Business Environment: Macroeconomics Parameters - Assignment Example

?Business Environment Contents Introduction: 3 P4: 3 P5 5 P6 6 P7: 9 P8 10 P9 11 P10 14 P11 17 P12 18 Conclusion: 19 References: 20 Introduction: There are two types of business environment. One is microeconomic and other one is macroeconomic. Microeconomics consists of characteristics and decision making behaviours of individual organization and household on distribution of limited resources. Aneconomy’s framework, character, ability is discussed in Macroeconomics; this is not individual decision making. Mainly international, local or state level economies are discussed in Macroeconomics. Macroeconomics parameters are employment rate, GDP (Gross Domestic Product), GNP (Gross National Product), PPP (Purchasing Power Parity) etc. Others macroeconomic factors like production, inflation, employment, investment, domestic income, international business relationships etc are discussed in Macro Economics (Childs, D, and Deitrich, S. 2003). P4: Economics can be described as social science. It is a study of how individuals, households, firms, consumers, nations maximizes there profit with limited resources and availabilities. In economics way we can term it as generating characteristics or optimizing their behaviours. Optimizing or maximizing behaviour means generating more gain for the concerned authorities with limited amount of resources. So in this type of economic social science people came to know how to utilize the limited resources to reach the targeted result. For example for an individual household it is like distributing their limited resource (income) into several household goods and services to gain maximum satisfaction for the all family members. It’s very hard for the households to decide (what to buy and how much to buy?) to maximize their satisfaction level. Three economic systems are Capitalist Economy or free market economy, Socialist Economy or state-run economy and mixed economy or public sector economy. Examples of free market economy are United States Economy. For socialist economy or command economy example can be North Korean economy and for mixed economy it can be United Kingdom’s Economy. In a free market economy capitalist society runs with the method of free organization network. Government’s role in this economy is like- Whenever government get a chance to promote competition it does that. Clear all the restrictions for the organizations to operate in a free market. To control the free competitions government should intervene with the market time to time. Sometimes government interventions motivate free market economy so that other way it wouldn’t be possible. In a command economy government role in it is very prominent and strict. For capitalist economy where government had minimum role in the economy but for socialist one government plays a huge role regarding markets rules and regulations. Nations with this system not only dislike free economic systems but also they made strict law against it. In this system all the productions units and natural resource are controlled by government and no private organizations are allowed to do that. Another economic system where simultaneously free economic system and socialist economic system works is known as mixed economy. There two sectors private and public resides simultaneously. Here private sector can work as a free market entity in broader economic and political restrictions. Main four questions for any economy is ‘what to produce’, ’how to produce’, ’when to produce’ and ’whom to produce’. All the country cannot produce everything by them. Resources are limited and fixed in this world. If a country wants to produce everything by them then that country will not going to make a single thing perfectly and because of lack of resources in middle of the work everything will be stopped or jeopardise. P5 To acquire certain economic goal government policies regarding taxation, current account deficits, subsidiaries and other financial matters which are under government’s or more specifically finance department’s control is known as fiscal policy. Objective of fiscal policies are- Growth of the economy More employment generation Stability in the economy Ethical practices of economic matters or policies. To reach the general economic target central bank of any country has the rights to change the flow of money into that economy. And by the policies central bank does that is known as monetary policy. Objective of both monetary and fiscal policy are same. Monetary policy can be change by several ways like- Changing interest rate. CRR (Cash Reserve Ratio). Central bank intervention in the open market operation. Central bank’s power to regulate their own policies over the entire public or private bank in a particular country’s economy. (Alpin. 