Impact Of Policies Of The European Union on UK Business

1902 words (8 pages) essay in Economics

14/06/16 Economics Reference this

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There are economic systems with different ideologies, for example socialism endorses government owned and regulated industry. Capitalism endorses free market competition. The allocation of resources in socialism is done by the government on the basis of their judgement of the requirements. Since in a socialist economy, only the state owns any and all industries and production and there is no private property, hence the state may allocate resources as it thinks best. Capitalism, allocates resources on the basis of the demand and supply requirements in the market, which have been created due to interaction of market forces unrestricted by government control. Here government has limited or no control over the market and allows for private property and hence the allocation of resources is a natural response or result of the market conditions.

Assess the impact of fiscal and monetary policy on business organisations and their activities (Explain the governmental policies (e.g. monetary, fiscal, social,) explain how the taxation level, interest rate, value of the pound and euro will positively or negatively affect business organization)

The policies created by the government impact businesses as they directly influence their operations. Monetary policies impact money supply and thereby affect interest rates, cash reserve ratio (CRR) requirements of banks and perform the role of being a regulator for inflation. Fiscal policies refer to the collection of revenue and spending by the government. These influence the tax rates that exist throughout the economy. Governments can use this as a tool to stimulate or conversely rear in the demand and spending in an economy. Both of these types of policies have a deep impact on the functioning of businesses. An increase in the rate of taxes means that organizations will have to pay the government more than before, thereby reducing their profits. Decreasing CRR means that banks will be able to lend more money to businesses by which they would be able to make better business development.

Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organization. (Choose any national or international organization and discuss how it is constrained by competition policies e.g. regarding monopolies and by regulations (good examples might be UK supermarket chains or airport operators).

Competition policies aim to keep the market fair and open to all by ensuring that unfair activities are undertaken by dominant participants of the market. A good example of companies being affected by such policies is super market chains. By tying-up or co-operating or merging operations or buy-outs with other businesses, powerful supermarket franchises can create a market situation where they practically have a monopoly over the market. Competition policies of the European Union don’t allow for manipulative exploitation of the rules and regulations that govern the market. For example mergers between supermarket franchises like Wal-Mart and Musgrave Group, while legal and even beneficial for the enterprises, must benefit the market and the customers in order to be approved by governing bodies. Similarly co-operation between two supermarket franchises must not harm the market competition in order to be allowed to be legal.

Explain how market structures determine the pricing and output decisions of businesses (Describe different market structures (perfect competition, monopoly, monopolistic competition, etc.) and describe how they affect pricing, distribution, product and service offering (good example is where there is a substantial competition, many suppliers and range of products and services for customers to choose from, another example is where there are few providers, little competition but high demand)

There are different types of market structures such as perfect competition, monopoly, monopolistic competition, oligopoly etc. In perfect competition there is an infinite number of consumers and suppliers. In monopoly there is only one supplier. In monopolistic competition, the market is dominated by one suppliers although other suppliers are present. The amount of competition in the market determines the cost of goods. In a monopoly, whatever is the price set by the supplier is the established price. In perfect competition, the market price is determined by the average market standard price. In monopolistic competition, the price is set by the dominant supplier, while the competitors price their product near or slightly lower than that of the domain supplier.

Illustrate the way in which market forces shape organizational responses using a range of examples (Discuss the market forces like, demand and supply, pricing decisions, customer expectations, market conditions, competition etc. and explain how the organizations need to respond to or react to those market factors ( for examples: supermarkets offering many more old brands, or low cost products )

The marketing decisions that organizations make are based upon a number of forces. The company has to meet the standards that are enforced by the government and the quality standards that are expected of the product by the customers. Since most markets are perfect competition, the price is determined by the price that has been previously negotiated as the accepted norm in the market by the forces of demand and supply. The quality of the product in relation to its competitors, its price and its market visibility, all go into determining its success. Developments in the market have subsequent impact on the dynamics by which the market functions. The situation of a large supplier going defunct would leave a lot of space for other suppliers to capture the freed-up share of the market. For this they would need to sell the most quality and cost efficient product in the market according to their respective market target segments.

