Business enviornment - Essay Example

TASK The Planned Economy is regarded as the Command Economy. The economic regulations impacting the various factors of production are legislated by the government, under the concept of the planned economy. The regulations are developed and imposed by the central government after taking various factors and opinion into account. The planned economy is an initiative of the government to improve and contribute towards the economic condition of the country, and to maintain equilibrium between the public and private sector of the country. It is under the discrete of the government to propose and implement measures, and focus upon the "production, utilization of the finished industrial products and the allocation of the revenues earned from their distribution". The government is supported by its certified planners. These planners are responsible for the delegation of responsibility, and the involvement and targets for the labour class are determined by these planners; "undergo the toiling part of the entire process". The planned economy seconds the concept of communism, where the role and authority of the government is influential against the private stake-holders. The involvement of the public sector in countries like China, Russia, Cuba and North Korea is large, the concept of planned economy is common in these countries, and the stakes of the private owners are limited and conditional. The role of the government is influential, and the private and public sector are under compulsion to operate under "guidance and directives from the government regarding production capacity, volume, modes of production and course of their actions" (Andersen, 2002). The profit margins of the private sector are therefore controlled and limited; the performance of the private sector is restricted and profit margins are monitored. The counter for the Planned Economy is the Mixed Economy. The Mixed Economy has provided an opportunity to the private stake-holders to invest and contribute in the economic development of the country. The balance of power and equilibrium is maintained between the private and public stake-holders. The economic policies formulated are implemented only after the incorporation of the recommendations of the private stake-holders. The production capacity of the private sector is non-conditional, and the private companies have the right to avail any business opportunity locally and internationally. The contribution of the private sector is therefore tremendous under the concept of mixed economy. The mixed economy offers freedom to private- sector produce and expands as per their plans; however this is strongly discouraged under the concept of planned economy. The overall economic performance of the country is assisted by the contribution of the public and private sector, and it is important for the government to take lead and monitor the business plans of these sectors. The private sector is basically interest-driven sector, and many significant and critical factors of the countrys economy are ignored by the private-sector while defining their economic targets and production plans. The government is the neutral body which shall decide and ensure that the private sector performs under optimum condition to benefit the interest of the country. Considering the example of the banking sector, the interest rates of the private banks have to be monitored and regulated by the government, if not any significant increase in the interest rates will increase the inflation and shrink the business opportunities for the local and foreign investors, thus reducing employment opportunities. The involvement of the central bank and government is essential to ensure that no such policy is launched by the private sector which shall overall dampen the economy of the country. Considering another example of the oil refineries, the production targets of the oil refineries cannot be left at the discrete of the private oil refineries. It is suspected that if the private-sector is authorised to decide upon their production target for the year, then fewer the production numbers larger the profits. Under such condition, it is the government who has to decide the production numbers such that oil import bills are reduced, and performance of the other public and private industrial units is not curtailed. The implementation of the planned economy therefore offers protection to the public against profit-oriented private stake-holders. The seriousness of the government also plays contributing role to encourage economic development of the country and its people. The lack of seriousness and corruption certainly limits the economic benefits of the planned economic model to the public, and the concept of planned economy has emerged as failed economic concept in different parts of the world especially Africa and Asia. Since 1980 onwards, the Western economic powers have undergone transition, the role of the private sector has increased manifold. The economic management reforms were launched to encourage "economic savings, improved service quality, more efficient government operations and effective policies", and the public and private stake-holders are grouped to envisage the economic policies (Andersen, 2002). The government is under certain obligation to apply social reforms, and therefore the economic reforms by the government are target-oriented, and are settled after the involvement of the private-sector. After 1980s, the role and influence of the private sector has dominated, however the decisions are still be monitored and controlled by the government under specific regulations. TASK-2 The Nintendo Wii has gained immense popularity among the young public. The sales of the product jumped manifold soon after the launch. The major competitor for this product was Sony PSP. Nintendo Wii was able to secure its market share even after the launch of PSP, the market share of this product in the developed countries soared. This brand was acclaimed for introducing distinct and creative approach, first ever of such intensity in the video game industry. Nintendo Wii was equally popular among the adult population, and the game unit was designed so as to develop the interest of this ignored-customer class. The commodity was introduced in the market at extremely reasonable price; the product was introduced at 50percent of its expected market value. The interest and participation of the customers was therefore natural. The gap between supply and demand was reasonable, but within short period of time the demand was extremely high against the supply factor. The prices of the product soared due to rising demand against limited stock. It is important to debate that