Business Environment - Coursework Example

Business Environment Often, people say the purpose of an economic activity is to produce goods and services that can satisfy human wants. The basic problem of an economy is about scarcity and choice as there is limited number of resources disposable in producing the unlimited quantity of goods and services that are desirable and meets the human’s ever-growing demand for an improved standard of living or lifestyle. An economic system, best described as an organizational network that a society uses to resolve the basic problem in determining for who, what, and whom to produce (Kurtz and Boone, 2008:14). In this section, this paper will discuss at least economic systems and their effect on allocation of scarce resources. Economic systems There are several types of economic systems but this paper will only concentrate on theses three namely, planned economy, participatory economy, and barter economy. In planned economy such as state socialism where the economy behaves like a hands on economy in which people follow the state laws of economy. In participatory economy, people guide the production and distribution of goods through participating in the system. While in barter trade, traders exchange goods for other goods directly. These three economic systems attempt to allocate resources effectively by helping in making decisions regarding how, what, and for whom to produce (Gitman and McDaniel, 2008:101). For instance, in planned economic system, the state owns the scarce resources whereby it allocates them to the public by setting up production targets and rate of growth according to how it views the public’s wants. In this system, the overall income and distribution of wealth falls in the hands of the state authorities. As such, the amount of resources an individual can access depends on his income and the resource depends on the value of market. Barter economic system entails of exchanging goods for other goods. In this case, these economic systems allocate resources effectively and accordingly depending on need and availability. Factors of production Factors of production contribute to scarcity of production in that, the more people produce, the more they are utilizing the available resources. Scarcity takes place following the inadequate availability of resources in spite of the fact that people require resources to produce. Factors of production include the natural resources such as land, water, air, and minerals among others. There is labor, which entails about the human effort used during production of goods whereby it involves marketing expertise and technical skills. There is also capital stock whereby these are human made goods or means of production in which people use them to produce other goods (Kurtz and Boone, 2009:52). With this sense, factors of production such as land contribute towards scarcity of resources since it is a natural resource and humans cannot control that by structuring another land upon using the first one. It is available, but has no alteration or effort on the part of humans. Out of the three economic systems listed above, I think the most appropriate one is the planned system of economy. This is because, planned system of economy bases on the process of accumulating capital. Simultaneously, it also seeks to direct or control the process of accumulating capital via corporative ownership or state ownership. By so doing, this economic system ensures stability and encourages equality among different people as well as expanding the power of decision-making (Kurtz and Boone, 2009:69). In addition, with planned system of an economy, the public, the state, and corporative all carry out production with view of attaining maximum profits. In this system, the market players are responsible for making decisions concerning investment and as such, they are able to assess which means of production are competent in the market. As a result, this system of economy is appropriate since it coordinates production directly to satisfy the economic demands as well as human wants. Fiscal policy and monetary policy Econometrics define fiscal policy as the ways by which the government resolves to adjust its levels of expenditure when finding means of influencing and monitoring the economy of its country. This strategic policy is sister to monetary policy where the central bank of a nation initiates measures aimed at influencing the supply of money within the nation’s economy (Gomes, 2009:2). The government and the central bank take these policies in an effort to realize the country’s goals. Fiscal policy has effect on rates of tax imposed by the government, government spending, and the rates of interests charged by financial institutions in a country. In monetary policy, the central bank, the regulatory committee, and the currency board initiates actions that determine the growth, size, and rate of growth of money supply in the economy. Upon, taking such actions, the central bank, in turn, affects the rates of interest by either increasing or decreasing hence influence the amount of money circulation in the market. This has effects seen in case of inflation, deflation, fiscal deficit, interest rates among other factors. Impacts of fiscal and monetary policies in the UK businesses The fiscal policy has relevant effects on the public sector employment in the UK businesses. The wages given in the public sector play an important role in achieving the efficient allocation of resources within the UK businesses. Presence of high wages given in the UK businesses entices the too many unemployed people to queue for public sector employment opportunities. However, during the great depression, the wages were low and the government faced many recruitment problems that led to demonstrations in different parts of the country. Cognitively, the UK businesses can still feel the effects up to date (Gomes, 2009:4). The current deviations brought about by the fiscal policy are creating deviations from the optimal policy hence increasing the volatility of unemployment significance. The introduction of wage shocks initiated by the UK government led to increase in rate of unemployment in the public sector, crowded out employment, and raised wages in the private sector. Monetary policy The UK businesses express objectives of monetary policy in terms of macroeconomic variables that include real output and inflation. However, it is worth noting that, actions of monetary policy portray a number of effects to these variables indirectly. Financial analysts put across that; financial markets depict a scenario that shows they react with immediate effect upon new financial market information (Gregarious, 2008:3). With this sense, it is analytical that, monetary policy makes use of financial data that can help businesses in the UK to understand and identify a more direct and immediate effect of changes in monetary policies and improve businesses’ knowledge of the transmission mechanism since the prices of assets play a vital role in a number of business channels. Among prices of assets, businesses are able to monitor closely and typically stock prices commonly