Introduction
Marks and Spencer is one of the largest retail company UK. The company has branches across UK making it easy for their customers to access their products without traveling too far.
They Keep focus on offering their valued customers with outstanding customer service and a wide range of quality products. Customers who walk in to buy products experienced a kind hospitality and personal attention as their products did.
Coupled with “good communication skills, outgoing and friendly personality, common sense, the ability to work in a team, commercial awareness, energetic, resilient and adaptable,” the personnel at Marks and Spencer are trained to offer the best of shopping experience to their esteemed customers.
In their operations, economic environment is important in as it affects the peoples’ purchasing power. Fluctuations within the economy influence services and products that are produced, and the Mark and Spencer industry is one of these.
Issues that affect the company include interest rates, which lowers the value of investments, exchange rates, and economic growth, which has an effect on citizens’ welfare and their purchasing power. Such factors have an impact on the profits and revenues of the airline.
The role of UK government
To achieve price stability, full employment, and economic growth, governments use fiscal and monetary policies as tools to manipulate aggregate demand in an economy.
During times of recession and sluggish economic growth, a government may follow the method of adjusting government spending and tax rates to stimulate economic growth and achieve full employment.
These deficit-causing methods stimulate trade leading to economic growth. The revenues generated during the subsequent economic boom can be used to recover the budget deficits incurred.
The surplus achieved during the boom periods will help the government to do two things; first, to slow-down the speed of economic growth and, second, to enable price stabilization during times of inflation.
According to neo-classical economists, when there is a budget deficit, funds can be borrowed from the public, from abroad or by printing of new currency.
When a government funds its deficit through release of government bonds, the interest rates in the market goes up, this is because the entry of the government into the credit market creates a demand for credit, and the interest rates tend to shoot upwards, thus creating a lower aggregate demand for credit.
This is known as ‘crowd-out’. When the government enters the credit market, the others in need of credit are crowded out of the market due to high interest rates.
This is against the goals of a budget deficit, which is to stimulate demand and supply and to trigger economic growth. Neo-classicalists also feel that manipulating fiscal policy can also decrease net exports, which in turn would increase the availability of national output in the local market and stabilize income (Morrison, 2006).
Likewise, the government can borrow capital from foreign investors when the interest rates are high. This would force companies in the country to compete with its own government in raising credit in foreign markets, thus forcing them to offer higher-interest for the credit that they get from abroad.
This way foreign capital flows into the economy, which causes demand and subsequent appreciation of its currency. When there is currency appreciation, exports decrease and imports increase because exports from the country are costlier due to currency appreciation and imports are cheap.
Other problems that can be caused by economic stimulus are the time it takes to determine the outcome of implementation of a fiscal policy on the economy, and the effect of inflation caused by increased demand.
Fiscal stimulus may not cause inflation when idle resources are utilized but it would certainly cause inflation when resources that are being utilized are merely re-deployed, because in this case the stimulus is creating demand for the resource under utilization when the supply is static.
It is important for a government to ensure economic stability in the country because without economic stability there would be no peace as the inequality of income distribution will exist.
It is the duty of the government to make economic policies that can contribute to the economic growth. A stable economy will lead to prosperity for the people and the state as whole.
The fiscal policy is made by the government to ensure the collection of the taxes in the country therefore a better fiscal policy will support the whole economic system.
When talking about the economic stability the most important issue that comes in mind is the price stability in a country. With price stability, many of the economic problems are already handled because it is the sole indicator of economic stability and helps in decision-making.
In an era of globalization, it is the responsibility of the government to make policies that can help in attracting foreign investors to invest in the country.
It is easy for the government to attract foreign capital because of this kind of integration. With the inflow of foreign investment, the economic growth can be ensured. Foreign investment also helps in creating employment in the country and controlling inflation.
Factors’ affecting Marks and Spencer’s marketing strategy
Competitive advantage refers to a special edge that enables a company or organization to deal with environmental and market forces better than its rivals. While, sustainable competitive advantage refers to one that is difficult for rivals to copy. This differentiation is important in the evaluation of the acquisition and its impacts.
