Assignment on Economic Systems of IKEA
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Added on 2019-12-03
Assignment on Economic Systems of IKEA
Added on 2019-12-03
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Table of ContentsINTRODUCTION......................................................................................................................1TASK 2......................................................................................................................................12.1 How economic systems attempt to allocate resources effectively...................................12.2 The impact of fiscal (government spending and borrowing) and monetary policy inIKEA organisation’s activities...............................................................................................22.3 Impact of macroeconomic policies on UK organizations and global economy...............3TASK 3......................................................................................................................................43.1 Explain how market structures determine the pricing and output decisions of businesses................................................................................................................................................43.2 Way in which market forces shape organisational responses..........................................53.3 How chosen organisation is shaped by the business strategies........................................5TASK 4......................................................................................................................................64.1 Discuss the significance of international trade to IKEA..................................................64.2 Analyse the impact of 2 global factors on IKEA.............................................................74.3 Evaluate the impact of policies of 2 European Union policies on IKEA.........................8CONCLUSION..........................................................................................................................8REFERENCES.........................................................................................................................10
INTRODUCTIONEconomic systems is an organized method in which nation or state allocate its resourcesas well as apportions services and goods in the national society. The economic systems ofworld fall into four categories, i.e. market economy, traditional economy, mixed economyand command economy but there are unlimited difference of each of them. An economicsystem should define what to manufacture, for whom to produce and how to produce. On thebasis of produced commodities and the business environment, some definite economic tacticswill be more successful. Besides this, a market is defined as set of sellers and buyers,generally known as agents who with their interaction both potential and real, define set ofgoods and its prices. Therefore, the market structure concept is understood as those marketcharacteristics that affect the firm’s results and behaviour functioning in that market. Here,the report is inculcating about role of economic system in resources allocation and impact ofmacroeconomic policies on UK firms including IKEA that designs plus sells ready to useappliances, home accessories, small motor vehicle and furniture. The middle section isillustrating market structure that determine output and pricing decisions of IKEA, marketsforces that shape responses of organization and business plus cultural environment that shapethe company’s behaviour in the market. Finally, the end of paper is summarizing globalfactors that shape UK’s business activities. TASK 22.1 How economic systems attempt to allocate resources effectivelyA government of company follow different economic systems that are introduced normallyfor effective allocation of resources that are illustrated below:Free enterprise economy– In such economy type, markets allow mutual beneficial exchangebetween customers and systems plus process, which based on markets for sorting outeconomic issues called as market economics. In a liberated economic market, resources areapportioned by the communication of self-governing and free market forces (Tepelus, 2005).It refers that producers define how to manufacture, customers define what to produce and onthe customers purchasing power it depends who will get the end products. Here, the marketeconomies work by facilitating shortest interface between producers and customers those arefollowing their personal interest. The self-interest lies at the centre of free market economies(Austin, 2002). 1
Planned or command economy–An appropriate solution to one big economic issue is scarceresources allocation or appointment of any agency by government. The particular procedureis defined to vital planning and economies that absolutely utilize this planning are known ascommand economies. In another terms, here resources are instructed and directed bygovernment to be utilized in specific manners. For instance, they can force citizen to decidethe number of hospitals and roads to be built or to pay taxes. There are some benefits thecommand economies have over free market, specifically in terms of rare resourcescoordination in the period of crisis, such as natural calamity or war (Cavusgiland et.al.,2014). Mixed economic system: The term mixed economic system is based on two aspects which ismarket forces and planning of government. In this type of economy the resources which areallocated in the private sector are allotted on the basis of the type of sector (Fan and Phan,2007). For example in the grocery sector of UK, all the resources are allocated on the basis ofmarket forces. In country the allocation of resources is based on combining the forces ofmarket and planning of government like in health care industry of UK there is provision forboth the sectors that is private and public. In most of the countries of the world, there ismixed economic system and only the difference is of share in balance of economic system(Eising, 2007). One of the example related to difference in balance of economic system isthat in Cuba, government allocates the resources in extensive manner and on the other side inEurope, allocations of resources is based on mixed economic system which is based oncentral planning and forces of market. 2.2 The impact of fiscal (government spending and borrowing) and monetary policy in IKEAorganisation’s activitiesFiscal policy is a decision of government in relation to taxing and spending. Ifgovernment desires to stimulate in economic growth, it will enhance spending for servicesand goods. This will ultimately enhance the service and goods demand. As demand goes up,production of furniture should go up at IKEA and it will require to hire more manpower (UKFiscal Policy, 2015). Due to this, unemployed individuals may have jobs as well as money tospend on service and goods. It will further improve the demand of more production and thusthe growth cycle will continue. By this IKEA may get more income or business as individualshave more amount to spend on its furniture’s. Therefore, spending of government tends toaccelerate economic development (Edwardsand Rees, 2006). 2
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