Impact of Monetary and Fiscal Policies on Business Activities in UK

This report analyzes the impact of monetary and fiscal policies on business activities in the UK, focusing on the case of Tesco. It discusses the role of these policies in regulating the economy, their effects on businesses, and the influence of global and regional developments on business activities. The report highlights the competitive advantages and challenges faced by Tesco in the context of these policies and global factors.

Business Environment
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TABLE OF CONTENTS
1. INTRODUCTION 1
2. Impact of the monetary and fiscal policies
on the business activities in UK
1
3. Asses the development in global and
regional aspects shape business activities
6
4. CONCLUSION 9
5.REFERENCES 10
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INTRODUCTION
Business Environment is defined as the factors including internal and external, which
affects the business. Both factors influence each other that affect the organisation and these
external and internal factors work together to accomplish the business objective. For
example external factors like political condition, economic condition of the country and
internal factors like organisational culture both affect the company. Tesco is the leading
brand name in the UK in the retail and supermarket industry which grows faster, it operates
largest range of groceries stores and supermarket in UK. Organisation suffers from the
fiscal and monetary policies which affects its development in UK and in Global market.
Further it discusses the regional and global developments reflect the business activities. In
this report, discusses about monetary and fiscal policies in UK influence the Tesco. Also it
concludes the global and regional aspects development affects the business activities. As
the UK has stability in the economy of the country and adopting new cultural and social
things in their country.
Impact of the monetary and fiscal policies on the business activities in UK.
UK has the largest economy in the world which is on sixth place globally. It
exhibits wide range of trading all around the world. As it possess the strong economy just
because of its good policies in terms of the monetary and fiscal terms. UK has the stability
in their government after Brexit as the EU has suffered a lot. Discusses on the impact of
such governmental policies. These policies helps to regulate the country’s economy and it
easier the survival of the people. People improves their living standard, their businesses
and thinks innovatively. Monetary and Fiscal policies are defined in financial ways which
includes different criteria implements on the charges for thee development of the country
by people. As these charges imposes on the people in the form of taxes, which have to pay
by the population exist in the country (Wood, Coe and Wrigley, 2016).
Monetary Policy
These policies conclude the interest charges and cash flow in the country, its uses
and their supply of money which helps the country to achieve their objective in economy
senses. This monetary policy is handled by the Bank of England which circulates the
money and make decision on the interest charges since 1997. Objective of this monetary
policy in UK is to keep the inflation stable and lower. In this way the Bank try to keep the
economy growth stable. If there is stability in the economic condition of the country, it
supports the country to target for large economy (Gonen, and et.al., 2017). 2% inflation is
targeted by the government. Setting the interest rates, it is about the rising in the inflation
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rate if the inflation rate is higher than the interest rates also higher. As the interest rates
rises, it reduces the demand of the consumers and prevents the economy which is
expanding too fast. If the economic growth in down, then there is cut off in the interest
rates , so the lower interest rates help too increase in the economic growth which leads too
reduction of the inflation rate. In some exceptional conditions, the Bank of England applies
the unconventional monetary policies. For example, in period of 2009 to 2017 there was
unstable condition in the economy of the UK then the government lowers the interest rates.
Hence they pursued the quantitative easing- a policy which includes the bonds of
government and increment in the cash flow or money supply (Nguyen and et.al., 2017).
Fiscal Policy
Fiscal Policy is about the changing tax amount and government spending which
directly influence the level of economic activities of the country. Fiscal policy affect the
levels of the government borrowings. It is not frequently used while government uses it to
moderate the economic condition. There are lots of political difficulties to change the rates
of the tax, it just reduce the inflation pressures. The government have to leave the
economic management to monetary policy and the Bank of England. But automatic
stabilisers of fiscal play an important role to fix the economy which is moderating
economic cycle when there was the recession in UK. Government automatically receives
the lower revenue in form of tax and spends a large amount the unemployment benefits.