2011. GCC Retail Industry) If interest rate is raised by central bank that triggers the rise in interest rate for all other banks which directly deal with individual customer or firm. If they also increase the interest rate then several macroeconomic misbalances can occur. P6 OFT (office of fair trading), it is a united kingdom’s non-profit and non-governmental organization. It incorporated in 1973 as per the fair trading act to protect consumers and maintain a fair competition in the market. It also ensures that no rough trading, scams and scandals are in business practice. Again by 2002 enterprise act its role was changed. (Office of Fair Trading, n.d.) Fixing price is illegal by competition rules in United Kingdom. And any unfair competition is also illegal. Objective of every business is to be the market leader. And competition policy helps organization to reach their but fairly. Impact of these policies onCadbury is huge. Organization like ofgem is regulate to formulate good for its customers who consume energy from them. By controlling the transmission and distribution network ofgem keeps Britain’s wholesale and retail market competitive enough. (ofgem, 2013) Aim of Open Water programme is to maintain a radical change in market in the sector of water. This helps the retail water customers and sewage facilities to the customers of Wales and England who are non-households. This programme is very much open helps its stakeholders to: Encourage innovation. Increase the number of choices for consumers. To save water resource it gives a very helpful approach. (Open Water, 2013) While buying Kraft, Cadbury had some restrictions regarding contractual issues. That notifications and clearance from competitor authority. Source: European Commission, n.d. Later competition commission and OFT clears Cadbury’s bid to buy Kraft. And the deal go ahead with it. P7: Perfectly competitive market is a hypothetical market condition where competition is greatly encouraged. It produces the best result for society and its consumers. (Economicsonline, n.d.) The demand of a product is usually influenced by several factors like price of the product, price of the related product, taste and preference of the customers, their income, administrative policies of the country, social and environmental factors etc. While considering the demands of confectionary, from the viewpoint of both an individual and the aggregate demand, the factors that would cause the leftward shift of the demand curve, i.e. the fall in demand, are discussed below- 1. Increase in the price of confectionary. 2. Increase in the price of chocolates related raw materials, colour and polymer and cocoa butter, cream milk, sugar, solid milk, cocoa mass, vanilla velvet, emulsifiers etc. (Cadbury, n.d.) 3. Increase in the price of fuel, gas, or petrol incline to delivery. 4. Pollution control and restrictive measures by the government on the environmental protection cause. The rightward shift of the curve i.e. the rise in demand can be caused by- 1. Fall in the price of chocolate on the occasion of some festival. 2. Fall in the price of chocolate related products. 3. Strikes by the public transportation unions or conflict between the government and the public transportation bodies. 4. Fall in the cocoa or milk prices. a. Factors affecting the supply of chocolates are- 1. The price of milk, sugar and cocoa. 2. The production plant, its location and the technology applied. 3. The competition in the market (2007. Food Safety Conference 2007). P8 a. While constructing the demand curve for Cadbury, we will put the price on the vertical axis i.e. the Y axis and the quantity demanded would be shown on the horizontal axis i.e. the X axis. The demand curve would be downward sloping starting from the left and tending towards right. This is because the variables that regulate demand curve are price and quantity of a product. Since price and quantity exhibits an inversely proportional relationship, which means when the price increases quantity demanded decreases and vice versa, therefore the curve is always negatively sloped i.e. downward sloping. b. The supply curve of Cadbury would be upward sloping as the relationship between increasing price and increasing supply is positive in nature. For example, with an increased price, the producers would be able to cover their cost of production more efficiently. Therefore supply is denoted by an upward sloping curve. c. If the cost of steel goes up, the immediate cost that would get affected is the supply curve. An increased cost of production would shift the supply curve to the left and it will be profitable for the production houses to manufacture more chocolates. However as a result, the price of Cadbury bars would also increase, which in turn would affect the demand among the consumers and in this case the demand curve would demonstrate a leftward shift. However in this case the market equilibrium price would be set at a higher point. This would happen due to the increase in the market price of chocolates and in turn would lead to the fall in the quantity demanded by consumers (Samuelson 2010). P9 PESTLE means Political, Economic, Social, Technological, Legal, Environmental analysis. Advance Electronic Company (AEC) is a Saudi Arabian organisation established in 1988. It is mainly work on repairing, maintenance, integration and manufacturing of modern electronic devices. From the very