Stakeholder Objectives and EU Trade Policies

This assignment explores the impact of European Union (EU) trade policies on international businesses. It emphasizes understanding the diverse objectives of stakeholders involved in trade and the importance of ethical and sustainable business practices within this context. The assignment highlights how EU policies, such as reducing trade barriers, can significantly shape the landscape of international commerce.

BUSINESS
ENVIRONMENT

Contents
Introduction................................................................................................................................4
Task1..........................................................................................................................................5
(1A)........................................................................................................................................5
(AC 1.1) Identify the purposes of GlaxoSmithKline (GSK) the National health service of
UK(NHS), the Red cross and any cooperative society in UK that you are familiar with......5
(AC1.2) Describe the extent to which GSK meets the objectives of its key stakeholders.....7
(AC1.3) Explain the responsibilities GSK has towards its key stakeholders and the
strategies employed to meet them..........................................................................................9
(1B).......................................................................................................................................10
(AC 2.2) Taking into consideration the recession that faced UK in 2009 assess the impact
of the UK government’s fiscal and monetary policies on the activities of GSK and AZ....10
(1C).......................................................................................................................................12
(AC 2.3).With reference to the Enterprise Act 2002 and article 101 and 102 of the EU
legislation, evaluate how the UK/EU competition and regulatory policies can or have
impacted on the activities of the GSK..................................................................................12
(1D)......................................................................................................................................14
(AC 3.2).Using a range of examples, illustrate how the forces of demand and supply
affects the pricing and sales decisions of GSK....................................................................14
(1E).......................................................................................................................................16
(AC 3.3)................................................................................................................................16
With the aid of the management tool called PEST/PESTEL judge how the business
environment impacts /affect the behaviour of GSK.............................................................16
(AC 3.3) (b)Judge how the cultural environment determines the behaviour of GSK.........16
(1F).......................................................................................................................................18
(AC 4.1)Discuss the significance of international trade to GSK and AZ............................18
(1G)......................................................................................................................................19

(AC 4.2) GSK and AZ are multinational companies operating in many parts of the world.
Analyze how global factors can affect their activities (Consider, political, economic, social,
technological, ecological and legal factors in the global context but not local)..................19
(1H)......................................................................................................................................21
(AC 4.3) Evaluate how the policies of the European Union, including the ones mentioned
below, can or have impacted on the activities of GSK and AZ...........................................21
Task 2.......................................................................................................................................22
Explain the three economic systems (Free market, command and mixed) and discuss why
you think one of them allocates resources more effectively than the others (AC 2.1)........22
Task 3.......................................................................................................................................23
Explain how prices and output decisions are determined in a perfect competitive market,
Monopoly, monopolistic competition and Oligopoly. (3.1).................................................23
Conclusion................................................................................................................................24
Reference..................................................................................................................................25

Introduction
Different purposes of different types of organisations are identified. Different stakeholders and their
objectives are assessed over the case study of GSK and AZ. The strategies to meet with the
objectives are discussed. The responsibilities to different stakeholders of GSK and their strategies
with marinating the responsibilities are discussed. The fiscal and monitory policies of EU and their
impacts on GSK have been assessed. The competition policy and other regulatory policies are
analysed. Different market structure, market forces, cultural environment forces etc and their
influences are discussed.

Task1
(1A)
(AC 1.1) Identify the purposes of GlaxoSmithKline (GSK) the National health
service of UK(NHS), the Red cross and any cooperative society in UK that
you are familiar with.
There are different types of organisations which are associated with the business environment.
These are:
 Sole traders
 Partnerships
 Private limited Company
 Public Limited Company
 Franchises
 Co-operatives
 Joint venture (Teece, 2010)
The purpose of different organisations is different. These are:
Purpose of Glaxo Smith Kline or GSK: GSK is drug manufacturing company and there are mainly three
priorities within their mission strategy. These are: to have balanced growth and increase the growth,
reduction of risks and improvements of the long term financial issues. The main purpose of GSK is to
grow a balanced business in global market within pharmaceutical industry and by simplifying the
operating model deliver more products to the market. Return of the capital employed is also main
purpose of GSK. (Teece, 2010)
Purpose of NHS: the purpose of NHS is to deliver the care services for health and social care.
Providing high standards services to the care users is the main priority for NHS. The NHS ensures the
effective use of valuable resources in order to get profitable and best outcomes for the individuals,
society and community in present and future perspectives. (Cantwell, Dunning, and Lundan, 2010)
Purpose of Cooperative society: the cooperative has the purpose to make benefits for the individual
who are attached to the cooperative. The profits are divided within the individuals.

