Impact of Market Imperfections and Government Policies on Business Strategy

Business Economics

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
CASE STUDY...........................................................................................................................3
1. Analysing market imperfections and market failure can affect entrepreneurship activity 3
2. Determining how market imperfections and market failure affect labour and financial
products..................................................................................................................................4
3. UK government economic policies can shape business strategy.......................................5
4. Presenting how UK government economic policies may shape business decisions..........6
CONCLUSION..........................................................................................................................7
REFERENCES...........................................................................................................................8

INTRODUCTION
Business economic deals with the study of financial, organizational and
environmental related issues in regard to the business organization. It involves effective
analysis of the market conditions which helps in gaining an insight into the concept of
scarcity, factors of production and consumption. This report s based upon the case study of
OFSMOKE which emphasize on promoting price regulations for promoting health of market.
It takes proposal for the regulation of the tobacco market which is highly and majorly
dominated by the cigarettes. This report outlines some of the details which might be
developed in UK which will support in shaping the business-related decisions.
CASE STUDY
1. Analysing market imperfections and market failure can affect entrepreneurship activity
Welfare economies mainly considers the malfunctioning markets also called as the
market failure as a challenge or barrier to the entrepreneurial activity. When there is no
incentive in regard to the private return, the services might not be provided to protect the
public goods and thus, render them more useful. On the other hand, now a days, market
failure is not been identified as challenge but it is being considered as a source of opportunity
in respect to the entrepreneurs (Lucas and et.al., 2018). The information asymmetries and the
and the externalities is the perfect example of the market failure which results into offering
numerous opportunities to the entrepreneurial firms. The same concept and argument are
equally applicable to the inefficient competitors along with the flawed pricing mechanisms.
In respect to the given case study, the main causes of market failure which is being
identified is the information failure and the externalities like the external costs imposed on
others by the manufactures. The number of major tobacco transnationals can be seen to be
decreasing because of the various mergers and acquisitions that now there are only 4 big
market dominating companies outside China. Excluding Indonesia, in all the main markets,
there are just 3 firms having a control of at least 80% of the market and many other markets,
all these three firms account for over 90 per cent. This resulted into making the UK
competition commission to investigate the mergers among the companies which would result
in making firms gain over 25% market share. In addition to this, the product is highly
addictive and along with that there is no alternative either in the form of pharmaceutical
nicotine or alternative tobacco products which are being available in the market in order to
compete with cigarettes (Parker, 2018). This is the main market failure but it has a positive
impact over the entrepreneurship activities as this has resulted into giving the cigarette