business cycle case study
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The Business Cycle: Case Study of the Davis Service Group PLC...
Case Study Subject: The Davis Service Group PLC
The Davis Service Group is a London-based organization specializing in the service industry since 1900. The organization operates primarily in textile maintenance, tool hire, and building systems.
Sunlight Services Group, the largest subsidiary of the Davis Group, handles textile maintenance and is generally responsible for roughly half the organization’s revenues.
The tool hire branch, unveiled in 2018, experienced rapid and immediate growth to become Davis’ second-largest financial contributor.
Third and final on the list of subsidiaries is Davis’ prefabricated temporary building sales and rentals, primarily marketed for use in the construction industry.
Business Cycles and GDP
Economies across the globe experience phases of fluctuation, seesawing (sometimes drastically) through varying degrees of shrinkage and growth, each period being a different, undefined, and unpredictable length of time. This cyclical process is known as the business cycle, a universally applied economic concept.
To be clear before we move on: Organizations do not experience the business cycle; economies experience business cycles. Companies are affected by the business cycle of the surrounding economy. Signature terms for the business cycle include booms and busts, economic growth, recession, depression, and Gross Domestic Product (GDP). An economy’s business cycle is often reflected in areas of trade, production, and overall economic activity, commonly measured by Gross Domestic Product over a specific time frame.
What Is Gross Domestic Product?
Gross domestic product, also measured over a particular period, is the value, in currency, of all completed services and goods produced within a country. Traditionally calculated annually, GDP can also be determined monthly or quarterly. Geographically, GDP applies to sub-territories like states, cities, counties, municipalities, etc. Financially, GDP considers such entities as public and private consumption, investments, private inventories, and variance between imports and exports. The flexibility of GDP makes it an essential gauge for the standard of living and economic health across a litany of demographics.
Organizations do not experience the business cycle; economies experience business cycles.
An infographic about the business cycle.
An infographic about the business cycle.
The Four Phases
The four specific phases of a business cycle include (1) expansion, (2) peak, (3) contraction, and (4) trough.
Expansion: An economy is experiencing expansion when employment increases, unemployment decreases, and there are noticeable increases in prices across most markets.
Peak: Eventually, expansion peaks and production reaches maximum allowable output, at which point inflation becomes apparent (often termed as a “bubble”).
Contraction: Pressures of inflation render peaks unsustainable, as rampantly high prices ravage incomes the market enters a period of correction known as contraction.
Trough: Growth begins to slow down, employment decreases, and price increases become dormant. This period is known as a trough. Eventually, the downward slide of a trough reaches its bottom and awaits the next round of the cycle.
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