Purpose of Red Cross: the purpose of Red Cross is to prevent the sufferings of the human pain from
the society and attached the volunteers and donators in this respect to the Red Cross. (Cantwell,
Dunning, and Lundan, 2010) Red Cross is non profit motivated organization.

(AC1.2) Describe the extent to which GSK meets the objectives of its key
stakeholders
The stakeholders are the groups or individuals who are associated with the business and the
organisation. The stakeholders are of different types and their objectives are also of different types:
External stakeholders: these are the important stakeholders who are impacting the business from
the outside of the business premises. The customers and the government in the location where GSK
has been operating the business are the external stakeholders.
Internal stakeholders: the employees, board members, directors and shareholders are the internal
stakeholders. These stakeholders are related with the business operations and also the success of
these operations. (Teece, 2010)
GSK meets the objectives of their stakeholders as:
Customers: the customers are the prior stakeholders for a business to have success in the business.
The customers chose the products of GSK for their high standard quality. The requirements of the
customers should be met for achieving their objectives. In order to meet the demand of customers
GSK should provide quality medicines and therapy equipments at marginal prices so that most of the
consumers can afford them. Also to make better quality products GSK should encourage R&D
activities with consistent investments and performance to manufacture high standard drugs.
(Cantwell, Dunning, and Lundan, 2010)
Employees: the employees and their skills are the main aspects for the GSK in their survival. In order
to meet with the objectives of the employees GSK should provide career growth in the organisation
as well as adequate salary increments for their employees. HR planning should be made for including
benefits of employees based on performances. The employees should be involved within the
decision making processes. (Teece, 2010) Also GSK should arrange rigorous training programs to
develop competencies of their employees to meet the changing advances in industry.
Government and legal framework: maintaining the legal policies of the government which are
related to the pharmaceutical field should be followed by GSK along with the fiscal and monitory
policy to meet the objectives of the government. Also GSK should update the process, policies and
R&D activities with new changes introduced/announced by government or legislation to meet their
objectives. Examples post Brexit many changes were introduced in policies in Britain which should
be updated in GSK centres. (Laumer, Eckhardt, and Weitzel, 2010)
Environment: fair competitive measures, carbon footprint, sustainability of the natural resource are
the actions that should be taken by GSK to meet the objectives of the environment associated with
community. They should build manufacturing units that produce low emissions and waste. Also
proper measures for waste disposal should be taken to control damage to environment. More eco
friendly measures such as recycling should be encouraged by GSK. (Cantwell, Dunning, and Lundan,
2010)
Key stakeholders of the GSK are different who has various objective and goals towards the
firm and it needs to fulfil their requirements in an appropriate manner. Customers objectives are

that the company provide high quality of goods and services at the reasonable and affordable prices.
Goals of employees are that firm give high wages and salaries along with various allowances,
compensations, benefits and monetary and non-monetary rewards. Government wants that the firm
will contribute more in terms of financial which lead to increase growth of the economy and cash
collection as well. Further. Shareholder's objectives towards GSK is that it provides higher rate of
return and dividend of potential investment at the end of financial year. Hence, these all the
objectives are needs to meet by the GSK for sustain the stakeholders at the workplace.

