Monetary Policy and its Impact

This assignment examines the relationship between monetary policy and its effects on credit costs and economic activity. It delves into academic research, including studies by Gertler & Karadi (2015), Jiménez et al. (2014), and Schularick & Taylor (2012). Students will analyze these works to understand how monetary policy influences credit risk-taking, lending practices, and overall economic performance.

Business Environment

TABLE OF CONTENTS
Introduction .....................................................................................................................................3
Task 1...............................................................................................................................................3
1.1.................................................................................................................................................3
1.2.................................................................................................................................................3
1.3.................................................................................................................................................4
Task 2...............................................................................................................................................5
2.1.................................................................................................................................................5
2.2.................................................................................................................................................6
2.3.................................................................................................................................................7
task 3................................................................................................................................................8
3.1.................................................................................................................................................8
3.2.................................................................................................................................................8
3.3.................................................................................................................................................9
Task 4.............................................................................................................................................10
4.1...............................................................................................................................................10
4.2...............................................................................................................................................11
4.3...............................................................................................................................................12
conclusion .....................................................................................................................................13
References .....................................................................................................................................14
REFERENCES .............................................................................................................................15
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INTRODUCTION
Business environment is the combination of internal and external factor which influences the
business. It can includes factor such clients, supplier government activities etc. the present report
is based on Nestle, it is largest food company in the world measured by revenue and ranked. It
makes variety of product such as breakfast cereals, dairy product, pet foods, ice cream etc. In the
present report the responsibilities of organization and strategies employed to meet them has been
explained. Along with this, the impact of fiscal and monetary policy on business and their
activities has been assessed. Apart from that, the significance of international trade to UK
business has been discussed
TASK 1
1.1
There are various type of organization operates it business activity which are publicly or
privately owned. The partnership business and sole trade also have a direct impact on
economy. The mission of nestle company is 'Good Food, Good Life' is to provide to its
customer with most nutritious choices with a best taste in wide arrange of food and beverages
categories and eating occasion form morning to night. Similarly mission of Cadbury Company is
to prove quality products is their promise (Nestle 2015). They continuously focus to build upon
quality. Their commitment is to continuous improvement will ensure that their promise is
delivered. For achieving the sets of mission vision company is focusing on the strategic
objectives under which company is working. They both company wan to deliver the products of
best quality to their customer. On the other hand vision of the Nestle Company is to be a leading,
competitive, health, wellness Nutrition Company to delivering and want to improve shareholder
value by being a corporate citizen. The vision of the Cadbury Company is to the leader in
expanding innovative choices for people. The other type of organizations are mentioned below
as:
Nonprofit organization- It can be defined as the kind of organizations which operates with an
objective to carry out development of society. Furthermore, these business operate for
elimination social causes such as poverty and unemployment.
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Private enterprise- The main objective of these companies is to earn higher profits and sales.
Furthermore, such businesses aims at the enhancing their existing market share and customer
base.
Public sector enterprise – The purpose of these companies behind carrying out their operations is
to regulate prices in the market. Here, these firms seek for providing quality products and
services to customers at very convenient prices.
1.2
Nestle meets the objectives of different stakeholders that are as follow
 Shareholder: Shareholder are those who invested money at the Nestle and they want in
financial return. In the profit and growth of the company shareholder are also interested
(Ebert, Griffin and Dracopoulos, 2014.). However, Nestle required to meet the objective
of if its shareholder by earning profit because they invest in their organization and they
want more in returns
 Employees: Employees are the part of the organization. They also have some needs and
want (Carroll and Buchholtz, 2014). Nestle employee produce a products and service for
its customer so it is a responsibility of the organization is to fulfill their needs. Employees
are interested in information about the stability of company in which they are working.
 Customers: Customer creates demand in the market of the products and service which
organization launch (Wild, Wild and Han, 2014). The nestle customer wants that
products deliver them quickly and it should be of good quality.
 Financial Institution: Nestle required to meet the objective of financial institution on
times. The loan and money taken from lender and banks should be played on time with
interest. Moe
 Environmental group and agencies: It is important that Nestle not the harm the
environment through the waste of product which they product. The environmental group
wants that nestle company should not affects the environment and keep it neat and clean
(Karadi and Gertler, 2015.). It is a responsibility of the organization to make products
which are not directly or indirectly affects the environment and also recycle the waste for
protecting it.
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1.3
There are various responsibility and strategies engaged of Nestle related to the
environmental and ethical issues, fair trade, consumer legislation and stakeholder etc. this are
discussed below
 Environmental and ethical issues: Nestle has a great responsibility related to
environmental and ethical issues. They are required to not harm the environment by
keeping it neat and clean (Jiménez, Ongena and Saurina, 2014.). The wastage produce in
factory should be recycled or destroyed so that it not harm the environment.
