hosting the 2012 Olympic Games. Even though its estimated that there will be £2 Billion in tourism revenue and its predicted that the benefits of the game will be felt across the whole of the UK with becoming the centre of the world's attention, there are so many disadvantages of the hosting of such a big games.
Advantages of hosting the 2012 Olympic games:
1. Urban regeneration:
Due to Olympic 2012, Government making a new stadium with setting capacity of 80000 and this will be the main focus area for Olympic. This East-end side is bit less developed area in comparison to other part of the London. So due to Olympic 2012 this area will be developing area very soon.
Government is building 5000 homes for the Olympic village which will be using for housing of the local people after the Olympic. It will increase the housing cost of the area.
3. Transport Improvement:
As large number of visitor will be visiting during the Olympic, Government is improving the transport line rapidly. Following Improvements are mainly focused:
a. Building a channel Tunnel which will connect Stratford with Kings Cross
b. Increasing the jubilee line capacity by 45%
c. Extending the DLR network
d. Major improvement work in East London line which is costing around £1bn.
East end is known as a area where unemployment rate is very high. As this area has become the Olympic Zone, now there are lots of short-term jobs opportunity is there which may help to reduce the unemployment rate.
UK is expecting the number of tourist will increase rapidly due to the Olympic.
6. Financial Benefits:
A city may receive lots of benefits from Olympic games. If we look at previous Olympic history we can see that Barcelona was able to do vast urban renewal from the gained revenue of Olympic. Sydney was also able to generate huge revenue from the tourist and it also increase the number of tourist for the city.
7. Employment Effects:
As we describe earlier Olympic creates lots of job which helps to reduce the unemployment rate..
8. Intangible Benefits:
There are lots of benefit for being host city of big event like Olympic. It could be tourist perspective, employment creation, development of particular area, improvement of transportation system, being the focus placed for the rest of the world.
Disadvantages of hosting the 2012 Olympic game:
Cost of hosting a big event is the main drawback. Government may need to spend around £2.373bn for Olympic 2012 and it is predicted which may increase. There could be huge operating loss which is nearly £500million.
Lakes of long term job:
Olympic is creating short-term job but it is not creating any long term jobs. So that after the Olympic, unemployment rate may increase rapidly.
With the Olympic Games being of the scale that it currently is, there is a risk of ending up in huge financial deficit if preparations are not organised or overseen properly. The result is a debt that lasts for years, as happened at the 1976 Montreal Olympics.
Rising Consumer Prices/Rent:
As we know that if demand increases, price will increase. So that price of product and rent may increase during the Olympic which will have a serious negative impact to the local poor resident. For example, is an area in which landlords will be able to charge 10 times their normal price during the surge of visitors to Athens in 2004. If too many prices shoot upwards in this way, a lot of poorer locals may find goods or services which they used to be able to afford are now out of reach. However, this change may not be affect larger cities. Cities such as Montreal and Los Angeles did not undergo any significant price surges around the Games, and price changes were consistent with those in surrounding cities.
Impact on Environment and Other stakeholder: [P2]
The London 2012 Olympic and Paralympics Games will bring a wide range of positive impacts to the region. These include transport infrastructure, employment, skills, and economic, social and environmental impacts. Many benefits include opportunities to showcase the region through various Olympic-related media. It has to be monitored noise, dust which is around the Olympic park. The waterways which runs around the park must need to be protected so that storing chemicals, oils do not run into the water ways.
Arrange a huge event like an Olympic can easily effect on environment. It can be effect environment in different way like
In this mega event it's very possible to environment effected by carbon emission. But Olympic committee has set an inspirational goal ‘Towards a One Planet Olympic'. They try to keep carbon emission as low as possible. London 2012 has pledged to undertake a study of the carbon footprint of the Games. The first draft of the carbon footprint and associated carbon management strategy, including a reference scenario and numbers quantifying emissions, is due to be published by the end of July 2008. This will then be revised in light of lessons learnt in Beijing
For running this Olympic it needs a huge amount of energy. There is a possibility lots of energy can be waste as well. So London 2012 planning a proper energy plan for reduces waste of energy.
In this Olympic game there will be lots of tourist who will come from all over the world. In this time London population going to be increase as well as waste. Because lots of people will dumps huge amount of waste every day. It can easily affect on environment. As further plans for waste infrastructure and minimising food packaging and other Games time waste are developed over the next few years it will become clearer whether the positive goals for waste management will be achieved
London Development Agency which is a subsidiary of the Mayor of London, its investing around £15 million for games and improvement of Lower Lea Valley. [http://www.londonnet.co.uk/ln/guide/about/olympics2012_stakeholders.html]
Comparison with other Olympic: [P3]
First of all let's have look at the Beijing Olympic 2008. Beijing Olympic can be treat as a one of the successful Olympic. Chinese President Hu Jintao declared open the 29th summer Olympic Games of Beijing in the National Stadium in north Beijing. For the Olympic they have built 12 new stadiums with 11 existing stadiums and 8 temporary stadiums. On the other hand for London 2012 Olympic one of the biggest Olympic park construction going on where the setting capacity will be around 80000.