Same as monetary policies the government have to adopt the expansionary fiscal policy in
exceptional conditions. For example, government in UK have to lower the rate of VAT
which again stimulate economic activities when there was the recession in 2009. It has
deep effect on the GDP about 10% borrowing to rise it (Prajogo, 2016). This level of the
borrowing the public which helped to provide a new energy to regulate the economy. As
the political cost is high to the government borrowing level. So there was the labour
government lost the 2010 election. So the government promised to follow the conservative
winning which is austerity policies and government spending. In period of the recession,
government spending increased and lower the taxes. It leads to the disposable income of
the people after lowering the taxes. This helps to higher the economic growth and
decreases the unemployment (Kljucnikov and et.al., 2016).
Objective
Low inflation
Strong economy
Lower the unemployment
Maintain sustainable public finance.
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Changes in the fiscal and monetary policies affect the businesses. These policies
directly affect the business and their operations. As the monetary policy impact the supply
of money, perform the role for regulating the inflation rate, cash reserve ratios, and bank
requirements. Fiscal policies which refers to collection of the revenue and spend by the
government. As explained it affects the taxation rates throughout the economy. So there is
deep impact on the businesses of these policies. It creates the competition among the
organisations mainly in supermarkets or airport operators which leads to the monopolies in
these industries. Competition policies try to keep the fair decisions in the market and which
open the unfair activities are not considered by the market competitors. So the Tesco
supermarket chain affected by this. it has tried to cooperate or merging the operations in
businesses senses with other organisations. Also it franchises the super market in the
market, so in this situation it creates thee monopoly in the market (Bah and Fang, 2015).
As there are different market structures which has to be followed by the company
like the perfect competition, monopolistic competition, monopoly, oligopoly, etc. In the
perfect competition there are many suppliers and number of consumers. In monopolistic
competition, there is only one supplier is present to supply the raw material while there are
other suppliers are present. So basically it depends on the cost of the product. In monopoly,
the price set by the supplier it is fixed. In perfect competition, the prices of the products are
average in market (Kozubíková, Homolka and Kristalas, 2017). So Tesco set the prices as
lower as they can afford the productivity costs. So that Tesco is monopolistic competition
in UK. In stepping to the market Tesco have to meet the standard criteria that has set by the
government like the quality of the product, and prices which are according to the financial
condition of the consumers. The perfect competition in market, is about the perfect demand
and supply. In which the previously accepted the norms by the government should be
accepted by the organisation. Quality of the products, and prices are competitively lower
than the others in the market, it becomes successful in this criteria.
Development of the supermarket in the market is very easier when they have
opened the local stores which help them to increase their reach towards people. It creates
the space for more suppliers and they must be cost efficient and good quality of products
which are according to market and match the criteria for the target segment. As there are no
economies in the world which are independent, so all economies influence the other
economy at global level. The basic necessary commodities impact the domestic market by
the running of vital businesses. For example there is interconnectivity between he global
economies which leads to the recession all over the world. Also there is the effect of the
shortage in the supplies of the raw material which should be cost efficient, and those
businesses which relies on the import of the goods from other countries. International
exposure had influences the market to be diversified and intensified due to the market
demand (Sims, 2016). Tesco had a great advantage of the international exposure they
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provide the goods or groceries at minimum cost and quality products. As they have their
own productivity range they have profit in it. As they have no expenditure for importing
the raw materials (Nakata, 2016).
Tesco has competitive advantages form these policies as they have invested to
increase their local and supermarket store in UK for generating more revenue. So the
government implies less taxation o them as they provide the products at affordable prices to
their consumers. This again beneficial for the country as there is unemployment in the
country, it provides the jobs which leads to raise the economy of the country. People get
help from the government which lowers the taxes on the food products and so consumers
have increases the credibility. These policies possesses great impact on the country’s
economic condition, it stabilises the economy to enhance their growth. It creates more
options in the market for the small businesses. As people can utilise their talent and
innovative ideas which again help the people to raise their standards. Tesco have the profit
from these policies as the country relies on these policies, company can get more profits
by the implementation of the monetary and fiscal policy as they create new franchises, new
suppliers and new consumer (Afonso, Jalles and Kazemi, 2019). Company have the profit
to enter into the global market. This helps in business expansion for the Tesco.