 Consumer legislation: The responsibility of the nestle company is to provide a good
quality of products to their customer and not cheat them (Schularick and Taylor, 2012).
According to the consumer right act 2015 it is a responsibility of the organization to
provide them a products which they demand and affected their health.
 Fair trade practices: Nestle responsibility is to do fir trade practices. The organization
trade is related to social, environmental and economical. They should not maximize the
profit at their expenses (Gertler and Karadi, 2015.). They should deliver on time and in
the desired quality with specification. The price of the products and service which they
deliver to their customer is fair. They need to make sure that no child labor and forced
labor in its workforce.
 Employees: Nestle required to provide benefits to employee who are working for their
organization (Bekaert, Hoerova and Duca, 2013). It is important that employee should be
provide job security. They are responsible to involve workers in business strategies so
that they came to know about the stability of business.
TASK 2
2.1
There are three types of economic system such as mixed, free and command economy that affect
the Nestle Company.
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 Free market economy: In this type of economy Nestle have freedom to pursue their own
economic interest (Arrow and Kruz, 2013). They can sell and buy goods in a competitive
market. It helps naturally in determining fair price of products.
 Command economy: it is also known as centrally planned economy. It is so because
national and central government’s plans the economy. It controls the entire economy and
decide how much resources should be allocated to the nestle company (Arrow and Kruz,
2013). Moreover, government also decides the price of products and service which
company produce.
 Mixed economy: Mixed economy is the combination of free market and command
economy. In this some action are taken by government for controlling the organization.
Nestle operates its business activity and operation in the mixed economy (Auerbach and
Gorodnichenko, 2012.). In this some of the control of resources allocation is in the government
hand. It also influences the decision of Nestle market. Resource allocation is a way in which
resources should are allocated to Nestle for producing the goods and services. What to produce: In Mixed economy it’s determined partly by government and partly by
consumer preferences. How to produce: way of producing is decide by the government and producer seeking
profit.
 For who to produce: it can be determine by seeing the purchasing power of and by
government preferences.
Factor impact the nestle company in mixed economy
 Consumer behavior; the consumer behavior is affected by this mixed economic system
because company produce a goods in limited resources which creates a problem in
fulfilling the demand of customer (Corsetti, Kuester and Müller, 2013). When costumer
demand a lot it decide in how much quantity the products should be made.
 Taxation: If government increase the taxation rate then it is required that company will
not face get profit because consumer buying power will be decreases. The tax rate is
decided by the government in mixed economy.
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2.2
In simpler terms fiscal policy can be defined as the important tool which is used by
government of the country to make some adjustments in tax rates and spending related to public.
on the other hand, monetary policy can be defined as the tool in which central bank makes
changes in interest rates with an objective to control flow of money. In terms of impact it can be
stated that fiscal policy can have direct impact on monetary policy at the same time. The
rationale behind this is that increase in tax rates creates low demand of loans in the market and
this may force central bank to lower down interest rates. The impact of fiscal and monetary
policy on the Nestle Company is significant. The main purpose of this policy is to stable the
economic growth, the balance of payment, inflation, taxation etc.
 Aggregate demand: it is a microeconomics concept which represent the total demand for
goods and services in economy. Fiscal policy role is to decide the government spending
and tax rate (Mertens and Ravn, 2014). The fiscal policy is used to reduce the
government spending and for controlling the growth by rapid inflation.
 Taxation: it is a type of fiscal policy which affected the nestle company. If there is lower
tax rate then consumer will buy more because they have more Money to spend on
products and services (Auerbach and Gorodnichenko, 2013). As it also lead to the
economic growth because employment opportunities are also increased. Lower tax rate is
favorable of the nestle company. However company can charge high amount firm its
customer to increase the profit.
 Interest rate: interest rate is the type of monetary policy. If there is lower interest rate
charged by lower (Yarbrough and Yarbrough, 2014). Then company will borrow more
readily. It helps in increasing the profitability of Nestle as well as fiancé cost reduced.
Company can invest more in new projects.
 Exchange rate: Exchange rate is the type of fiscal policy. The exchange rate is low then
then is is benefits to import resources for other country. When the exchange rate is low
then cost of important will also reduce (Chor and Manova, 2012). On the other hand
global economy suffer due to high exchange rate. High exchange rate will lead to
reduction in the price of products and services.
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2.3
There are many positive and negative impact of competition policy on the activities of Nestles as
an organization.
