BITE College Unit 2 Business Environment
Understand the Nature of the National Environment in Which the Business Operates
P 2.1 Giving relevant examples, briefly explain how different economic systems such as: command, free enterprise, mixed and transitional systems attempt to allocate resources effectively
There are different economic systems present in the market like command, free enterprise, mixed and transitional system and all of the systems try to allocate resources in their own way. Among the above mentioned systems the most common ones are 3 of them that are free market economy, command economy and mixed economy. They all follow different methods for the allocation of resources and these decisions are driven by many factors which depend on the way these systems work. Let us discuss each of them separately. First is the free market economy. Now as the name it suggests that this is free market economy where there is total freedom for the producers and the buyers to produce whatever they want and buy whatever they want (Holden, 1996). They can deal between them to buy and sell the products and services in the way they want and there is no intervention from any third party.This type of structure enables the problems to be handles automatically by the system and the market is responsible for the allocation or managing resources. In the free market economy the stakeholders have a lot of options to choose from because of the independent market forces. Here the Seller decides what they want to produce depending on the preferences of the customers. Here the customer requirement and preferences are given the top priority. The main motive of the business here is to make maximum profit. Next we have the command economic system where the controlling authorities are responsible for the effective allocation of resources. The controlling authorities here are the government and its related organizations.They are the ones who interfere in the business activities are responsible for deciding things on behalf of the organization. In the command economic system, the decisions are made based on the need basis. The companies have the right to decide what to produce, for whom to produce, how to produce, how much to produce, etc. The allocation of resources in such a system is done by proper planning and strategy. So according to some of the economists, the command economy is better than the free market economy. Next comes the mixed economy which is nothing but a mix of the above mentioned two economies i.e. free economy and command economy. Here the decision like what to produce how much to produce is taken partially by the consumer preferences in that region and partially is decided by the government policies and their intervention. The decision regarding how to produce is taken by the organization but under the government intervention. The customers for whom the products are produces are decided by the consumer purchasing power, their interests, and government policies as well (Spar, 2006).
P2.2 Considering Sainsbury PLC UK, assess the impact of fiscal and monetary policy on their activities
The fiscal and monetary policies affect the business to a great extent and the business activities largely depends on the fiscal and monetary policies. The Sainsbury PLC also is affected to a great extent by the fiscal and monetary policies laid down by the government of UK. These monetary and fiscal policies are set up by the government for controlling the money supply and for the betterment of the society and to control the business activities. The businesses have observed that policies set up by the government like the fiscal policy or the monetary policies play a very crucial role in formulating the fiscal and monetary policies of any country to keep a balance between the expenditure of the government with respect to its earning to meet its objectives. All these objectives of the government are achieved by fixing these policies keeping in mind the objectives that need to be served. The main things which will be governed by these policies which will be affecting the business would be the tax rate that are charged from Sainsbury and the spending which will be done by the government (Scherer, 1990). The policies which are setup by the government mainly falls under these two sections i.e. the fiscal and monetary policies. The fiscal policy can take the form of automatic or discretionary depending on the present conditions and the government preferences. In the UK it’s not considered to be favourable for the company to expand in different geographies. There are many reasons behind this. One of them is that the tax rate is too high. When the tax rate is too high it will become difficulty for Sainsbury to pack to their lenders and investors. This also means that the company would be having less disposable income. This will also mean that the customers will append less and this will in turn give rise to the supply demand issue.
On the other hand, monetary policies also affect the business in the same manner. Mainly the monetary policies are setup in such a way that it controls the money supply in the market. This affects the businesses like Sainsbury as well.
P2.3: Evaluate the impact of competition policy and other regulatory mechanisms on the activities of Sainsbury plc UK.
Apart from the monetary and fiscal policies another policy which is set up by the government and which affects the businesses a lot is the competition policy. Salisbury is a very big name in the UK industry. It is one of the most popular chains of super market in UK and stand in the third place in UK. It has a very strong presence all over the world. It also have a lot of competitors all over the world and this means that they have to carry on activities that they remain competitive in the market and they provide the customers better goofs at better prices (Whitley, 1994). All these are under the competition policies which control the way the organizations providing the goods to the customers and the prices at which they are offering their products to the customers. This is necessary as this will control the businesses and this will stop the business to take the undue advantage at times for the goods that is necessary for the consumers. In the UK, the company had to face the regulation of the competition law which was incorporated by the UK government in the year 1948. This law was passed with the prime motive of creating a healthy and robust competitive market where every competitor has a fair chance to compete with its competitors. This also helps for stopping the big players to take the advantage over the small players and every player in the market gets equal opportunity to flourish. These laws are in favour of customers in giving them multiple options to choose from. This also helps in the fair pricing of the products and services offered by different organizations.
Task 3: Understand the behaviour of organisations in their market environment
P3.1: Explain how market structures determine the pricing and output decisions of Sainsbury plc UK.
The market structure majorly determines the pricing and the output decisions of the Sainsbury PLC. The decision making as to how much to produce and at what price the product should be sold in the market is a very crucial decision to make and there are many factors which comes in into play before deciding this. The decision of price and output can affect the business highly and is responsible for the success of the organization if the organization can correctly determine that what will be demand and how much the customer would be ready to buy (Kollmann, 2002). This decision is highly influenced by the market factors. Market structure is very crucial in making these decisions by Sainsbury. Market structure is basically the way in which these interactions between the seller and the buyer happen. Market structure generally defines the number of players in the market, the price at which they are selling the goods, the kind of competition which prevails in the market, the kind of market structure it is whether it is free market or command market. If the goods and services which are sold in the market is different from each other than the decisions of what to produce and at what price it should be sold lies with the seller but if in the market the products and services offered are similar to each other than the decision on the quantity to be produced and the price at which it should be offered depends on the competitor products that how much the competition is producing and at what price they are offering their product.Order Now