Introduction
The day-to-day economic world is driven by different policies as adopted by different countries based on different schools of thought. The paper investigates the organisational purposes of a business, the nature of national environment in which the business operates, the behaviour of organisations in their market environment, and the significance of global factors that shape the national business environment.
Worth noting is that the prevailing political leadership that subscribes to certain ideologies usually informs an individual country’s choice of an economic system, which in turn dictates the economic system to be used. An example of an economic system is capitalism.
How Economic Systems Allocate Resources Effectively
Capitalism can be described as the free market economy, which advocates for the determination of market prices through supply and demand of goods and services. Under capitalism, the state allows businesses to buy and sell their goods and services without the state interfering in the pricing of the same.
Under the capitalism system, the production of goods and services is largely privately owned. The role of the state is to provide an economic environment that will ensure the citizens of the state are protected within the economic system (Cohen 15). In fact, although capitalism is free from state interference, it still has to work under certain laws as provided by the state to guide it. This therefore gives the present day capitalism the definition of a mixed economy because it is not perfectly capitalist.
An example of a planned economic system is socialism. Under this economic system, the central government or any agency of the central government determines the production of goods and services. Cohen states that under this system, the government centrally plans and controls the economy together with the flow of goods and services in the market (12). The government determines and enforces the prices of goods and services. The slight advantage that the system has is in the almost equal distribution of wealth and income.
Impacts of the Fiscal and Monetary Policy on Business Organisations
The fiscal policy is the official government outline that spells the steps that it will take in its effort to manipulate the budget deficit or surplus as a way of achieving its economic goals. The fiscal policy is usually a budget statement outlining tax measures taken by the government, the borrowing, and lending that the government will do as it works towards meeting its budgetary obligations (Langdana 6).
The fiscal policy affects the prices of goods and services by either increasing their taxation or reducing it, therefore making the cost of goods go up or come down. The government uses the fiscal policy as a tool for controlling inflation. According to Langdana, the fiscal policy employs two instruments when working; these include automatic stabilisers and the discretionary fiscal policy (6). The fiscal policy in its working will lead to cheap production of goods, or it may lead to expensive production of goods, thus affecting the pricing of the same.
It is the attempt by the government through the central bank to manipulate and control the amount of money in circulation so that only the right quantity of money is in circulation. The monetary policy has a direct effect on the supply of credit to market, the interest rates, and other variables determined by money. The monetary policy is usually controlled through taxes being levied on goods and by manipulating the overnight lending rates between banks (Langdana 8).
This will make the value of the currency either appreciate or depreciate and in so doing affect its exchange rate on the international market. A weak currency allows the country to export its goods cheaply as pegged to the dollar while a strong currency makes the country’s goods expensive on the international market. This therefore has an effect on the country’s foreign reserves.
The Impact of Competition Policy and other regulatory mechanisms on the activities of a selected organisation
The world of business is full of competition from different businesses that sell similar goods but to the same clientele base. This therefore leads to the adoption of survival tactics by rival businesses as a way of surviving in the business and/or to make a profit from the same. Left on their own, business organisations such as McDonald’s will resort to unethical moves that will see them push their competitors out of the market. Thus, the government has to step in and play the role of the regulator so that any form of competition is fair to all players (Cohen 23). The government employs different measures to control competition. It makes legislation or simply passing policies as provided for by the law. Competition regulatory policies and other mechanisms usually have an impact on individual businesses because they either enable the business to thrive or inhibit the business in its growth. Competition policy will protect the country’s manufacturers from imports, which might be cheaper on the consumer than the locally manufactured goods (Strange 14). Therefore, a government will enact a protectionist policy that will control the amount of imports that compete against the local goods. On the local scene, the government will enact competition policies to ensure that there is an even playing field for all players. The competition policy can take away advantages that an organisation previously had when it is forced to conform to the new regulations and policies. Other regulatory mechanisms such as licenses will require a business to conform to certain standards for it to operate as per the government’s demands. These become inhibitions because they come at a certain cost to the business.
Strategies and Appropriate Solutions
In its attempt to provide a solution, the government should work towards empowering the citizens in areas that they can be empowered while at the same time propping up the economy where it can be propped up. The United Arab Emirates has a unique system of economic governance that allows the different emirates to share resources effectively.
The United Arab Emirates practices the free economy system where individuals are allowed to own property and businesses. The ownership of property is not restricted to land locals alone but also to foreigners who are encouraged to invest in the Emirates.
The government has created an enabling environment that allows businesses to thrive by creating tax-free economic zones that allow free trading (Cohen 34). Any government can apply this strategy depending on its needs and abilities. In the case of the United Arab Emirates, the government finances 80% of the expenditure using money from the oil sector.
Many goods in the market are usually imported, with the government subsidising the goods so that they can be affordable to the masses. Measures such as providing subsidies enable the nation’s population and the business community to afford goods, thus boosting the economy. A good fiscal policy by the government will ensure that employment opportunities are created and that citizens are able to pay taxes from employment.