Judge how the business and cultural environments shape the behaviour of a selected organization. (Select any national or international business organization and describe how it changes its behavior with changes in the external environment for example in conditions of recession, demographic change, etc. you can also consider if the organization changes over and see how it would respond to cultural differences)

When McDonalds first entered the Indian market, it couldn’t run its businesses owing to the fact that beef was illegal in the country. The company had to shut down for a number of years while the court decided upon the case. The decision came in favour of the people and McDonalds had to resort to using only chicken products. The company also couldn’t employ people because of the religious factors. This decision applied on KFC and Subway as well, when they entered the Indian market. The main argument against the use of beef and pork were religious. In the dominant Indian religions, these meats were prohibited. So companies had to change their product to be able to survive and prosper in the booming Indian fast food industry.

Discuss the significance of International Trade to UK business organisations (Describe the importance of International Trade and reasons of going international

International Trade is essential for every country in the world today. The export and import of products satisfies the demand in the domestic market while also generating revenue. The import of products also satisfies the demand for valuable materials required in the production of products. The demand can also be by the customer. Developing markets demand better services at greater cost efficiency and international organizations have a huge potential for market capture as native businesses are likely to be smaller in size. Companies from the UK that go international, are able to reach a much bigger market that they would’ve done domestically. Naturally, this leads to greater stability, survivability and profits, which are the goals of every business enterprise. Exposure to international competition also encourages business to be more aggressive in the operations. Survival in a global economy rests upon an organizations’ ability to change according to market changes and international exposure leads by default to business expansion.

8. Analyse the impact of global factors on UK business organizations (Research and discuss the negative and positive impact of global factors (PESTEL) on UK business organizations. You could look on the negative effect on the euro problems, consider factors such as shortage of raw materials, metal, food, etc. or growing demand from developing countries for products and services).

In the world we live in today, there are no economies that are independent. All economies are part of the global economy and the changes therein affect all parts. Commodities that are essential to basic necessities or the running of vital businesses are the ones which have the most immediate and significant impact upon domestic markets. A prime example of the interconnectivity between economies is the financial crisis of 2008. Other factors like shortage in import of raw materials affect the production efficiency of domestic businesses that rely on these imports for the creation of commodities. Other essential items like food or metals, also have a significant impact. Due to international exposure the demand in the market diversifies and intensifies. So if subsequently the import is unable to fulfil that demand then the market becomes volatile. Therefore, while international trade may lead to expansion of businesses and market it can equally disrupt these as well.

9. Evaluate the impact of policies of the European Union on UK business organizations (Discuss the developments of European Union and European Monetary Union;

The European Union is the single largest market in the world and this means that all members of EU can freely conduct business and trade practices throughout other member states. Naturally, the scope for business activities for UK businesses has increased significantly by IKs membership in the UK. Benefits like reduced or abolished selling tax and freedom from other restrictive fiscal measures and policies means that the businesses can enjoy higher profits and operate more freely without having to deal with frequent government intervention. Another important aspect of EU membership is that while companies from other areas of the world are still bound by the regulations and policies of respective European nations, businesses belong to UK and other member states are not. Thus they have a decidedly higher profit margin and success rate within the EU. EU policies have also ushered a liberalization of policies and hence many products which were prohibited from being traded can now be freely traded across different EU nations.

10. Describe at least two EU policies (working conditions, welfare, and freedom of labour movement) and look on the positive and / or negative effects these might have on UK businesses.

The EU’s competition policy ensures that the market competition remains free and that companies work to provide the best products to customers at the best prices. This ensures that no company is able to create a market situation wherein it profits at the expense of other companies. Thus, the chances of surviving and doing well, particularly for small scale or emerging companies, is enhanced. The policy for violation being rather stiff, this rule is followed to the letter and monitored zealously by concerned agencies. On the flipside, these policies can be somewhat restrictive for large businesses which can potentially reduce or inhibit expansion. EU’s trade policies with other parts of the world are binding on all members and while this gives certain advantages in bargaining to EU member states it can also be a problem as this restricted individual members from freely stating their preferences and forming agreements accordingly.

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