regarded as being highly sensitive to economic news within the UK businesses. Memo to the CEO of Bacardi and Martini UK Company name: Bacardi and Martini UK Company address: P. o Box 5909, London Date: April 10, 2012. To: Chief Executive Officer Bacardi and Martini UK From: Manager, MARTINI Vermouth, and Sparkling Wines Retailers Subject: How this Company should responding to changing monetary and fiscal policy. Following the recent evidence of monetary and fiscal policy shocks and stock market variables initiated by the UK government, this company should exert impacts of stock market that helps in getting better understanding of the prevailing effects of monetary and fiscal policies (Gregarious, 2008:5). In order to solve any problem that may come along with monetary and fiscal policies, the company should resolve the issue of identification and study a system of equation where the variables of these policies behave simultaneously and endogenously and in the end assume the role of implementing the available company data. Therefore, implementing the studied equations can enable the firm to identify the variations of monetary and fiscal policies, which in turn can endorse ways of dealing with both internal and external pressures. In order to respond effectively to changing monetary and fiscal policies, Bacardi Company should keep up to the minute of emerging money related policies released by the Bank of England, as this would enable the company understand the market trends in the country. Evaluation of the success of monetary and fiscal polices in controlling businesses within the UK According to the results obtained from the most recent studies, monetary policy seems to exert a neutral effect on the UK businesses’ stocks. Actions taken by the Bank of England that aimed at influencing and controlling the quantity of money circulating in the UK economy, controlled the an unexpected increase in the market interest rate that depressed equity prices. This effect led to statistic significant that resulted to higher rewards of the market through attracting capital from different businesses within the UK and the outside economy, hence appreciating the currency. The success of these policies suggested a traditional approach, which is due to the stronger assumption on the prices of assets and shocks the UK businesses requires (Corallo, 2006:20). This success of fiscal and monetary policies led to innovative and useful techniques capable of capturing reliable estimates of the relationship between the prices of assets and monetary shocks within the UK businesses. Evaluation of the impacts of competition policy The policy of competition covers the various means by which the competition authorities of national governments resolves to ensure markets perform better and achieve higher levels of economic welfare and economic efficiency. In businesses within the UK, competition policy aims at promoting competition between businesses at different margins, which enables them to markets work well and contribute towards increased competitiveness and efficiency of the UK economy within the European Union single market (Ellis and Singh, 2010:71). In addition, competition policy in the UK businesses looks forward to widen the choice of consumers in markets for goods and services and facilitate technological innovation, which in turn promotes gains in dynamic efficiency. Due to competition policy, businesses in the UK are able to draft effective price competition between suppliers. Regulatory mechanisms Regulatory mechanisms help in controlling and keeping the internal environment of an organization relatively stable and maintained at narrow limits in spite of external changes affecting the organization. Bacardi and Martini UK uses feedback as a form of regulatory mechanism to check on responses of customers, suppliers, stakeholders and the likes. Upon applying feedback in responding to external changes, the Company is able to respond to claims, accusations, and comments regarding means of improving its operations (Tagkalakis, 2004: 6). Presence of a network that provides basis of articulating to both external and internal feedbacks, this organization creates a panel where it can detect negative variables and take actions to respond directly and tacitly. Another regulatory mechanism this company incorporates in its daily activities is consumer demand. The success of this company base on the fact that, consumers want a particular type of wine whereby, they want it new, safe, and above all, cheap. Consumer demand as a mechanism of regulating businesses in the UK entails that, companies with the ability to provide the best services and goods succeed. On the other end, those businesses that create unsafe and expensive products run out of business mainly due to lack of customers (Tagkalakis 2004: 10). As such, this company strives to provide the best types of wines at the cheapest prices which makes create a stable business environment for itself. Furthermore, this company initiates entrepreneurial promotion by engaging actively in action training, which helps the business mediate between its activities through intensive training of its staff. In conclusion, economic thinkers make considerable influences of changing for resources and demand on productivity of businesses within UK. These changes study the relationship between production of goods and services and the availability of resources. With that knowledge, businesses within the UK are primarily in a position to for who, what, and how to produce the preferred goods or services. This ensures there are minimal effects wrong choices, which in turn influences the distribution of products. Indeed, the degree in which the government regulates the supply of quantity of money in the market through fiscal and monetary policies determines the performance of businesses within the UK. The dataset covered in this paper explains how economic resources affect allocation of resources effectively, influences of both fiscal and monetary policies, and evaluates the impact of competition policy. Moreover, the paper engages an organization within UK that facilitates the understanding of how all these factor affect businesses within the United Kingdom. Bibliography Corallo, E. The effect of monetary policy on asset prices: evidence form Germany and UK, 2006. Ellis, K and Singh, R., 2010. Assessing the economic impact of competition. [Available http://www.odi.org.uk/resources/docs/6056.pdf accessed on April 10, 2012]. Gitman, L. and McDaniel, C., 2008. The Future of Business: The Essentials. Ohio: Cengage Learning. Gomes, P. Fiscal policy and the labor market: the effects of public sector employment and wages, 2009. Gregarious, A. Monetary policy shocks and stock returns: Evidence from the British Market. [ Available http://www.scottishhistorysociety.org/media/media_22185_en.pdf accessed on April 10, 2012]. Kurtz, D and Boone, L., 2008. Contemporary Business. Ohio: Cengage Learning. Kurtz, D and Boone, L., 2009. Contemporary Business 2010 Update. New Jersey: John Wiley & Sons. Tagkalakis, A. The effects of macroeconomic policy shocks on the UK labor market, 2004. Read More