This will enable the government to fund other programs such as infrastructure through monies collected as tax (Langdana 23). On the other hand, businesses should exploit the incentives provided by the government because the incentives are meant to enable them maximise on the profits they are expected to get. The businesses should also seek favours from the government by pushing for changes in areas that they feel will benefit them.
Market Structures, Pricing, and Output Decisions
The market structure in a free market is usually determined by the demand and supply of goods, which in turn determine the price of goods. The availability and non-availability of goods in the market are some of the strongest determinants of prices for goods because they will either create scarcity of goods, a perfect balance between the supply of goods and services, or oversupply of goods and services (Cohen 3). Different structures such as monopoly come into play depending on the positioning of players in the market.
A monopolistic market has only one supplier of goods and services without any form of competition. The supplier therefore sets the price of goods. It will be up to consumers to decide whether they will buy or not. In case the commodities are essential, the supplier will set a very high price than the supposed market price.
However, consumers will pay for the goods and services (Cohen 3). In addition, oligopoly a type of market whereby there are few specific suppliers of goods and services who come together to form an association that makes them agree to set prices for their specific goods.
They therefore end up controlling the market as well as prices of goods they sell. An example of this is the oil industry through OPEC. Moreover, in a perfect competition, there are many suppliers of goods and services fighting out for a specific clientele base. Under this situation, the customer decides where to buy their goods and services because the goods retail at the same price. Therefore, no specific supplier has an advantage over the other in the market.
How Market Forces Shape Organisational Responses
The dynamic nature of the market dictates business organisations to take the necessary measures and steps to ensure that the business survives changes in the market. A static business will fail to survive because unresponsiveness to market changes leads it into a disadvantaged position that can easily take away its profits, which are its reason to trade.
When there is an oversupply of goods and services, competition among players in the field for clients intensifies, thus leading to a drop in price of the goods. Customers will have many buying options. They will thus go for the person selling at the lowest prices. At the same time, the business selling at the lowest prices will see their stock turnover rise.
When the demand for a specific good is high and the supply of the same good is lower than the demand, the business will take advantage to sell its goods and services at a higher price because consumers will still pay for the price as demanded by the seller. Alternatively, sellers of goods and services will find out suppliers offering the best prices for specific goods and services to source the goods at a lower price so that they can also offer the goods at a much lower price relative to their competitors (Cohen 4).
There are instances when stores find themselves with old stock that is not moving very fast at the current prices. The store will lower the prices of the goods as a way of making them move fast either before they expire or as a way of creating space for newer products in the market. At this instance, the prices the goods will be much lower as a way of cutting on loses.
How Business and Cultural Environments affect Organisational Behaviour
Businesses change with the change in the environment in which they operate in order for them to remain relevant. The business environment is made up of several factors such as the law, demographics, and the supply of goods and services to the market. According to Cohen, a good business should be able to change with the change in the environment by being up to date with the trends of the moment as a way of remaining relevant and competitive (13).
Good examples of businesses that have changed with the trend are music distributing companies such as Sony and the Apple Companies. When online music became the new thing in the market, Sony saw the trend and opened online stores from where people could buy and download music because many people were moving away from buying music in hardcopies to buying music online.
The trends in business are set by the prevailing cultural conditions, which dictate what sells fast in the market. On the other hand, cultural factors shape up a business because people’s culture is informed by their belief systems, which the business has to understand and/or for it to fit in the given community.
Methods for Different Market Types
Different markets for goods take shape in different ways depending on the prevailing factors that drive the market (Langdana 36). Players in a given market also influence the direction the market takes together with how business is to be driven in that area.
For instance, for a short time, countries such as the United Arab Emirates have become major players in the airlines industry because of the capital advantage they have. Within a short time, they have been able to build some of the major airlines such as the Emirates and the Etihad airways from Qatar. This move is happening in the backdrop of a very competitive industry that is seeing many airlines close their shops.
The major Arab airlines are simply enjoying capital from their oil industry together with the cheap oil from their own governments. The availability of this resource is enabling them to compete profitably. As they are referred to, the petrodollar airlines are never affected by the price of fuel, which has become the most dominant determinant in the airlines industry. Therefore, to survive in the airline industry, governments have stepped in by providing subsidies.
Critical Reflection
To achieve realistic improvements in the economy of a country such as the United Arab Emirates, the government needs to get its priorities right so that its economic advances and plans remain relevant to the population of the country.
The United Arab Emirates as a country has a large population in the middle class, with the ruling elite making the upper class who are affluently rich. The government needs to invest more in its population in terms of labour so that the population does not depend on the government’s support forever because this can last only as far as oil is available and/or as far as the oil is still on demand.
The propping up of their airlines to be world class can only be described as being done for pride rather than for business purposes because the amount of money being pumped in for subsidies can be put to other uses such as making the country more of a producing nation as opposed to an importing nation.