To prepare for Olympic visitors, Beijing's transportation infrastructure was expanded significantly. Beijing airport had a major expansion, adding the new Terminal 3 which is the world's largest airport terminal. They reopened the Beijing south railway station after remodelling. They have introduced Beijing-Tianjin intercity train to connect with co-host city. On the other hand for London 2012 Olympic the government has already introduced major construction for London underground, and approximately 7.7 million tickets are available for sale for the London 2012 Olympic Games.
An estimated 1.5 million spectators are expected to watch the Paralympics' Games..
If you compare the investment, London 2012 Olympic are investing for then Beijing Olympic. London 2012 has got more sponsor then Beijing Olympic. House of common has approved budget of 5.3 billion pound for construction of venues
Impact on local business: [P4]
The London 2012 Olympic and Paralympics Games will bring a wide range of positive impacts to the region. These include transport infrastructure, employment, skills, and economic, social and environmental impacts. Many benefits include opportunities to showcase the region through various Olympic-related media. Many small business premises have to move away due to manufacturing the main park. It's really worse to business owner, because they have been doing business for long time and when move to new place it will take long time to settle down. On the other hand, During the Olympic number of tourist will increase. They will come to London to visit and they will spend money over here. So that it's a great opportunity for the local business to increase the profitability.
For business people, 2012 London Olympics will not be just a gathering of sports events and countries—not just for entertainment—but more than that, it is going to be a huge potential business. Many people from different countries, various races and colours, will converge in one place and this just means, great business opportunity.
There is a great deal of investment that is being pumped into the country and the area in particular and many are looking at the business opportunities that will come about as a result of this huge sports gathering. The London 2012 Olympics will be a great venue for the local United Kingdom based athletes as they look to showcase their talents to the country at large.
There are also some potential negative impacts to the region as a result of the Games. The South West may experience a decrease in tourism as a result of displacement or negative effects on staging the sailing events. Research shows there are a number of ‘Olympic aversion' markets that can increase tourism flows outside host cities. A number of national and international tourists may choose to not visit the region during 2012 because of perceived congestion and overcrowding. Through a structured and co-ordinated approach, the South West can plan accordingly for the tourism opportunities of people staying away or at home during the Games themselves. One such market will be London residents wanting to escape the Games, and the South West is one of the UK regions that has recognised the potential of this market, with the South West England Legacy Strategy for the 2012 Games noting the potential to capitalise on the displacement of UK citizens from London; this can be mitigated by developing events (big screen, festivals etc.) to attract visitors.
Impacts on economy:
The total cost of the hosting Olympic 2012 will be around £736 million and if could affect in welfare of London around £4003 million. So that Olympic 2012 will affecting significantly to the local economy which can help to recover the recession. There will a great opportunity for the economy to be stronger. For example, The Olympic 2012 games will impact in London economy because many tourist will come here, the hotel business will increase at that time, Food, drink business will increase. Because many people, tourist comes here and they will buy food, drink for them
On the other hand we should also know that hosting of Olympic could be courses for huge loss. For example we can tell about Munich Olympics 1972. They made loses of £178 million and in 1976 Montreal made losses of £692. If we look at 1984 los angels Olympic and 1992 Barcelona Olympics they made around £215 million profit as because of the increased economic performance , creation of large market, and broadcasting rights. So that Olympic 2012 could affect significantly to local economy.
Micro and Macro Environmental Factors related with Olympic:
There are some uncontrollable factors which has got impact on the business organisation. As like that Olympic Games could be affected by some micro and macro environmental factors and it could influence on the number of tourist. Factors or elements in an organization's immediate area of operations that affect its performance and decision making freedom. These factors include competitors, customers, distribution channels, suppliers, and the general public.
Example for Olympic 2012:
Competitor- There is no competitor in London 2012 Olympic
Customer- People's who buy the Olympic events ticket.
Suppliers- Construction firms, workers.
For macro environment we can say the economic factors, environmental factor political factors, technical factors, social environment and for micro environmental factors it includes the supplier, stakeholders, government, and competitor.
These are the factors has got significant impact on the Olympic Games also. For example currently the political, situation of UK is satiable. So that tourist can visit UK without any fear. So that each an every factor has got significant impact.
Marco and Micro environmental factors also has got affect on SME's growth.
To find out the macro and micro environmental factors on the SME's growth we can have a look on the PESTAL and Potters five forces Analysis.
PESTEL analysis: [P6]
It is a part of the external analysis when doing market research and gives a certain overview of the different macro environmental factors that the company has to take into consideration. Political factors include areas such as tax policy, employment laws, environmental regulations, trade restrictions and tariffs and political stability.
A political factor is one of the major factors which have got significant impact on SME's. In UK political situation is stable and Politian appreciates small and medium business. All the existing rules regulation of business and the spending power of the customers are very good for SME's.