(AC1.3) Explain the responsibilities GSK has towards its key stakeholders and
the strategies employed to meet them
The responsibilities of GSK are the most important factor in the business operations. The business of
GSK should be run by maintaining the legal frameworks, social responsibilities, ethical
responsibilities towards the main stakeholders. (Xue, Shen, and Ren, 2010)
GSK is responsible to offer better return for the investment done by their shareholders and thus
meet their expectation of profit sharing. In order to do this GSK should distribute revenue and
income equitably with shareholders. Additionally, GSK should inform their shareholders about
decisions taken by board members for strategic changes and growth of company in order to
encourage shareholder participation.
GSK is responsible to environment for its conservation and prevention of damage due to waste and
emissions generated from production units. They should use machineries that are of high end
technology that keeps low carbon emissions, low noise and generation of hazardous waste. GSK
should use proper waste disposal systems as approved by environment control agencies. They
should also manufacture medicines that are not harmful to humanity and environment both.
(Laumer, Eckhardt, and Weitzel, 2010)
GSK is responsible to government and legislation by practising their policies and maintaining rules
and laws framed by them. Also by paying taxes and duties on time GSK can act responsibly to
contribute in development of economy. They can provide transparent financial audit report to
government and agencies to maintain fair trade and responsibility.
GSK is responsible to their employees for providing anti discriminatory policies and working
environment which is safe and secure. In order to meet this GSK practices Equality at work as per
law by avoiding all practices based on biasness related to sex orientation, gender, age, disability,
religion etc. They also provide occupation safety and risk free workplace to prevent damage to
employee health and safety, additionally all critical information related to personnel’s are kept
confidential to provide sense of security. (Laumer, Eckhardt, and Weitzel, 2010)
Stakeholders are key part and asset for each organisation in the industry and firms must
fulfil their goals and objectives. Responsibilities of the GSK towards employees are such as give
better allowances and fair salary as well as provide all the facilities along with effective working
environment. GSK's responsibilities for the customers are like as provide high quality of medicines as
well as consumer goods to the buyers across the globe at fair and affordable prices. In addition to
this, towards the government it has responsibilities are such as earn high profit and increase
contribution in the GDP rate of economy. When growth rate will increase then productivity of the
firm is also affects in positive manner. Stockholders are also important for the GSK who gives capital
and firms responsibility for them is such as give more return of its potential investment.

(1B)
(AC 2.2) Taking into consideration the recession that faced UK in 2009 assess the
impact of the UK government’s fiscal and monetary policies on the activities
of GSK and AZ.
There are different governmental policies and laws within the business environment of UK. In 2009
UK market economy has faced with great recession which has made the scarcity of the valuable
assets in the economical market. With the fiscal and monitory policy the government has been
stimulating the national economies and also reduces the risks in the financial system. These policies
are impacting on the activities of the business organisations like GSK and AZ. (Klapper, and Love,
2010)
The fiscal policy are decisions taken by government to collect revenue in form of taxes from public
and corporate which are used for development initiatives of the nation. During 2009, when UK was
hit with recession various policy changes were brought about with surplus budget adjustments,
increasing tax rates, introducing new taxes to meet with the economic crisis. Example many
amendments in rate of interests that were introduced resulted in decrease in supplies within market
and thus affected activities of GSK and AZ. As a result these companies have to face loss of sales and
revenues. Further these resulted into los of return on investments made by creditors and
shareholders of these companies making both GSK and AZ face difficulties in their operational
expenses during recession in 2009. Thus this crisis affected their market value and customers.
While monetary policies are decision taken by central bank of countries regarding rate of interests,
credit supply, money supply and other monetary matters. During 2009’ recession both GSK and AZ
had to face looses in income, sales and brand value as UK’s credit rating was hampered which hit
financial stability of these countries and also the industry operating within them. But after G-20
meetings various initiatives and collaborated reforms were introduced by different countries to
tackle the global economic crisis. (Laumer, Eckhardt, and Weitzel, 2010)
Fiscal policies relies with different types of rules and regulation made by the regulatory
body. The authority who handle overall fiscal policies is the government of country and it made the
rules and regulations which are affects to the company such as GSK and AZ in positive and negative
both manner. When government spending increase or decrease then sales and profit also affected.
Further, in fiscal policy import export rules, taxation polices, tariffs etc. included which are settled by
the government of UK. When taxes increase then indirect expenditures will enhance and lead to
reduce net income of GSK and AZ at the end of financial year.
Monetary policies are relies with the financial terms and conditions which are handles by the
central bank of UK and respective country. In these different factors are considered such as interest
rate, exchange rate, reserve rate etc. When the central bank increases interest rate then company
needs to pay higher cost of debt to the commercial banks from its generated profit. Further, it
influences profit of the GSK as well as AZ in adverse manner. Hence, it can be said that the monetary
polices highly impact on both the firms.