 Competition act 1980: according to this act intention is to prevent the misuse of
monopoly powers. With the increasing competition it aimed to control competition
between companies. There are many isolated products which helps to the growth of
company (Golub, ed., 2013.). On contrary it also has a negative impact on economy
because firms have started producing products which are unhealthy for leading in the
competition. Nestle required to think in innovative manner so that it make a products
which are different from its competitor and healthy for its customer.
 Enterprises act 2002: according to this act it provide polices which should be adopted
by enterprises so that they can carry out its trading activities fairly (what is monetary
policy 2016). This act has competition policy objective that is to make all decision
through independent bodies, creates a strong deterrent effect etc. the activities should be
carried out in fairly manner in competitive market.
 Fair trading act 1973: according to this act company required to adopt fair trade
practices. This act also help in protecting customer against the misleading actions and
unfair price given by the traders. If a single entity involve in unfair trade practices it
affects whole business (Ebert, Griffin and Dracopoulos, 2014). Hence, it can be stated
that this act help in protecting customer form unfair trade practices
TASK 3
3.1
There are different kind of market in different economies so there are different kind of
pricing decision and output take place. The market structure determine the pricing and output of
nestle in various way that are as follow
 Monopoly structure: in the monopoly market there is only one seller and many buyers.
There are number of substitute of products and service are available. In this seller can sell
a more products if it keep the price of the product low (Carroll and Buchholtz, 2014.).
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There is only one seller so prices is decided by him which should be accepted by
everyone in industry. From selling products in monopoly market nestle required to make
product which are unique and and of high quality.
 Monopolistic: In monopolistic market there is many sellers and buyers. There are many
different types of products are sold in this market. The output level is deiced at point
when marginal cost and marginal revenue is equal (Karadi and Gertler, 2015). Different
sellers set their own price of their products and services. Nestle can sells its product in
monopolistic market because there are many sellers and price is decided by its own.
 Oligopoly: There are many buyer and few seller in the products are homogeneous and
identical. Output is decided by considering competitors price. If the price is reduced then
customer may switch to other brand products (Jiménez, Ongena and Saurina, 2014).
Market leader sets price when there is differentiated products and agreement is made
when sellers are sells identical products.
 Perfect competition: This is a market where many sellers sells the same type of
products. Many buyer are there in perfect competition so firm can sell whatever they
produce. So firm can produce many outputs. Prices id adopted which is set by industry.
3.2
Market forces can shape organizational responses using a range of example such as
elasticity of supply, pricing decision etc.
 Elasticity of supply: it is a quality of products and services which is provide by the
Nestle company is company produce large quantity for products and service then it
supply of products and serves are many.
 Elasticity of Demand: it is a quality of buyer who want to buy the products of nestle
company. If there are less buyer then demand of products is also less. When there is
lower the price of goods or services the quality is bigger (Gertler and Karadi, 2015).
Nestle response to its market demand by watching the attitude of consumer through
market research.
 Pricing decision: Competitor of nestle is more then it need to keep the price of products
less for increasing the demand of products. Nestle require to create a products and
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services which are different from other competitor so that pricing decision is not affected
by it.
 Prices Elasticity of demand: Price elasticity to demand reflect the relationship between
quality and price show the effect of change in price on the quality of demand. Price is
rises due to higher demand of the product while it fall if demand falls. For example if rice
is increasing result by 2% then it will result in decrease in quality of demand by 2.1 % so
the 2.1% is price elasticity demand (Auerbach and Gorodnichenko, 2012). In this
situation demand is stated as elastic and the total spending on good will decline. The
demand of nestle products is distinguish among the market on the basis of its unique
attributes
 Demand and supply: In a market where nestle operates its daily activity is the has an
enormous effect. If the supplier are more then they demand cheaper price on the other
hand if demand is more than price of the products is increases.
3.3
The business cultural and environment shape the behavior of the Nestle on the basis of
labor market trends, employees skills, technology etc. this are discussed below:
 Technology: technology play a great role in success of the business of the Nestle
Company. There e many advance technology used by the organization which helps in
producing a goods in large quantity in minimum time. This new technology also help in
delivering the products and service to the customer who are abroad. Company is facing
many advantage from this new technology.
 Employee skills: For Nestle Company it is important to hire a skilled employee who
have more knowledge and experiences of advance technology and of other things
(Yarbrough and Yarbrough, 2014). The company is are producing a products and services
which are different from other for making this product they are required skilled
employee.
 Innovation: Nestle company required think innovative for produce a goods which are
different from its competitor (Delcour and Wolczuk, 2014.). By doing so demand of their
goods and services will also increases, customer will like to buy products from them
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because of its uniqueness at high price. Innovation products help to retain the customer
for longer period of time.
 Research and development: Through research and development company can produce
products and services according to the demand of customer. Now a time people want
tasty and healthy products so company need to focus on both taste and health. Through
research company to get new ideas and strategy for producing a goods.
