Many factors of the economy help to indicate certain trends in the tax industry. The Gross Domestic Product has been calculated at an increase of 3. 9% the first quarter of 2004. Consumer spending has also increased . 4% from the last year. Both of these statistics may indicate an upward trend in the nation’s economy. A consumer may have more disposable income therefore, they may be more apt to spend their extra money on a tax preparation service. This would reveal a positive effect for H&R Block. The unemployment rate has increased nationally while the employment rate is decreasing.
This may result in a decrease of the amount of tax returns that H&R Block files annually, due to the amount of taxpayers that have become unemployed. Either these people may have no taxes to file due to their job loss, or they may not have the extra money to pay for a tax preparation service. If a person is out of work then they may have the extra time to file their taxes in their own time. Demographics There are many trends in national population characteristics that indicate both opportunities and threats to H&R Block. The U. S.
Census Bureau predicts that the U. S. will experience a large increase of the Hispanic, Asian, and many other ethnic populations. This will create a large demand for employees that are at least bi-lingual. H&R Block also has an opportunity to open temporary offices in parts of the country that would benefit consumers requiring an employee to speak their native language. The U. S. Census Bureau has also indicated an increase in the percentage of the nation’s population that is college educated. This may pose a threat to the tax preparation industry.
A person that has received at least a 4-year college degree may obtain the knowledge to prepare their own taxes, thus eliminating their demand for a tax preparation service. On the other hand, their college education may indicate an ability to earn a better income, so they would require the services of an organization like H&R Block. With the baby boomers now entering their fifties, birthrates indicate fewer births and more deaths among the population. This would obviously result in less people needing to file taxes, therefore less demand for a tax preparation service.
It is important for an organization to analyze the appropriate economic factors and respond with the correct actions so that they may maintain a competitive advantage within their industry. The age groups with the fastest growing income should help H&R Block to determine what markets and consumers they should be targeting. This is a critical piece of H&R Block’s success. Sociocultural Martha Farnsworth Riche served as Director of the U. S. Census Bureau between 1994 and 1998. As director, she was required to identify and assess important socio-economic trends such as the lengthening of dependency among youth.
She refers to this as the Boomerang Age . This trend may indicate a large threat for organizations like H&R Block. If young adults are depending on the aid of their parents longer, then this means that the family would continue to claim their children as dependants on their tax returns. This would result in a smaller number of tax returns due to families filing on one return. There has also been a large increase in the percentage of divorces among the nation’s population. Due to the fact that these families will not need to file together, the percentage of single households in the U. S. steadily increasing.
This would indicate an increase in the number of taxpayers needing to file a return, therefore resulting in an increase for a tax preparation service. Political-Legal Tax Laws may have both positive and negative effects on the tax preparation industry. If certain state tax laws are more complicated this may require additional training for an employee at H&R Block, so that they are knowledgeable of government regulations. A consumer may yield a high demand for a tax preparation service if tax laws are too complicated to enable a person to file their own returns.
Government programs such as welfare require different tax forms with many itemized deductions for them to be filed with the IRS. Consumers participating in programs like these may require the aid of a tax preparation service to complete these complicated tax forms. Technological The technology of the Internet poses both opportunities and threats to organizations such as H&R Block. Many consumers have experienced the ease and convenience of being able to e-file their taxes. H&R Block has developed several one-time services at a low price that any consumer needing to file their taxes can take advantage of.
An estimated 18. 7 million users e-filed their taxes with H&R Block services last year. This was an increase of 45% from the 2002 – filing year. H&R Block has also developed easy to use software that consumers can purchase to file their taxes year after year. The H&R well known brand name has made this software program the #2 brand used by consumers. With competition increasing among these e-file tax services, there may be other organizations that stake a claim on this high demand product. However, H&R Block continues to dominate the tax preparation industry with the largest amount of tax returns filed last year.