(1C)
(AC 2.3).With reference to the Enterprise Act 2002 and article 101 and 102 of the
EU legislation, evaluate how the UK/EU competition and regulatory policies
can or have impacted on the activities of the GSK.
The enterprise act 2002 has been formed by the UK parliament in order to make changes in the
competition Law in UK in respect with the mergers and insolvency. These are referred as the
regulatory mechanisms which are used by the government to encourage business opportunities and
maintaining the competitive environment in the business of UK. (Laumer, Eckhardt, and Weitzel,
2010)
Competition policy: competition policy is set of regulations and rules which are followed by the
organisation in the competitive market. The essential measures which are needed to be followed
while stepping within the competitive market by the organisation are defined within the competition
policy. There are different factors which are needed to be followed by the organisation in their
competitive strategies. The competition policy act 1998 prohibited the monopoly in market and
allowed entry of new companies in pharmaceutical industry thereby allowing business like GSK to
operate independently to expand their business. Also, this allowed high equity of customers due to
equity in prices of medicines with UK market. These competition policies even allow equity in quality
of products, sourcing of materials etc within GSK and other pharmaceutical companies. (Laumer,
Eckhardt, and Weitzel, 2010)
Trade policy: the competition policy is also attached with the fair trading. Through the enterprise act
the office of fair trading has been made to efficiently monitor the trading rules of government and
business trade activities. GSK and AZ have to make fair activities in the trade. Also due to Enterprise
act 2002, companies like GSK do not get involved into unethical mergers & acquisitions as these
regulations allow stringent control and investigation process.
CARTEL policies under European commission control pricing within UK markets creating uniformity
or near to uniformity in prices. This helps to prevent unhealthy price war between companies
including GSK and their rivals. Also advertisements are focused on true business motives to ensure
safety and security of consumers. (Klapper, and Love, 2010)
At the working environment there are different types of competition policies and methods
adopted by the GSK for generate higher sales and revenue in comparison to rivalry firms. There is a
European Union (EU) is one of the main regulatory mechanism which lead to make the competition
rules in proper manner. Along with this Civil Aviation Authority, World trade organisation,
Commissions and authority body of competition etc. are also regulatory frameworks and mechanism
of policies at the global level. In addition to this, Competition Act, 1998 is also one of the most
important mechanism which helps to make effective competition policies for GSK business entity.

(1D)
(AC 3.2).Using a range of examples, illustrate how the forces of demand and
supply affects the pricing and sales decisions of GSK
Different market forces are there within the market to influence the organisation’s decision.
Demand and supply are the two main factors within the market forces which affects the decisions of
the organisations.
Demand is the market force where consumers are willing to purchase a product/service at a given
price in a specified time in order to consume. The law of demand states that when prices are low
then demand for quantity of product/service rises and when price is high then demand falls. Thus
there is inverse relationship between price and quantity demanded. At GSK the decisions related to
sales and pricing depends on quantity of medicines or equipments demanded in market which can
be increased by strong promotion of products and facilitation of their services. (Welford, 2013)
(Source: NetMBA, 2016)
Supply is the market force that influence producers of a product/service to supply them in market at
a given price during the specified time. There is direct relationship between price and quantity
supplied which means that as price rises supplies rise and price falls supplies fall. Hence in order to
increase sales and prices of medicines, GSK should plan activities that support their operational costs
and margins. This can be done by utilization of resources optimally, integration of advanced
technologies, improvements in online service delivery and reducing counter distribution. (Mithas,
Tafti, and Mitchell, 2013)

(Source: NetMBA, 2016)
In the market world, there are mainly two forces which lead to make changes in
organisational responses and influences to the sales, revenue and profit as well of GSK. The two
forces are such as demand as well as supply by which prices of medicines and consumers products
get changes. When the demand is high and supply is low in the market then prices of products and
services raises where the GSK's sales affected. On the other side when supply is high and demand is
low in the pharmaceutical market then prices of the firm increases. In this situation GSK give
response that in terms of positive way because revenue and yield of the enterprise increases.

