Introduction
The main objective of this paper is to understand business environment in relation to how economic factors and government regulations impact business decisions and activities. It begins by explaining the different processes of allocating and distributing limited resources in various economy systems. Then the paper assesses the impact of fiscal and monetary policy on business organizations and their activities. In this section, the paper develops a discussion of how expansionary and contradictory policies impact on the business environment. Using Orange UK as an example, the paper then develops an evaluation of the impact of competition policy and other regulatory mechanisms on its activities. Lastly, the paper looks at various market structures and how they influence business decision output and pricing.
Part 4: How economy system attempt to allocate resources effectively
An economy system refers to a method of manufacturing, distribution, and consumption of products. In an economic system, various entities, structure, consumers, agencies, institutions, work together to form a structure of economy within a society or community. From the point of view of government, the limited supply of capital, resources, land, and labor influences the production of goods and services. There are three main categories of economic systems. They include: mixed economy, command economy, and market economy. It is the duty of the government in all these three economy systems to ensure that the limited resources are allocated effectively to all the competing stakeholders.
Market economy is based on supply and demand. A lot of decisions regarding distribution, production, consumption, and investment are based on the market mechanisms. A free pricing system determines the prices of products and services. In a market economy, the governments usually play the role of regulating the economy. In most cases, governments in such economies do not allow the market to self regulate or to be controlled by its own forces. However, the degree of intervention is very low such that the markets majorly depend on mechanisms such as supply and demand. Free market economies are however profit oriented making it difficult for production of nonprofit goods. The main concern is who will pay such goods despite the fact that they are an inevitable need for the public. Unlike the market economies, governments in a command economy have full control of the markets. All resources are planned and allocated by the government. The implication of this type of economy system is that there is no freedom to choose the goods to for production and consumption because everything is dictated by the government. In order to meet the challenges experienced by command and market economies, most government opt to adopt the mixed economy system that combines state regulations with freedom of private enterprises. A good example of a mixed economy system is the economy of the UK. In the UK, the government regulates the market at the same time it allows private companies to operate freely. However, the regulations are only aimed at ensuring fairness within the market .
The effective allocation and use of resources in these three economy systems varies with countries. The intervention measures taken by government are usually in the form of regulations, taxation, subsidies, prohibitions, and provision. Governments normally ensure that public goods are not over priced . The goods have to be affordable for all in order to increase social benefits and to maximize consumption. In order to encourage merit goods and to increase their level of consumption, governments always use subsidies and similar incentives. In regards to demerit goods, the amount of tax imposed on them is usually heavy . This is in order to reduce social cost. For instance, a government can increase taxation on demerit goods to cover the cost of education. Education in most countries is a heavily subsidized social amenity so that most people can be able to afford it. However in order to subsidize education at this level, there has to be heavy imposition of tax on demerit goods .
Governments also engage in privatization as a way to raise resource and encourage free market enterprises. Commercial activities in various sectors are no longer controlled by governments to encourage effective management of the resources .
Part 5: An assessment of the impact of fiscal and monetary policy on business organizations and their activities
Governments impact on the economic activities of a nation through the monetary and fiscal policies. Monetary policies entail measures that impact on the supply of money within a nation while government spending and taxation is the basis of fiscal policies. The two have a great impact on business decisions. They influence the manner in which the decisions are made. For instance, the decision to hire more employees or seek for additional funds for business expansion is based on these government policies .
In the UK fiscal has been strengthen and directed towards ensuring public finances remain sound over the medium term. It is based on strict rules. The fiscal policy also supports the UK monetary policy. Businesses in the UK are affected in various ways by the fiscal and monetary policy developed by the government. For instance the fiscal policy defines the nature and amount of taxations that businesses in the UK have to face. If the taxation policy seeks to increase the level of taxation, a lot of business decisions will negatively be impacted. High taxes have the implication of less business money. If the businesses do not have enough money, they would not hire more employees and may be begin cutting down cost in various ways. The businesses may also be forced to pass the taxation increase directly to their customers. However, the opposite case where taxation is low, business decisions can be impacted positively. Basically, low taxation would stimulate investments within a country, both local and foreign investment.
