Introduction to Business Environment - PDF
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Added on 2020-10-04
Introduction to Business Environment - PDF
Added on 2020-10-04
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Introduction to BusinessEnvironment
Table of ContentsINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................11) Monetary policy......................................................................................................................12) Fiscal policy............................................................................................................................33) Global factors..........................................................................................................................64) Regional factors......................................................................................................................8CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
INTRODUCTIONBusiness environment refers to sum total of internal and external factors which influenceon business. Business environment can consist factors like suppliers, consumers, competition,improvement in technology, government activities etc. It is helpful in determining the businessopportunities, helpful in planning, increase profitability, make improvement in overallperformance etc. Company can control the internal factors not external (Schularick and Taylor,2012). This present report is based on different business sectors of United Kingdom. Under thismention report will be discuss about the impact of monetary and fiscal policies on activities ofbusiness firms with in UK. The impact of regional and global factors in shaping the businessactivities will be discussed here in detailed manner. In order to conducting this presentation,there are total four members are included in a group. MAIN BODY1) Monetary policyIt refers to process through which monetary authority of country like currency board,central back etc. assure the stability in price as well as trust in currency. This policy ismacroeconomic that laid down through central bank. It consists management of interest rate andmoney supply through government of country in order to attain the macroeconomic objectivessuch and consumption, liquidity, inflation and growth. Under this, the main objectives of thecentral bank is to manage an inflation and also minimize unemployment rate. In order to reduceinflation, central banks use the contradictory monetary policy. The monetary policy includesusing the interest rate and some of the other monetary tools to develop impact on consumerspending power along with the aggregate demand (Rey, 2015). The main aim of monetary policyis to stabilise economic cycle and avoid recessions. It is related with the credit availability andinterest rates. The monetary policy develop the negative impact on businesses in UnitedKingdom because alteration on the monetary policy enhance demands consisting enhance creditsupply, interest rates and many others.Impact of high interest rates Usually, Central bank enhance the interest rates when inflation is to be predicted toenhance in inflation target. The higher interest rates tend to minimize inflationary pressures andrate of the economic rates. In addition to this, high interest rate incline to moderate the economic1
development, they can be maximise borrowing cost, minimize disposable income and also limitgrowth in spending power of customers. Under this, when the consumers pay minimum inmarket then it provides money to them for spend that develop the ripple impact of enhancespending throughout an economy. The Bank of England has enhanced interest rate from .5% to .75% and it is high levelrate. In United Kingdom, interest rates were slashed to 0.25% after the .5% for record to theseven years (Galí, 2015). For an example- In context to retail sector, if the interest rate will be high then in thiscase the ability to pay to consumers will be reduced. It will minimize ability of customers topurchase the services and goods and through thus sales of organisations in retail sector will bereduced.On the other hand, business firms in United Kingdom can make more investment ininterest-bearing accounts for the purpose of make money. At the time of high investments, firmscan earn the more money from these kinds of investments. The enhancing interest rates candevelop the high affect on the several business due to demand of the credit goes down and alsothe customers switch to saving the money to spending it. Impact of Monetary policy on InvestmentMonetary policies is related to strategies which employed through central bank withregard to money that circulation in an economy. The main aim of the monetary policy is to attainthe long term economic development and the central banks may have the various statedobjectives towards end. In addition to this, monetary policy can be accommodative andrestrictive. When economy of country is developing too fast and the inflation is more then in thiscase the central bank should take some necessary step to cool economy with the help of raisingthe short term interest rates.There is a direct and indirect impact of the monetary policy on investment. Direct impactcan be through direction and level of the interest rates. On the other hand, indirect impact isthrough the expectations regarding inflation is headed. Control of money supply Money Quantity circulation in an economy impact macro and micro economic trends. Atmicro level, there is large free supply and easy money for the personal spending. In this, peoplecan get the loans like home mortgages, personal and car loans in an easy manner. On the other2
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