Significance of International Trade to UK Business Organisation
International trade has different effects on the UK’s business organisations depending on what platform one wants to look at it. There are two platforms, with one being for imports while the other one is for exports. On the platform of exports, the international trade is good for the UK’s business organisations because they offer an external market for goods outside their country.
Any business organisation will want to export the surplus of its goods so that the goods on the local market remain competitive. Therefore, international trade opens doors for goods from the UK to the global market, thus boosting the country’s balance of trade.
On the other hand, international trade opens up the UK’s market to goods from other countries into the UK market, thus creating a lot of competition for the local goods from local manufacturers. This move has a domino effect on the business organisations as well as the economy in general because, as long as importers work within the international trade agreements, they are allowed to import goods into the UK.
This provision can be a source of competition to the local goods. International trade is governed by agreements, which are reached on a give-and-take basis that allows the local business organisations to gain and/or cede ground. The role of the government in this case is to ensure that the balance of trade remains favourable.
Negative and Positive Impact of Global Factors
Global factors have both positive and negative impacts on businesses in the UK and the world over. Each country on the global arena is fighting for a share of raw materials, which have become scarce with time. This has led many business organisations to close shop because they can no longer trade competitively on the global stage. The global market is also responsible for the provision of raw materials to the UK companies. This role is subject to competition from other manufacturing countries, which compete for the same raw materials.
This situation has therefore forced the UK’s business organisations to come up with strategies for survival, but which are expensive to maintain. Other factors such as the European monetary crisis have had an effect on the economy of the country because the country has had to step in to provide stopgap measures for other countries on the European Union block (Stewart 56).
The unstable prices of raw materials such as metals on the global market have hindered proper planning for many UK’s companies in the construction industry because the acquisition of the same cannot be pegged on a long planned budget. The growing demand for goods manufactured in the UK is influencing positively on the business organisations because they are able to sell their goods on the international market, thus developing their global base.
Impact of the Policies of the European Union on the UK Businesses
The European Union on its formation was meant to create an economic zone that will filter any members who wished to join by subjecting them to certain economic and political conditions before they could be allowed in as members. This has had both positive and negative effects on the UK organisations business. The European Union has led to the creation of a protected zone for manufacturers in the UK in such a way that only goods from certain economic zones will be allowed (Stewart 57).
It sets quotas so that goods imported into the European Union are controlled to curb instances of dumping. The European Union has led to a big problem in immigration because it allows free entry to citizens from member states. This path has led to an influx of immigrants from the impoverished Eastern European countries that have increased competition in employment opportunities for locals because they are cheap to pay relative to locals.
As a European Union country, the euro on the other hand has had many problems that have had members threaten to abandon it as a currency of choice. It has led to member countries such as Greece employing austerity measures as a way of reversing the negative economic situations they have encountered. The UK as a member country playing a big brotherly role has had to step in to provide financial assistance to Greece by being financed by the UK taxpayers.
Appropriate Findings
The findings in this case indicate many factors that affect the smooth running of any business at any time. Any business organisation should be dynamic enough to swim with the tide of change so that it does not run down when changes come into play. The world has become a global village due to information technology and information explosion, thus opening up opportunities for different players in different parts of the world.
Therefore, it is prudent for any organisation to be proactive in its planning by putting all factors into consideration and by being on the lookout for change at the earliest stage. The UK business organisations enjoy the economies that come with a strong pound to the dollar. What manufacturers need to do is to take up the many incentives provided and/or maximise them to their advantage.
Conclusion: The European Union and the European Monetary Union
In conclusion, the European Union as currently constituted is slowly loosing the goals it was created to achieve. As an economic union, the union was initially supposed to derive its value from being an exclusive zone that would hold during certain conditions before one could join it. The present day situation paints a picture of a Union of almost all European countries because it is bloated with new members who can meet certain political conditions. It has therefore stopped from being an economic zone to being guided by politics.
The decision by the UK not to join the European Monetary Union can be attributed to the UK not wanting to cede its economic muscle by ceding the control of its currency because other countries such as France and Germany who are major players also will eclipse the economic power of the UK by taking control of the euro. This decision has paid off because the euro has become a very unstable currency due to poor monetary policies by some of the European Monetary Union members such as Greece and Italy, and Spain to some extent.
Works Cited
Cohen, Solomon. Economic Systems Analysis and Policies: Explaining Global Differences, Transitions & Developments. Michigan: Palgrave Macmillan, 2009. Print.
Langdana, Farrokh. Macroeconomics Policy: Demystifying Monetary and Fiscal Policy. Springer: Newark, 2009. Print.
Stewart, Patrick. Crisis in the Euro zone: Transatlantic Perspectives. USA: Council on Foreign Relations, 2010. Print.
Strange, Rogers. Japanese Manufacturing Investment in Europe: Its Impact on UK Economy. Routledge: London, 1993. Print.