Monetary policies are equally significant in an economy because of the nature of influences they have on the business environment. Most businesses require credit to expand their operations. Access to credit is therefore very important for businesses. Issues such as interest rate determine the accessibility of credit by institutions. The UK government has a monetary policy that seeks to expand the economy. Such an expansionary policy reduces interest rates thereby increasing the ability of businesses to access credit. For instance, the UK is one of the economies that were hard hit by the global economic crisis of 2008. During this time, the interest rates short up, inflation became high, and accessibility of credit was made difficult because of the low cash flow. However, after implementing a fiscal package to save the economy, key economic indicators such as interest rates and inflation were put under control.
On the contrary, if a government has monetary and fiscal policies not aimed at economic expansion and supporting private enterprises, the effect is a reduced supply of money which eventually leads to the inability of companies to access credit or borrow loans from banks. Such monetary policies are called contradictory monetary policies. Therefore the way in which monetary and fiscal policies influence the business environment depends on certain critical factors including whether the policy is contradictory or expansionary or the magnitude of the action . Expansionary monetary policies are associated with increased supply of money in the market, high government spending, and low taxation. But contradictory monetary policies are associated with reduced supply of money in the market, reduced government spending, and high taxes . Each scenario has its own circumstance where it is best applicable. For the UK government, it is currently having expansionary monetary policies .
Part 6: an evaluation of the impact of competition policy and other regulatory mechanisms on the activities of a selected organization
Regulatory mechanism and competition policies have been linked to business performance in economies . Basically competition policies and regulatory mechanism are aimed at encouraging a certain degree of free market within an economy . For the market economies, there are very few restrictive regulatory mechanism and competition policies because the governments in these economies do very little to interfere with the activities of private enterprises .
Even though the UK is an open economy that encourages development of private enterprises, government regulations have had varying impacts on companies within the telecommunication industry. The telecommunication industry in the UK was once fully controlled by the government however from the early eighties the government began privatizing the industry. Most companies have emerged to build reputation under various sections of the telecommunication industry. One of the biggest companies within the industry in the UK is Orange. The company provides mobile communication and data solutions to consumers.
The competition policies in the UK fail to offer any major protection to smaller firms. The large and well established firms enjoy the benefits of controlling the market as long their activities are not in violation of any legal requirement. The policies and regulation mechanisms further encourages foreign firms to venture into the local market and begin competing with local based companies. Because of the intensity of existing competition, some of the local firms forced into mergers and acquisition in order to increase their existence or raise their market share. For Orange UK, the regulations mechanisms and competition policies have allowed the company to merge with T-Mobile and form a powerful force that occupies a significant large share of the UK market. Such a move may have various positive and negative implications. Despite having a large control of the market, the situation put off other players within the industry especially the small and emerging companies. At the same time, such a move may slow down important aspects of the telecommunication industry in the UK. For instance, the mobile industry is strongly associated with innovation and research and development. If a few companies are in control of the market, it is hard for other players to use innovation as a competitive advantage to edge out rival companies.
Earlier hypothetical discussion has focused on excessive marketing and advertisement impact on consumer behavior and following above, existing part has design to discuss on necessary solutions to resolve market crisis. Considering organizational structure or business types, aggregate sales, marketing and advertising procedures, it required vast technical arrangements as well as unavoidable change in consumer’s demand and hence, articulation of right solution would brought greater win rates in the competitive market in terms of high revenue generation along with low cost structure attributes; therefore, ultimate operational efficiency would also develop.