(1E)
(AC 3.3)
With the aid of the management tool called PEST/PESTEL judge how the
business environment impacts /affect the behaviour of GSK
PEST analysis of GSK:
Political: under the political factors come government policies, laws and regulation in the state
including political stability. After separation of Britain from EU the business environment within UK
changed which has its impact on policies of GSK and its business activities. Many new reforms and
changes were introduced. Earlier all member states within EU had uniform policies and governance
approach. But post Brexit policies regarding quality control, health and safety policies, ethical
sourcing of materials and risk assessment etc have changed which has impacted activities of GSK.
(Mithas, Tafti, and Mitchell, 2013)
Economic: under this factor the behaviour of GSK will be impacted by economic status in Britain. UK
government has taken various reform initiatives in monetary policies that have increased purchasing
capacity of consumers with reduction in interest rates. Also VAT has been raised from 17.5% to 20%
which will raise production cost of manufacturing drugs and subsequent adjustment in final prices of
medicines. (Boons, and Lüdeke-Freund, 2013)
Social: UK consumers are highly conscious with regard to quality standards of products, so GSK is
very careful that none of their manufactured drugs or equipments creates any damage to consumer
health and safety. So all their products are properly investigated under quality checks process and
then labelled with proper manufacturing and expiry dates.
Technological: advancement in technology due to globalisation and digitalization has resulted GSK to
take approach towards online selling and direct distribution to customers. Many of their drugs are
sold through online pharmacy rather on physical counters. This saves retail costs and shifts more
price benefits on consumer ends together with facilitating their convenience and access. (Duffy,
and Jonassen, 2013)
(AC 3.3) (b)Judge how the cultural environment determines the behaviour of
GSK
The cultural factors like language, religion, values and perception affect the business as well as
workplace culture in GSK. These have direct impact on business growth in terms of low profits, sales
and low brand recognition. Hence depending on cultural factors in country of operation GSK has to
adjust their business management policies to achieve their business goals.

Example different countries have different languages so promotion and advertisements of GSK
should be based on these language changes to prevent mis- interpretation of message. Example in
UK “tabling a proposal” means immediate action while in US it means just opposite i.e. delayed
decisions. So marketing and advertising activities should take control of these factors.
Another factor like religion and beliefs of working people affect their behaviour and attitude at work.
GSK ensure a working environment where value based employee culture is nurtured where
employees respect one another’s values and customs irrespective of diversity. This prevents loss of
time and efforts to deal with employee conflicts. At GSK there is no power war or crisis due to
culture. (Becker, Kugeler, and Rosemann, 2013)

(1F)
(AC 4.1)Discuss the significance of international trade to GSK and AZ
Within the term international trade different export and import activities are associated along with
approaching to different markets. GSK and AZ have been operating in the global market through
international trade. With the international trade the organisations are extending their customer
base. Expansion of the business is also done through the international trade. With the international
trade the organisations are having better opportunities in the market.
Due to international trade many new technologies and improvement in manufacturing process,
quality control etc are incorporated among different production units of GSK and AZ. Example
production units of GSK in India are upgraded with new technologies that are applied in US or UK.
Thus there has been improvement in their product and service distribution. After Johnson and
Johnson and Pfizer, GSK has placed itself in the third place within global market as the third largest
Pharmaceutical Company.(Davenport, and Beck, 2013).
Example, with new improved machinery and infrastructure support, it was possible for GSK to
manufacture Ebola vaccine at low costs which was in huge demand in international markets.
GSK and AZ have made a wide range of products in associated with different disease in different
areas. The product development model of GSK and AZ is based on the major disease areas and the
current conditions of the health of these societies. (Becker, Kugeler, and Rosemann, 2013)
By offering large number of products in oral health care, nutrients drinks, other medicines like
Gaviscon, horlicks, Sensodyne the organisation has been approaching large consumer base
indifferent regions. These products are developed on common diseases.
AZ and GSK are currently making medicines for the broad range of world’s most common diseases
such as respiratory, oncology, infectious diseases etc. to approach other countries.
Through international trade the organisation can have better access to the other resources which
would be needed for production. The availability of different resources also can be extent through
the international trade.
Also due to international trade it has been possible to manage economies of scale effectively by
businesses. Example to manage operation and production costs, GSK and AZ can outsource their
services to countries like India or Philippines where cheap workforce is available who are highly
skilled, educated and have strong communication ability over native people of UK. This will help to
maintain overall cost of business. Moreover, due to international trade it is possible for GSK and AZ
to procure raw materials at cheap rates from countries where they are abundantly produced which
helps to maintain low costs of medicines in UK markets. (Davenport, and Beck, 2013)
Further international trades open new opportunities for business expansion and growth in foreign
locations where tax structures are more flexible or low as compared to UK. Thus GSK and AZ can
expand their operation in countries like Dubai where foreign corporate taxes are as low as 10%
which offers them scope for expansion.