Analyse how development in global and regional aspects shape business activities.
Different countries of the world are connecting with each other for their own
purposes like they want to enhance their reach towards world. So in this way the people
connected to each other for businesses purposes.
Development in Global Aspects
Globalisation leads the businesses to increase and enter into the global market
which again help the country for increasing their economy. As it has three main aspects
which are political, socio-cultural, economic (Schiavone, 2016). So all these factors affects
the businesses at global level in which socio- cultural factors influence the countries to
exchange their culture, tradition, languages, fashion, food etc. Social and cultural changes
affects the business of the particular country. It increases the demands in the public for
other things which may not available in their country, so they have import from other
countries. Political factors of the country affects the condition of the country in many
senses like they have to follow the rules and regulations in the country. If there are changes
in the political conditions like Brexit in UK and EU countries, people may suffer from this,
as there is changes in government policies and structures. They applies new rules and
legislation in their country which has over all affect, mainly it influences the business
activities. As the government changes, the companies have to follow the new policies and
procedures. They have to pay the duties on the import and export of the good. It may leads
to lower their profits. Economic changes, this is mainly concerned because it is the
backbone of the country which affects the GDP growth as well (Rittberger and et.al.,
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2019). So in fluctuation in the economy people have survived from many downfalls like
there may be recession period, the people of the country may suffer from unemployment.
International Monetary fund as given four aspect of global development which are trade
and transactions, capital and investments, migration of people, dissemination of people. All
these aspects had huge impact on the country. As the businesses have to suffer in trading
the goods and transactions will be affected like change in currency. Organisation may have
their own business plans like they invest in the global market to generate high revenues.
Migration of people also affect the condition of the country, people moved from one place t
another in search of the jobs or finding new ways for income or many other reasons. It
leads to unhealthy issues in terms of the mental condition of the people, stress, and also
there financial condition becomes bad. So the companies have also negative or positive
effect of the economic factors, as they can have potential market in positive sense while
they may loss their stability in market in negative aspect (Bennett and Raab, 2017).
So the business have the great impact of the development of the globalisation, they
may suffer from the changes in their consumers demand, economic conditions also affect
their businesses. Changes in governmental policies leads them to slower their business
activities, as they have to adopt many policies rules and regulations for the smooth flow of
the business. Tesco has to adopt these global changes in UK, country suffers from the
Brexit which have affect their business growth. Company has wide range of supermarkets
in the country, so they faced the issues of recession, lower economic condition, so their
investment and capital also affected. They have to find new ways of income so that they
can match their objectives. Globalisation makes their mind to enter into new market so that
they can achieve their target for profit motives and become brand which increases their
value in market. They provide good quality of the products at lower prices so more people
attracted to these stores. Company provides discounts, offers to the consumer which fulfil
their requirement at low prices. To invest in the new market company have to prepare
business plan and more funds for investments and they have mutual decisions among their
investors or stakeholder. People moved from the country due to changes in the condition,
so it losses the company the losses in consumers, they need to find new potential buyers.
As the company increases their branches in country, this will have encourages the
economic condition of the country (Bosi and et.al., 2016. ). Also people come from
different regions due to migration, will raise the demand of the products. It gives the profit
to the company. They can learn from the diversity as they able to appoint the different
people in their organisation which may affect the organisational culture. The internal and
external environment of the company will influenced by the development of the global
aspect.
Development in regional aspects
UK has survived from many changes during these years, regional development affects the
economy of the country. As there are lots of changes adopted in UK which affect their
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public, local vendors, organisations and political conditions. The regional development is
affected by different factors like social –economic and environmental factors. These socio
economic factors mainly human resources, financial conditions, infrastructure
developments and many more things affect the condition of the country and influence the
regional development. As people who has start their own businesses for money motives, as
opening in the new small businesses in the country it support the economy with increased
GDP per capita income. Also people have innovative ideas of businesses, people adopt
technology transformation which easier their lives. As the advancement in technology, it
leads to changes the management system of the government. It imposed great impact on the
people mentality. Business ahs very positive effect of these socio-economic factors like
more highly skilled employees in the organisation, innovative ideas, and problem solving
attitude in the worker of the organisation proved helpful for the expansion of the business
(World Health Organization, 2019).