As marketers need to consider the state of the trading economy in the state of a trading economy in the short and long tern. The economic condition of UK is much better then any other country for SME's. In UK economic growth is very good; customer has got more spending power. So that it's very helpful for the SME's.
Sericulture Factors: the social and cultural influence on business very from county to country. As UK is a multinational country it a good place to do business. Peoples already adopted with so many culture and they do respect each other. Here people would like to spend so that it's good for SME's. Also when customers do perceived that their cultural values are being respected by the business as evident in its market(ing) strategy and customer handling, they will respond more positively to the business and its revenues will increase.
Industry change is driving insurers to reinvent themselves by building new strategies and deploying new technologies. But it isn't easy in the tight economic market to fund new projects while prioritizing investments. It is more crucial than ever to know when to be an early adopter, and when to be a fast follower. Kimberly Harris-Ferranti, research vice president, Gartner, Inc., recently discussed opportunities to achieve a first-mover advantage, and others where it is acceptable to follow the crowd.
As UK is technologically advanced it easy to get access to the new technology which is helpful for SMEs and it's easy to get competitive advantage.
Environmental Factors: climate changing, global warming, waste management could affect the business significantly. Sometimes it's not easy to adopt with new environmental factors. In UK people are concern about environment. It's difficult to do business without concern about environment. It may increase the cost for small and medium business organisation as they have spend extra money for the waste management or recycling.
Current law and order in UK is very friendly for the business. Small and medium business organisation can get help for the local authority and police any time. The legal environment is secure and government has introduced business friendly law and regulation
Affect on SME Growth: [P9]
There will be certain affect on the SME growth. It has been shown through Porter's Five Forces.
Porter's Five forces
The model of pure competition implies that risk-adjusted rates of return should be constant across firms and industries. However, numerous economic studies have affirmed that different industries can sustain different levels of profitability; part of this difference is explained by industry structure.
Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates.
In the traditional economic model, competition among rival firms drives profits to zero. But competition is not perfect and firms are not unsophisticated passive price takers. Rather, firms strive for a competitive advantage over their rivals. The intensity of rivalry among firms varies across industries, and strategic analysts are interested in these differences.
It could create following cost for SME's
1. A larger number of firms
2. Slow market growth
3. High fixed costs
4. High storage costs or highly perishable products
5. Low switching costs
As there are large numbers of SME's in UK the completive rivalry is very high which is affecting it. As because of London 2012 Olympic games the number of competitor will increase.
Threat of Substitutes:
In Porter's model, substitute products refer to products in other industries. To the economist, a threat of substitutes exists when a product's demand is affected by the price change of a substitute product. A product's price elasticity is affected by substitute products - as more substitutes become available, the demand becomes more elastic since customers have more alternatives. A close substitute product constrains the ability of firms in an industry to raise prices
In UK the threat of Substitutes are very high. For SME's they have to take quick decision regarding substitutes. It's also affecting SME's.
Buyer Power: The power of buyers is the impact that customers have on a producing industry. In general, when buyer power is strong, the relationship to the producing industry is near to what an economist terms a monophony - a market in which there are many suppliers and one buyer. Under such market conditions, the buyer sets the price. In reality few pure monopolies exist, but frequently there is some asymmetry between a producing industry and buyers. The following tables outline some factors that determine buyer power.
In UK the buying power of customers are more and they have got more choice. In order to get more customers all the SME's has to provide excellent customer service. As London hosting Olympic 2012 games its good for the SME's that the number of Buyer will increase.
A producing industry requires raw materials - labour, components, and other supplies. This requirement leads to buyer-supplier relationships between the industry and the firms that provide it the raw materials used to create products. Suppliers, if powerful, can exert an influence on the producing industry, such as selling raw materials at a high price to capture some of the industry's profits. The following tables outline some factors that determine supplier power.
Like other big business supplier has got some power to influence the SME's. Due to Olympic London 2012 number of SME's will increase and if the supplier has got more power they may increase the price of the produced which may seriously affect the SME's.
Threat of Entry: It is not only incumbent rivals that pose a threat to firms in an industry; the possibility that new firms may enter the industry also affects competition. In theory, any firm should be able to enter and exit a market, and if free entry and exit exists, then profits always should be nominal. In reality, however, industries possess characteristics that protect the high profit levels of firms in the market and inhibit additional rivals from entering the market. These are barriers to entry
Let's have a look its easy to enter into the market what will happen to SME's and its difficult then what will happen:
Due the London 2012 Olympic the threat of new entry will increase significantly which may affect lots of SME's.
We can easily realise the situation of UK. From the analysis we can say that UK the Competitor rivalry is very high, so that every day lots of small business organisations are closing down. Also buying power of customer is very high and supplier power also involved with this. Due to London 2012 Olympic the buying power, supplier power and rivalry will be very high. Existing SME's have to take preparation for that now onwards. They have take plan in order to maximise the profit during the London Olympic 2012.
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