(1G)
(AC 4.2) GSK and AZ are multinational companies operating in many parts of
the world. Analyze how global factors can affect their activities (Consider,
political, economic, social, technological, ecological and legal factors in the
global context but not local)
There are different global factors which are associated with the operations of the multinational
business.
Political factors: different laws in the global market and the current stages of political dimension
have been affecting the multinational companies like GSK and AZ. In order to do trade activities GSK
and AZ has to face different laws in different countries while doing import and export of the
business. Different political situation such as instability in different countries will make impact over
the business decisions and affairs of GSK and AZ due to reform in policies, trade agreements or
licences. (Davenport, and Beck, 2013)
Economic: stability in the economy within the global market is required. Unstable economic
conditions in the global market impact on the economic market assets of individual countries. Stable
economic conditions within the global market are necessary for providing mutual beneficial
approach to the customers.
Social: social trends in the global situation has been important to be analysed by GSK and AZ.
Current food habits, life styles etc which are enforcing obesity, chronic diseases worldwide must be
researched by these organisations. In many parts of the world the society has been suffering with
the obesity and also with HIV. (Davenport, and Beck, 2013)Considering these, GSK and AZ should
develop their medicine. (Hill, Cronk, and Wickramasekera, 2013)

Technological: current globalisation trends within the worldwide market influencing the business
operations. The communicational aspects should be improved by GSK and AZ. With technological
adaptation within the communicational system the organisations can approach different customers
in worldwide basis.
Legal factors: legal factors are greatly associated with the international trade. With different legal
system and policies GSK can face various influences in the international trade. Example, GSK and AZ’s
trade practices are governed by G20 forums and their guidelines as they bring financial stability in 20
member countries collaboratively including UK under international trade. Nearly 80% of foreign
trade comes from these countries and hence they are significant.
Ecological: currently global warming, scarcity in the natural products for medicines are imposing
threats in the business of GSK and AZ due to low availability of resources or materials. Also
international protocols like KYOTO have their impact on activities of these companies mainly on
reduced emissions from production units to conserve climate change. These agreements establish
global compliance systems between regulators and companies to cope with responsibility on these
concerns. (Becker, Kugeler, and Rosemann, 2013)

(1H)
(AC 4.3) Evaluate how the policies of the European Union, including the ones
mentioned below, can or have impacted on the activities of GSK and AZ
Different EU policies are impactful in the business of GSK and AZ. With the changes in the policies EU
impact over the business activities of multinational companies.
Border trade is the flow of services and products which are exported and imported across the
international borders. Crossing the border would be positive in expanding the business activities.
Excise tax and VAT are associated with the boarder trade. In the reduction approaches of the
barriers in cross boarder business activities, the lower excise tax over the pharmaceutical products
would be efficient for doing business by GSK in profitable aspects. With low VAT such as in Spanish
boarder the import and export cost can be reduced by GSK and AZ. Thus policies on import, export
etc will add to operational and production costs in manufacture of drugs thus pushing price
adjustments in final product and to their consumers. (Hill, Cronk, and Wickramasekera, 2013)
The trade barriers are associated with every product which is traded. Non discrimination and
reduction of the trade barriers under EU’s free movement of goods, people and trade between
member nations would impact on the market access of material, distribution and on the national
welfare. The removal of the discrimination would impacts on the equilibrium of the prices in long
run measures of GSK. The removal of the restricted policies can negatively impact on the
organisation as strong competition policy can foster free entry, resource allocation etc due to which
GSK observes these consistently to remain fair in market and maintain an image of favourable
company to remain competitive and win confidence of their suppliers and consumers. (Becker,
Kugeler, and Rosemann, 2013)
Technical trade barriers are associated with the EU policies and impact on the freedom of the
movement of the products. The policies of health, safety and environment are harmonised which
are impacting on the products of GSK. In March 1968 EU had taken certain steps in harmonising the
regulations which are concerning to pharmaceutical products. These policies have brought about
with the changes in the approximation of the technical and safety standards within consumer
protection measures that are imposed in the business activities and products of GSK to produce and
deliver medicines and services that are safe for consumption and do not cause damage to humanity
and environment. (Davenport, and Beck, 2013)