TASK 4
4.1
Significance of international trade to Nestle UK business organization are as follow:
 World trade organization: it helps countries and producers of goods deal fairly and
smoothly with all its business activity across the international border (Wild, Wild and
Han, 2014). It provide framework for negotiating and formalizing trade agreements. It
also helps in solving disputes between free trade on industrial goods.
 Emerging market: International trade is very beneficial for the other organization.
Nestle company can operates it business where needs of products are more like it can
emerge in India, Russia and other countries. The world trade organization is most
powerful. Through it company nestle productivity and profitability also increases.
 Economic growth: the Economy of UK will also grow if there is significant increases in
the international trade. It helps to add the GDP which helps in increasing a national
income of country. Hence business activity can be impacted because two nation leads t
conflicts and arises many political issues.
 Competitiveness: Exporting and importing of goods from one country to another
country. UK will get competitiveness if they sell the goods that they export that is
exporting products in appropriate manner is very beneficial for the UK.
 Optimum utilization of resources: Nestle invoked in international trade that the
resource of society will be utilized at optimal level. Company can avoid the wastage of
resources and it is very helpful for expanding its business all over the world.
4.2
The impact of global factor on the UK nestle organization
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 Business; the nestle company is operating it business at global level so it is necessary to
follow the rules and regulation of that country where business is operated. There are
many political factor affects the activities of Nestle (Schularick. and Taylor, 2012).
Government rules are different for it country so they require to follow it strictly.
 Competition: nestle Company required to see its competitor in other country before
operating its business. If there is a competitor of the the Nestle in a country where it want
to expand its business. Then it have to face a tough competition it also required to
differentiate its product form other company products.
 Employment: For operating a business activity company is required employee. Without
an employee company cannot carry out its work activity. Nestle should not put children
or old lady for working in their organization.
 Environment: The global warming tenancies and increasing levels of air pollution can
impact the the business of nestle (Auerbach and Gorodnichenko, 2012). In other countries
people want their environment need and clean so company required to avoid large
amount of wastage and try to keep a healthy environments
 Work force skills: Skilled employee are very important for the Nestle Company. The
organization is using an advance technology and making a goods which are heather for its
customer. For this purpose company requires to hire a skilled workforce which is come
time in other country many not possible due to lack of education. This problem can be
faced but the organization at the tie of operating in other country.
 Lobar cost: Nestle also have to pay cost on labor who are working in their country. In
other country there may be a labor demand high salary for working with them it effects
the organization profitability.
 Tariffs: Nestle will also get impacted by tariff system of other country. In some country
government charge high rate of tax from the organization (Chor and Manova, 2012). If
effects the nestle company because they need to pay high tax rate to the government, it
effects the profitability of the organization. The profitability of company is decreasing
because of high tax rate, it creates no sense operation a business in other country.
4.3
The impact of polices of the European Union on the UK business
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 International business environment: The EU policy pay a major role in stimulating an
employment. It encourages UK business effective so that Nestle Company can become
competitive in international market. It provide an opportunity of developing and training
on government funds and also sponsored employment program.
 Exchange rate: Euro is currency which is used for trading purposes in between EU
member country. So the fluctuation rate is attended and trading can be done smoothly.
When there is a less exchange rate then economy will be down.
 Creates global system for fair and open trade: the world trade organization helps in
helping the system for trade rules and to keep the global economy open for trade (). The
EU policy works for maintaining the global trading system to ensure that it can be
adapted in fast changing world.
Inflation policy in this sudden rises of the price of product it should be stopped so that
customer not suffer from high price products. If the interest rate is increased by the EU policy
then it effect the organization because they cannot borrow the money. On the other hand
taxation policy also effects the Nestle business because increase in tax rate also may change the
buying behavior of the consumer.
CONCLUSION
Form the above report it can be concluded that Nestle required to meet the objective of its
various stakeholder such as employee, shareholder etc. it is a responsibility of the organization to
use fair trade practice for the benefits of customer and company itself. There are many positive
and negative impact of competition policy on the nestle company. Further it can be concluded
that through monopolistic company can sell its products and services to the various customer.
Business and culture environment such as technology, skilled employee etc., help in shaping the
behavior of Nestle. Through international trade company can easily expand its business all over
the world. Further there is various impact of Global factor on nestle company.
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REFERENCES
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Online
Nestel 2015, [Online].<Available through:<http://www.nestle.co.uk//>. [Accessed on 22th
october, 2015].
What is monetary policy 2016, [Online].<Available through:<https://www.thebalance.com/what-
is-monetary-policy-objectives-types-and-tools-3305867>. [Accessed on 22th october,
2015].
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