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The London Olympic Games Report


On 27th July, 2012, the London Olympic Games will kick off (London & Partners, n.d., pp.1). The event will bring together athletes from all around the world to compete in a total of 26 sport events (London & Partners, n.d., pp.2.) Indeed, the London Olympic Games is attracting a lot of international and local press coverage. This is always the situation with all Olympic events.

The event has its impact on the economy of its host country and vice versa. Hosting the Olympics requires that a country has an economy that is stable as the event is quite costly. In this report, we explore the impact of London economy on the Olympics.


London: The strategic environment

London will be the venue for the 2012 Olympics event. In the United Kingdom statistics reveal that London is the largest metropolitan area (Pricewaterhousecoopers, 2009, pp.21). Similarly, statistics reveal that it is also Europeans Union largest urban zone.

London receives the most international visits than any other place in the planet. The city’s Heathrow airport serves the highest number of international passengers compared to all other airports and thus it is the busiest airport in the world (USA Today, 2011, pp. 8). The city has the most number of universities in Europe which makes it the largest higher education hub on the continent (London.gov.uk, 2008, pp.3).

According to 2010 data, among the municipalities of Europe, London is the most populated with a population of 7,825,200 people. According to the same data, it is the second most populated urban area in Europe. It’s metropolitan area is also the largest in the European Union with a population of 12-14 million people.

London’s economy

17% of the Gross Domestic Product (GDP) of the United Kingdom is generated by London (USA Today, 2011, pp. 2). Economic activities done in the city’s metropolitan area yield 30% of the United Kingdom’s Gross Domestic Product (GDP) (Lecomte, n.d., pp.76). London is associated with financial dealings of great global prominence and as such challenges New York’s position as the world’s most important financial hub.

The city’s most thriving industry is finance whose exports make London a major contributor to United Kingdom’s balance of payments. In 2007, London’s finance industry had employed 325,000 people. In London there are 480 overseas banks that make it the city with the highest number of overseas banks in the world.

London’s service industry currently employs about 85% of the city’s population. The city’s economy was not spared by the 2008/9 global financial crisis and as a result the city estimated that 70,000 finance jobs were lost in a year. Huge financial institutions located in London include the Bank of England (BOE) and London Stock exchange (LSE).

The city is the headquarter of the FTSE 100 and over 100 of the largest company’s Europe. The city also hosts major media companies such as the BBC and the media distribution industry in the city is among the top most competitive industries. The city’s port, which in terms of size is the second-largest in the UK handles approximately 45 million tonnes of cargo annually.

Another of London’s major industries is tourism, which is associated with annual revenue ranging between £7-10bn (London & Partners, n.d., pp.1). The industry has however been on a downturn owing to recent terrorist attacks. Though not a thriving industry like finance, manufacturing and production is a significant employer of London’s workforce.

The industry contributes 11% of the city’s Gross Domestic Product (GDP) and 8% of United Kingdom’s manufacturing output (USA Today, 2011, pp. 2). The workforce concentrated in London’s Metropolitan area is the largest in Europe at 9,000,000 people. Office space in London is quite difficult to come by due to low supply and as a consequence it is very costly.

Actually, in 2002 the city had the highest office occupation costs in the world (USA Today, 2011, pp. 10). Great strides made in London’s telecommunications and transport infrastructure have facilitated the realization of smooth supply chains and healthy competition in the city’s various industries.

As a consequence of the competition, London has some of the lowest costs compared to other cities in the European Union (USA Today, 2011, pp. 10). Utility Costs in London are very friendly.

Economic concepts and their effects

Supply and demand is one of the concepts of economics (Biattie, n.d., pp.3 ). In a market, when demand for a product overwhelms its supply the supplier of the product raises its price so that he or she can make more profits (Biattie, n.d., pp.3 ).

However, when the supply overwhelms demand the supplier lessens the price of the product so that he or she can manage some sales (Biattie, n.d., pp.3). To illustrate how supply and demand will impact London with respect to the 2012 London Olympics we consider some cases.

The games demand for tourist accommodation in London will obviously overwhelm supply, therefore, as discussed above cost of accommodation will most likely go up (London Olympics 2012, 2011, pp.1). This means that the city’s tourism industry will experience a lot of growth owing to increased returns and most likely will contribute more to the city’s and UK’s Gross Domestic product (GDP).