Task 2
Explain the three economic systems (Free market, command and mixed) and
discuss why you think one of them allocates resources more effectively than
the others (AC 2.1)
Free market: free market has been developed over the power of the demand and supply of
products. Within this economic system there is no government intervention.
Command economy: within the command economy the government has total control over the
pricing of the products and services as well as on the production. The types of goods and services
which would be produced are decided by the government. The distribution channels which are
associated with the business are also decided by the government in this economic system. (Hill,
Cronk, and Wickramasekera, 2013)
Mixed economy: within this economic system there are both the features of command economy and
free market. This economy is partially controlled by the government and the other parts are based
on the ratio of demand and supply. Within this economy public and private sectors are involved.
(Becker, Kugeler, and Rosemann, 2013)
With the free market the resource allocation has been dependent over the customers. Depending
over their demand the supply of the products is done. Through centralised planning the resources
are allocated by the government in the command economy as they decide what to produce and
through which components. In the mixed structure the resources are allocated in accordance with
the demand and supply.(Duffy, and Jonassen, 2013) The private sector allocates the resources
through analysed demand and supply graph and public sector allocates resources through
centralised planning.
Within these economic structures the mixed economy has been more effective for the resource
allocation as here resource allocation is dependent over customers’ power of buying and the
customer welfare as well as business environment factors are maintained through the command of
government. (Hill, Cronk, and Wickramasekera, 2013)

Task 3
Explain how prices and output decisions are determined in a perfect competitive
market, Monopoly, monopolistic competition and Oligopoly. (3.1)
Perfect competitive market: in this market there is large number of small buyers and sellers who
have strong knowledge of markets. The barrier to entry and exit in this market does not exist and
hence business can operate easily. There is no market power in this market. The firms are offering
similar products so competition level is high and hence prices of product/services are mostly fixed.
Demands of the products are impacting the output decisions and the purchasing capacity of the
customers is the key indicator of the pricing decisions. (Boons, and Lüdeke-Freund, 2013) Thus
businesses in these market structures act as price taker due to limited restrictions and hence output
and price depends on demand and supply within market and organizations flow with these changes.
Monopoly: within this market structure there is single seller but large number of buyers. There is no
close substitutes or close competitors within this market and there is no price competition. The
market power is absolute based on decisions made by single firms and the government regulation is
existed. As there is only single seller they act as price makers and hence set a fixed price. Also due to
only single seller the demand of the products are always higher in this market. This high demand
leads to the output decisions that are monopoly to achieve supernormal profits. (Becker, Kugeler,
and Rosemann, 2013)
Monopolistic competition: there are different small organisations within this market structure. The
production is dependent on the differentiation of the products. Non-pricing competition is
significant in this market. Thus decisions related to prices and outputs are based to target customers
through uniqueness of product/services, human capital and distribution process to achieve
competitive advantage. Thus here firms are price makers who set price as per consumers.
Oligopoly: in this structure there is presence of only few big firms who dominate markets. The
pricing and output decisions are dependent on customer taste, preferences, level of competition and
acceptance of product/service in the markets. Also these bug firms show dominance due to
restricted entry by new firms in the markets mainly due stringent policies, taxation rules and norms.
(Becker, Kugeler, and Rosemann, 2013)

Conclusion
Every organisation has been operating within business environment. Through analysing the current
situation within the market the business can operate in successful way. There are different purposes
of every organisation. Different types of organisations made different purpose within their products.
Through meeting the objectives of the customers and other stakeholders the business can be run
with enhancements approaches. Meeting the objectives of the stakeholders and also maintaining
responsible approaches within the business operations is essential. EU develops different policies
over the trade and the business activities within the trade such as reduction of the trade barriers and
policies can influence international business.

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