nature of a society its social aspect depends on its cultural environment. People follow its culture as a whole. But it always has a main role in AEC’s business to promote values, beliefs and prospects its business. Cultures comes under the social factors of an organization and it is a very valuable part of external factor. Problems arise when a cultural collision happens like if AEC’s employees unable to cope up with local cultures when there cultures and local cultures are different. Muslim culture is very much different than European or American culture. So business culture of Islamic organization also varies from Middle East to far west. Political: Political structure of Saudi Arabia has a great impact on its business like AEC. As two types of multi layer politics play in that country having ministers and kings so it’s a complex political structure (Wright 1981). Economy: Economy of Saudi is very much dependent on oil export. So exporting oil to foreign lands is their core competency. But still company like AEC is doing enormous business with the keep in peace with western and eastern electronics organization. Social factor: The present era acts as a catalyst toward change and merges the western and Islamic philosophies in cooperation; Islamic theology with western procedure leaning management structures are considered on a large scale by the firms for achieving greater success. This idea of integration gives rise to an Islamic organizational outline known as “Management by Islam (MBI)”. This kind of an Islamic organizational structure would then present the Muslim institutes and firms an exclusive explanation for dealing with the expatriation issues as discussed earlier. The framework would include- 1. Training the managers, employees and leaders in a high-tech management set-up with a religious-centric structure of organization for creating the environment of accountability and transparency. 2. Reforming the firms with process-oriented proficient supremacy models. 3. Accepting, applying and preserving best practices for running an organization. An in-depth understanding of the Dynamics and structure of the Saudi and international electronics market is possessed by the Advance Electronic Company. The superior engineering and technical capabilities of the company has helped it to forge close working relationships with many renowned international OEMs. The end-to-end customer support of the Advance Electronic Company, its reliability and its ability to deliver on time and to budget are excellent. The Advance Electronic Company successfully operates in the Industrial business, Military, & Telecom sectors and has shown leadership in it. The service package provided to the customers by the Advance Electronic Company is aimed at standard as complete satisfaction and quality. More than 2000 people are encompassed in the Advance Electronic Company team with a variety of skills, qualifications and experience. The first company to receive the AS 9100-A2001 certificate in the Middle East and Africa was the Advance Electronic Company. Technological: As the development in global network is in progress and distance does not matter anymore. And presence of Saudi is nearer to Europe and middle of the world between developed west and developing east, so companies like AEC is using its location advantageous to its technology business. Environmental: Electronics business does not impact so much on environment when it is a repairing and maintenance business. But still all kind of ultramodern safety and security measures is been taken. Legal: Presence of dictatorship in Saudi along with democracy actually helping this kind of uptrend organisation to grow (Advanced Electronic Company, n.d.). P10 While considering the market of the UK, we can find the presence of several well known FMCG brands like P & G, Nestle and Unilever. In the recent years it has been noted by TESCO that the consumers have restricted their habit of impulse purchase and are continuously looking for the best deals in town (Shore, 2012). Findings by Annual Global Summit of the Consumer Goods Forum, 2012 present the five big challenges faced by the FMCG market of the entire world that include mass urbanization, growth of the middle classes, ageing population, sustainability and consumers in the driving seat. Thus these challenges could be overcome by- Speedy and comprehensive adaptation to change Continuous Innovation Collaboration towards improved supply chains Investment (Kent, 2012) UK economy is an open economy. All the business from any part of the world has equal right to do business in UK. Best interest for UK policy makers is increasing the scope of international trade. This exploits UK exporters and importers to foreign markets with their strength, abilities, resources and expertise. As a result- Get better and cheap resources from international market to get competitive advantage over competitor. Continuous innovations brings intelligent mind of the world in UK. Promote business in less developed economies and help them to cope up with developed one. Bring political stability all over the world. Source: National Statistics, 17 Dec, 2103 This is a representation export and import business growth of United Kingdom during 1990 and 2004. Source: National Statistics, 17 Dec, 2103 Here it is shown that with which countries or regions UK have most close trading relation. Source: National Statistics, 17 Dec, 2103 Here it is shown that what the products UK trade most with foreign nations are. (The National Archive, 2013) P11 To get a worldwide outcome a circumstance need to build that is known as global factor. Several global factor like slowdown of economy, finding new prospective markets, uses of hi-tech technologies, change of preference of by the customers etc (Reid, R., and Bojanic, D. 2009) Technology is one of the important macro enviro9nment factors which have substantial impact on this food business. Use of advance technology in business process and activities stimulate the output and potentiality of a business which also help to compete with the intonation companies in the same market. Again familiarity of advance technology among the people of the target market will help the company to efficiently communicate to the target audiences of this business i.e. the business promote the brand and its offering through advance medium of advertisement and promotion. Adoption of advanced technology in the food production process has revitalized the retail sector of UK mainly by the few multinational retail food giant in this market. Accessibility of hi-tech food production equipment in this market will help the business to reduce wage cost and focus more on research and development to conduct new product development very frequently and it is very much necessary as life cycle of a food product is very small. Technology also helps the multinational businesses like Nestle, Mars, Jacobs Suchardetc to offer very minimum turnaround time to the customers and it has become core competence of these food brands. Therefore, the company also can adopt maximum use of technology in production and preservation of food products to ensure high quality varieties of foods to the customers (Ojugo, C. 2009). P12 The Single Market Act (2011 and 2012): To improve digital marketing, e-commerce, efficient logistics services, proper distribution of energy and efficient use of electronics technology this act was introduced. By this act UK business got access to the world largest trading place where 500 million people live and 21 million companies do business worth of 11 trillion Euro. (Department for Business, Innovation & Skills, Foreign & Commonwealth Office, 2013) Employment Policy: To improve employment condition government influence a lot. Current UK Government is heavily working on improve the employment condition of UK by creating more jobs. Government is funding and sponsoring to train the people who are having problem to find a suitable job. Also new EU rules on contractual employment affecting the contract employees from UK who are working in EU. Also UK organisations affected by free labour movement policy of EU. (External Environment Theory, 2013) Conclusion: By this research it is quite clear that how Cadbury is adopting changes with the change in global economy. And also that external factors of the organization impacting how much to its business (Rao, K. 2011). References: Ojugo, C. (2009). Practical Food & Beverage Cost Control. Cengage Learning. Rao, K. (2011). Services Marketing. Pearson Education India. Reid, R., and Bojanic, D. (2009). Hospitality Marketing Management. John Wiley & Sons. 2007. Food Safety Conference 2007. Retrieved from Accessed on 14/12/13. Childs, D, and Deitrich, S. (2003). Contingency Planning and Disaster Recovery: A Small Business Guide. John Wiley and Sons. Alpin. 2011. GCC Retail Industry. Retrieved from Accessed on 14/12/13. Samuelson Paul. A.2010.Economics. India: Tata McGraw-Hill Education. Office of Fair Trading, n.d Retrieved From Accessed on 14/12/13. ofgem, 2013. Gas. Retrieved from Accessed on 14/12/13. Open Water, 2013. About Open Water. Retrieved from Accessed on 14/12/13. Economicsonline, n.d.Perfect Competition. Retrieved From Accessed on 14/12/13. Cadbury, n.d.Products. Retrieved from Department for Business, Innovation & Skills, Foreign & Commonwealth Office, 2013. Making the single market more effective. Retrieved From Accessed on 16/12/13. External Environment Theory, 2013. Government and EU influences on business activity. Retrieved from Accessed on 16/12/13. Wright, Peter. Management International Review , Vol. 21, No. 2 pp. 86-94. Springer. 1981. Web. Advanced Electronic Company (n.d.).Welcome to AEC. Retrieved from http://www.aecl.com/Home.aspx Accessed on 17/12/13. Shore, S. 2012.Consumer trends in FMCG. Available at < http://www.concertomarketing.com/wordpress/?p=1538 Accessed on 17/12/13. Kent, M. 2012. The five mega-trends shaping tomorrow's customers. Available at < http://www.bbc.co.uk/news/business-18503627> Accessed on 17/12/13. The National Archive, 2013. World Trade - UK Trade and Investment. Available at < http://webarchive.nationalarchives.gov.uk/+/http://www.dti.gov.uk/ewt/uktrade.htm> Accessed on 17/12/13. Read More