why Nintendo intentionally launched their brand at reasonably lower prices, and did not availed the business gains which were then transferred to the dealers, who subsequently increased the prices of this product due to limited stock. It is strange that Nintendo denied itself to secure profit margins, which were then gathered heavily by the dealers. The Nintendo agreed to compromise upon their profit margin, and allowed the dealers to secure profit. The market share of the product soared multiple, the marketing campaign were launched not only by the Nintendo but the dealers to increase their profit-revenues. Critically, the company had to compromise upon their profit margin, but at the same it also had to spend lesser on the marketing of the product. The product was popular, it was cheap and it was already good, therefore Nintendo has successfully re-emerged in the market after this launch. Taking a critical overview, this is the exact approach taken by the government administered public-sector. The prices settled by the government are such that it offers the dealer with ample profit margins, if the prices are increased by the government than probably the dealer might not be able to make financial gain. Through such approach, the government was able to achieve two primary objectives, increase the market shares of the public-product, and improve the profit margins for the numerous dealers. Such concept has encouraged and supported entrepreneurship. Entrepreneurship develops business in the country; it supports versatility and development of the economy. The government through such an approach offers financial fortune to millions, and this improves collectively the quality of life of the masses, and excites economic activities. The oil prices internationally follow similar pattern. Presently, the oil prices have reduced significantly. The countries are exporting oil at lower prices, however the dealers are still trying to secure their profit margins, and benefit of the low-cost still has to be shared with the local population. However, the decline in the prices has essentially secured the profit shares for the dealers, who are now actually aware of the purchasing capability of the local population. The prices of food items have essentially dropped, as the oil prices have reduced the overall transportation cost; however the dealers have not yet reduced the prices proportionally, and have maintained their previous profit margins. Such activity develops middle-class within the society, at the expense of lower-class. Under such condition, the government can offer relief and loan schemes to the poor population through developmental schemes, this shall be possible as the imports bills have reduced due to lowering oil and food prices. TASK-3 The rising prices of the basic commodities are great challenge for the UK government. The inflation of the country is on rise, this is essentially because of the gap between the demand and supply. There are two distinct approaches to reduce inflation i.e. either the government offers subsidy to high-inflation items or the government should increase the purchasing power of the local population. In most of the countries, the government offer subsidy, and therefore the public has to generally spend lesser on the item against its actual price. Such an approach is not constructive; the capacity of the government to pay for the population in actual is based upon tax-revenue. The government collects tax from the public only to pay for cheap foods is not the actual notion of the imposition of tax, rather it is to develop the infra-structure for the masses and create economic opportunities for the people, and install social reforms. The other option shared by the government is to increase the purchasing power of the local population, this is possible only if the government is able to create healthy environment for investment. The government should encourage public-private partnership, especially during this period of economic recession, and should generate employment opportunities for the country. The government should focus upon the development of units essential which are being imported or are high-priced. The profit margins of the private companies shall be monitored, and if it is impossible to regulate such margins the government should encourage public companies to invest and these avenues and create competition for the private companies. Such an approach will increase supply against the rising demand factor, and will contribute towards dampening of the prices. This approach will also generate economic opportunities for the local population of the country through development of industrial units. The gap between supply and demand factors can be lowered by increasing imports, but this will create an impact on the foreign revenues of the country. The government of UK has to be cautious about its foreign reserves in the midst of economic turmoil. The government can further seek the involvement of the financial institutes to control inflation; the interest rates of the financial institutes should be lowered significantly. This will increase the business activity of the country, and will add momentum to the economic activity. Once the business units are in throttle, the wave of competition will compel the competitors to reduce their prices to increase market share. Such an approach will consequently reduce the inflation, and will develop business and employment opportunities for the masses. The government has another option of introducing regulations which shall strictly monitor and control the profit margins of the industrialists and business dealers, but such measure will develop reluctance among the private sector to invest and continue their business operation. The consequences of such measure shall be negative, and will further shrinkage the demand factor and will cause increase in inflation; the employment rate will also decline through such measure, often regarded as offensive approach against private sector. It is suitable for the government of United Kingdom to control inflation by decreasing interest rates, encouraging investment environment, and by providing subsidy on specific items. The application such measures shall be based essentially upon the time-lag between implementation and result mode. References 1. Henrik Andersen, Gavin Lawrie. Examining Opportunities for Improving Public Sector Governance Through Better Strategic Management. 2GC Conference Paper. July, 2002. 2. Debts, Deficits and Service Reductions: Wakefield Health Authority’s Legacy to Primary Care Trusts. 2003. 3. Public Service, Private Finance: Accountability, Affordability and the Two-Tier Workforce. PFI in Local Government. 2001. Read More