Regional growth includes several strategies in terms of the business, commercial
services and funding programs. All these things help the country to get the success in
establishing the good economic condition in the UK. As the UK’s separation from the
European Union promoted the government to make new policies which is favour of the
productivity growth. So these policies can help the country to get recovery from the
financial crises as well. They have so much liberty in their market and also working to
make it more flexible after Brexit. It is the best business environment for the investments
and global expansion purposes. Import and export is equal to 62.5 percent of the GDP. So
they have opened the market for all. As they have average applied tariff rate is 2.0 percent.
In some parts the UK has removed the tax duties on trade, also they reduces the produce
specific regulations and they don’t support some barriers in trading like smooth import
export, higher the profits etc (Danaei and et.al., 2016).
Companies in the country have many benefits from their changes in politics,
technical and socio-economic factors. Businesses are expanding with increased
productivity at lower cost. The people are satisfied now because of the end of the financial
crises. Country is adopting new culture so it changes the demand of the consumers in
market. People like the innovative and quality products. Tesco has great benefits of the
changes and development in the UK. They have chances for expansion of their business as
they have freed the tax duties in import and export it enables them to trade at big level. As
the company recruits the employees it will bring some advancement as they have new
organisational culture and their business structure will be affected, also the innovation in
the technology increases the productivity. They have highly skilled employees in their
company which have proper knowledge of the market and conditions. They know the
demand of the consumers. So that they can plan according to them which brings more
potential buyers in their local stores as well as supermarkets. Hey adopt the regional culture
so that they can attract more customers (Prajogo, 2016). To become the globally first
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largest supermarket ranges, they can collaborate with the local vendors and they can hand
shake with new suppliers which again help them form the costing. As they provide raw
material at good prices. This brings latest trend to b followed in the company they will use
the digital online marketing strategies as they promote their business online with providing
good discounts. As they have local market knowledge like they know about the SME’s so
that they can tie with them. People adopts new culture so that company can brought up
trends for festival , like they provide the occasional stuff, home decor etc, this will impact
their business. But there may have some challenges and issues in adopting new structure in
the business due to the external environmental changes like they may e unable to fulfil the
requirement of the consumers, also it will impose the losses in inventory as they have out
of stock products or excess of products. So they have to bring the technology
advancements according to the world, like they have uses the updated database online,
cloud computing, data about their workers online which maintains the consistency of the
organisation (Kljucnikov and et.al., 2016).
Regional development helps the organisation to establish new milestones for
achieving growth in the businesses. As they great impact on the economy, because
development needs huge investments so their may be fluctuation in the economic condition
which slow down the business activities. So Tesco have to be prepared for these
consequences and strong backup for themselves. It will provide them to stable in market
for long terms.
CONCLUSION
According to the study about the impact of the fiscal and monetary policies on the
business organisation in UK, which helps the country to become stable in economic sense.
It may affect the businesses as the changes in policies and taxes amount, the growth of
business is slower down. But many positive effect are there like it provides aid to the
consumer so it help the business to maintain the stability. Fiscal and monetary policies are
adopted by the government to maintain their economy so that people have less burden of
such policies and legal laws. Businesses have to assign and agree with these policies in
terms to regulate their firm. Tesco follows the governmental rules and regulations, it makes
their survival very easier. Also the development in the global and regional aspects shapes
the business activities like they have adopted new culture in their organisation and
enhances their productivity. Also, organisation is free to enter in global market. Regionally
is affects the local vendors and opens new door for the [people to do their own start-ups.
Tesco has positive impact of such development in advancement of technology, they
appoint highly skilled employees, they change their business culture, they change their
products. So overall these aspects help the company to become more valued in market.
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