For instance, availability of shared drives separated from organization’s website for advertising, marketing and sales, effective solution for official document management featuring integration availability with related group technologies, system available to web content management in order to concern marketing and sales requirements of the organization, system available to collateral management through. It may reduce hostile consumer behavior towards excessive marketing and their attitude would neutralized by specialized storing method, organizing, distribution of goods as well as tracking materials and at last, available hybrid or collaborative solutions to convey Web based marketing collaborative opportunities that would effectively compose bridge among employees and valuable consumers through coordinate, communication and collaboration.
The electronic and manufacturing sector have treated as a major job resources in the past but in the concurrent era BPO, ITES PDH and techno-professional human resources are the top contributor of job sectors in the UK while there are elevated focus of R&D centers in this area. In the Scrutinizing, the UK labor market, it has evidenced that wage rate in other regions is at the top indicator while wage rate in UK scored at the lowest level, more specifically the wage rate in UK has assessed fifteen percent lesser in relation to the national average.
The UK has been moving in the direction of a high-income level economy emphasizing on advanced value-added attributes, knowledge predestined economic actions, but failed to encounter the high turnover rates of the staffs while recruiting, and retaining skilled and talented human resources is a greater challenge for the companies. UK staffs always look for better job, switch to the multinationals or any other company without any obligation to their employer while the migrated foreign staffs demonstrate lower productivity, and hamper the usual growth of the business.
The development and growth of the UK has deeply concerned upon its rich supply of well-educated and trainable workforce to create a centre of attention of the investors towards the export-oriented electronics manufacturing for last four decades, by this time the skills of workforce has already gained enrichment of human resources. With the changing dynamics of UK’s integration in the AFTA and WTO, today UK faced serious challenges of both reducing productivity and scarcity of skilled human resources.
Part 7: Explanation of how market structures determine the pricing and output decision of business
A product or a service fails to perform well in situations where there is no market. The main structure of a market that influences pricing is supply and demand. Prices normally drop when the supply is high. However, they would go up when the demand is high . Any product or service has to have a market in order for it to flourish. Business managers and economists use the principle of supply and demand to determine the pricing and output decision of companies . However, the type of market structure also plays a role in determining the pricing and output decision . The importance and implication of market structures applies to both short run and long run decision. These decisions can either be focusing on market entry or changing business capacity . For instance a business that intends to expand its frontiers or enter a new market will have to make consideration of the market structure and the principle of supply and demand. Essentially, businesses have to be designed in a manner that suits its operating market environment . For instance, a business that operates in a market where it is the sole supplier of a product which it has patented will have different decisions output and pricing compared to a similar business operating in tight and competitive market .
A market structure basically refers to the characteristics of a market. This ranges from organizational to competitive characteristics because these are the main features that can best describe a market. There are four main types of market structure which have been classified by economic scholars . They include: oligopoly, monopolistic competition, monopoly, and perfect competition. In oligopoly, a small number of well established firms dominate a large share of the market; in monopolistic competition, there are numerous firms in a market each enjoying a small share of it ; in monopoly, a market is dominated by a single firm or company, perfect competition is characterized by a perfect demand curve, market structures that have no restriction to entry, and unrestricted number of consumers and producers.
Market structure influences decision regarding pricing. Most of studies conducted to develop an understanding of market structure have focused on the pricing strategies and the nature of competition within each structure. Pricing is influenced depending on the structure of the market. For instance, if a market is highly competitive, the industries will dictate and set the prices . The main reason why market structures influence pricing is because the nature of supply and demand is different in the various market structures. Additionally, the market structure may influence pricing because of the fact that it determines the ease of entry into a market . A competitive market structure experiences a high supply of goods and services since there are several companies trying to survive in the overcrowded market . According to the principle of supply and demand, when the supply is high, prices of commodities are most likely to drop. Therefore, in a competitive market structure, businesses are forced to reduce the prices of their goods and services.
Conclusion
The paper has assessed the business environment in relation to mechanism of various markets and government intervention measures. Running a business may be a real challenge because of the dynamics of the market. It is the duty of managers to evaluate the business environment in which they operate and ensure it is always favorable for their businesses.
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