Government policies- Government policies on business activities play a crucial role in the success or failure of business entities. With regard to Marks and Spencer’s, the company’s success has been greatly influenced by the government’s policies towards the telecommunications industry.
The UK government has a pro-market policy in its retail market, whereby the forces of demand and supply control the prices in the industry.
As a consequence of its policies, it has liberalized all the sectors of the retail market, eliminating all restrictions on foreign ownership.
In doing this, the government’s aim is to offer a level playing ground in the market, to ensure that the consumers are provided with the best available services with regard to quality, capacity, and price.
Government policies have therefore contributed to the success of Marks and Spencer’s, though this also means that the company faces more competition.
Economic environment- UK is one of the most competitive retail industries in the world, whose resilience was demonstrated during the global melt down.
However, the country was experiencing growth attributable to various factors such as a stable currency and low inflation rates, which have helped to create a conducive business environment. The inflation trend for the country for that period was as shown;
Inflation in UK: 1960-2011
(Bank of England, 2011).
The government’s policy makers are forwarding background document in order to reach their target in handling inflation and be able to prepare in responding to economic challenges.
For their central bank, its main concern is to maintain the inflation as their monetary policies complement in keeping their financial situation more stable.
They acknowledge the threat of financial bubbles as it is hard to determine when they will burst. Through maintaining the inflation rate, a country could stay more flexible in their monetary policy.
Furthermore, UK believes that they need to be aware on the occurrences of financial imbalances since it has great relevance on asset prices. Indeed, these aspects present greater risk to the economy of a country.
In fact, UK is also aware that good economic times sometimes could cause financial imbalances since people become more complacent and risk takers (Sadler and Craig, 2007).
As it relates to Marks and Spencer, this has positive implications since this means that the UK population has a high purchasing power.
This means that as the economy grows, more and more people will purchase the company’s products and services, which will increase the company’s market share.
Economic Efficiency and Government Subsidies
Economic efficiency is a standard used in economics to evaluate the production cost of inputs. Any product or good is said to be economically efficient when the production cost of a given output is as low as possible (Bade and Parkin, 2003).
The recent debates about taxation system have also been rationalized through the validity of the economic efficiency because the raising tax rates have been found to produce negative impacts.
The principle of economic efficiency works for defeating rising inflation, unemployment, and higher costs. In order to determine the efficiency of any economy, the principle is applied to evaluate costs for the given outputs (Mankiw, 2011).
Changes related to outsourcing of most overseas products, environmental issues, trends related to global tourism, legislations affecting the sector as well as changes in world fuel prices and supply.
Fluctuations in the world economic standards, either recessions or inflations affect retail industry as a whole. The impact of most of these issues is that they require the government to inject more money into the sector, which drains the economy in the short run but benefit in the long run.
The government undertook adjustment policies including deregulating some industries. Deregulation is core to the expansion of the economy and since railroad underwent deregulation; it has experienced massive capital investment in its infrastructure.
This has improved the overall output in the industry hence boosting the overall economy through increased revenues, job creation and improved taxes it yields to the government.
When economic conditions deteriorate, some businesses are forced out of business. When the economic status of the nation adjusts upwards, most business enters into business.
These climbing trends in the industries of transportation, manufacturing, and agriculture indicate that these areas need to be focused primarily in the national fiscal and monetary policy because these areas have further opportunities for employment and their total contribution in GDP.
However, it is unlikely that the PPI for manufacturing and agriculture industries may seriously hinder the consumers to buy the products due to economic barriers and the multiplication of costs.
In order to overcome this persistent issue, the government should control the cost of manufacturing by providing the private industries with raw material of competitive prices in order to make the outputs economically efficient.
Reference List
Bade, R. & Parkin, M. 2003. Foundations of Economics. New York: Prentice Hall.
Bank of England, 2011. UK Inflation 1960-201. Bank of England. Web.
Mankiw, N. 2011. Principles of Economics. New York: South-Western Cengage Learning.
Morrison, J. 2006. International Business Environment: Global and Local Marketplaces in a Changing World. London: Palgrave Macmillan.
Sadler, P. & Craig, J. 2007. Strategic Management. London: Kogan Page.