In the period during the games demand for transport services is also expected to go up and as a consequence is its cost. Therefore, the transport sector is another beneficiary of the 2012 Olympic Games. Generally, demand for most things is expected to grow drastically as we approach the Olympic Games and as consequence so are prices.

From an economic point view this will be very benefitting as shown by the examples above. Thus the supply and demand concept is destined to have a very handsome effect on the economy of London, the strategic environment of the 2012 Olympics.

Scarcity is another concept of economics (Biattie, n.d., pp. 1 ). The concept emphasizes that given the dynamics of the world choices have to be made. The concept is applied in scenarios where needs unlike means are unlimited (Biattie, n.d., pp.1).

In such situation a choice has to be made on what need is to be attended to. The market system is what determines the need and the degree of attention to it. To illustrate how scarcity will impact London with respect to the 2012 London Olympics we consider some cases.

As we approach the Olympic Games the demand for public transport is expected to grow. Therefore the London market will be in need of public transport means such as taxis, buses, etc.

By law of scarcity it is more beneficial for a vehicle manufacturer to produce vehicles that can be used for public transport rather than put up luxury vehicles as this will be a step towards meeting the demand which in turn means more sales for the manufacturer. Beer consumption is also expected to rise during the Olympics.

According to the concept of scarcity it will be much more beneficial for a wheat farmer to do business with a brewer than with a baker as the former’s demand for the raw material will be higher meaning good profits for the farmer.

The concept of scarcity will help facilitate the meeting of demand. It thus can have both a positive and negative impact on London’s economy depending on whether the perfect balance is stuck between demand and supply. At the raw material level sales should be expected to rise, however, London is not a producer of raw materials so these benefits may be enjoyed elsewhere.

However, if the balance is met meaning that supply will not overwhelm demand then scarcity is expected to have a direct positive impact on London, the strategic environment of the 2012 Olympics.

Cost and benefit is another concepts of economics (Biattie, n.d., pp.4). This concept emphasizes the fact that an individual will make a choice that he or she thinks will be the most beneficial to him or her (Biattie, n.d., pp.4). Unlike scarcity, there is no clear relationship between demand and supply; cost and benefit. When a person walks to a store to buy a TV set, he or she will settle for the one that is affordable.

The TV set the person buys may not be the one of best quality. Thus, the person makes the choice because it is rational. Considering the case at hand, most people might find it rationale to watch the games on their television sets at home.

Thus, the option of travelling to London to watch the games alive will not be appealing to them. This minimizes the earnings the city will accrue from the event and thus the cost and benefit concept is likely to have a negative impact on the city’s economy.

Opportunity cost is another of the concepts of economics (NetMBA.com, 2010, pp.1). It tests the worth of a decision by exploring whether an alternative to it would have yielded more benefits (Ivestopedia ULC, n.d., pp.1). For instance, when a person chooses to go to school instead of working, the opportunity cost will help determine whether the person made a good decision or not.

Scarcity is what brings about opportunity cost as it necessitates the need for making choice. In economics opportunity cost always exists when there is a choice to be made between multiple options (NetMBA.com, 2010, pp.1). Considering our case, when a tourist considers an opportunity cost involved in travelling to London to watch the Olympic Games he or she can easily think otherwise.

This is because it would be more beneficial for the individual to invest that time and money on an income generating venture. Therefore, using this illustration it can be concluded that the concept of opportunity cost is expected to have a negative impact on London, the strategic environment of the 2012 Olympics.

Competition: for or against?

Competition is an economic phenomenon displayed in the market place (Ivestopedia ULC, n.d., pp.1). It ensures that in a particular business dealing neither the buyer nor the seller has a complete influence on the price of a product (WebFinance, 2011, pp.1). When sellers compete amongst themselves it is that they secure favourable offers from potential buyers (Kasper, n.d., pp.1).

In the same way when buyers compete amongst themselves they secure favourable offers from sellers (Kasper, n.d., pp.1). Competition is characterized by free will, motivation and self interest of the market participants (Kasper, n.d., pp.1). Competition is a process that typically involves sellers bringing down their offers and buyers aimed at weathering the competition.

Competition leads to enlightenment in two ways (Kasper, n.d., pp.2). The first is when a business dealing ends in profit for a seller. The second is when a business dealing ends in a loss for a seller; the seller’s competitors learn from it and know what to lay off or change. Healthy competition in a market is essential in the fulfilment of 3 functions that are vital for the society (Kasper, n.d., pp.14).

The first is discovery; inherently competition is an incentive that drives market participants to search for knowledge (Kasper, n.d., pp.15). The knowledge gained from the search leads to discovery of better and improved products. The second function is selection and peaceful coordination, competition promotes selection which triggers a quest for knowledge (Kasper, n.d., pp.16).

In a market with healthy competition there are no conflicts on price as a participant’s involvement in a business negotiation is out of his free will and self interest, thus competition promotes peaceful coordination.

The third function is the power control, in the market with healthy competition there is no monopoly leading to uncontrollable power (Kasper, n.d., pp.17). In monopolies prices of commodities which can be hiked to the satisfaction of an individual but not the whole society.


A recommendation made in this report is that city of London should embark on a marketing and advertising campaign. Marketing is a management activity aimed at achieving the exchange of products between market participants (MarketingTeacher.com, 2011, pp.1). Advertising is the promotional service paid for by a sponsor that is set towards facilitating more sales on the sponsor’s product (About.com, 2011, pp.3).

Marketing and advertising are critical in reversing the effects that the opportunity cost, cost and benefit economic concepts have on London, the strategic environment of the 2012 Olympics. The two economic concepts have been seen to have a negative impact on London, the strategic environment of the 2012 Olympics.

Through advertising and marketing, people can be successfully persuaded to travel to London and watch the games alive. This is an outcome that will have a positive economic impact on the city. The marketing and advertising campaign should be aimed at convincing people that travelling to the city to watch the games. That is, the campaign should give people a convincing reason to travel to the city for the Olympics in 2012.

Another recommendation by this report is that the city puts together a team of economists who advise on the actions to be taken with respect to the event. When discussing the impact that scarcity has on London it was pointed out that there is a need for the proper balance to be struck so that the concept can have a positive impact on the city. Putting up together a team of economic experts is a huge stride in achieving this balance.

The experts monitor the economy with respect to the Olympics carefully examining demand and supply of different products and when needed making recommendations to the city that maintain the desired balance between the two aspects. In addition to this it is important for the city to know the economic effect that will follow after the conclusion of the games.

A period of high economic growth immediately followed by one of relatively low growth can have damaging effects on the economy. The team of experts is critical in identifying such effects and developing action plans against them. In addition the experts can enlighten the city on how to introduce and maintain healthy competition in the 2012 Olympic Games market.

Cost of production in an entity using the economies of density approach goes down as the population density increases (Encyclo MMXI, n.d., pp.1). Now, during the 2012 Olympic Games London population is expected to swell.

It is therefore a strategic move for the city to tune its production to an economy of density approach so that during the Olympic Games when the population density rises, the costs of production go down. Thus, the economy of the city benefits from the reduced costs of production.


This report is of the conclusion that demand and supply will have a positive impact on London, the strategic environment of the 2012 Olympics. This report also concludes that scarcity will have a positive impact on London if the right balance is realized between supply and demand.

This report concludes that cost and benefit will have a negative impact on London’s economy. This report is of the conclusion that opportunity cost will have a negative impact on the economy of London. Finally, this report concludes that competition if introduced into the 2012 Olympic game market will have positive results on both buyers and sellers.


About.com. (2011). Marketing vs. Advertising: Web.

Biattie, A. . Web.

Encyclo MMXI. Look up: Economies of Density. Web.

Ivestopedia ULC. Economics Basics: Monopolies, Oligopolies and Perfect Competition. Web.

Ivestopedia ULC. . Web.

Kasper, W. . Web.

Lecomte, D. The economic positioning of metropolitan areas in western Europe. Web.

London. (2008). Number of international students in London continues to grow. Web.

London & Partners. London 2012 Olympic games. Web.

London Olympics 2012. (2011). Accommodation. Web.

MarketingTeacher.com. (2011). What is marketing. Web.

NetMBA.com. (2011). . Web.

Pricewaterhousecoopers. (2009). III – Which are the largest city economies in the world and how might this change by 2025? Web.

USA Today. (2011). London-Overview. Web.

WebFinance. (2011). . Web.

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