Business Economics Report: UK Economy and Co-op Food Performance

This business economics report provides a comprehensive analysis of the UK economy and its impact on the Co-op Food grocery business. The report begins with an overview of the UK economy, its economic system, and key characteristics. It then delves into microeconomic concepts such as scarcity, resource allocation, supply and demand, market equilibrium, different market systems (perfect competition, monopoly, and oligopoly), and opportunity cost, evaluating their relevance to Co-op Food's decision-making. The report further examines demand elasticity and its significance for the firm. Task 2 focuses on pricing implications, corporate objectives, and a comparison of market structures, including an evaluation of the impact of UK regulations. Task 3 analyzes the changing economic structure of the UK and its effects on Co-op Food, alongside an evaluation of economic tools and government policies. The report also assesses the UK's economic performance. Task 4 explores competitive advantage, the merits and demerits of free trade, and the impact of developing economies and recent economic shocks on the UK economy and Co-op Food. The report concludes with a summary of findings and references.

BUSINESS ECONOMICS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Summary of UK economy, its economic system and characteristics.....................................1
TASK 1............................................................................................................................................2
1.1 Explaining scarcity problem and allocation of resources.................................................2
1.2 Explanation of importance of supply and demand as well as equilibrium.......................2
1.3 Different kinds of market systems and opportunity costs................................................3
1.4 Evaluating role of opportunity cost in order to determine that in which way economies tale
decisions.................................................................................................................................4
1.5 Explanation of demand elasticity and significance of it...................................................4
TASK 2............................................................................................................................................4
2.1 Explaining implications of pricing as well as corporate objectives.................................4
2.2 & 2.3 Comparing market structures in terms of determining price and how these affect to
the firm's behaviour................................................................................................................5
2.4 Evaluating impact of UK regulations on market power...................................................5
TASK 3............................................................................................................................................6
3.1 Analysis of change in economic structure of UK and its impact on Co-op Food............6
3.2 Evaluation of economic tools...........................................................................................6
3.3 Evaluating government's policies success in order to meet macroeconomics objectives 7
3.4 Evaluating economic performance of UK .......................................................................7
TASK 4............................................................................................................................................9
4.1 Competitive advantage theory..........................................................................................9
4.2 Merits and demerits of the free trade..............................................................................10
4.2 Analysing impact of developing economies...................................................................11
4.4 Influences of recent domestic and global economic shocks on the economy................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

ILLUSTRATION INDEX
Illustration 1: Equilibrium chart.......................................................................................................3
Illustration 2: UK GDP rate.............................................................................................................8
Illustration 3: UK inflation rate........................................................................................................8
Illustration 4: UK unemployment rate.............................................................................................9
Illustration 5: Estimated impact of world shocks on UK’s GDP...................................................12

INTRODUCTION
The study under which financial problems, challenges and issues faced by corporate
world are involved is considered as business economics. It deals with basically monetary policies
and various issues like management, strategies, business expansion, price determination, etc. The
present study is based on "Co-op Food” company which is UK based and operating in grocery.
In the grocery items, it majorly deals with vegetable products in the overall UK market. The
study provides explanation of law of supply and demand along with the description of market
equilibrium. Further, it shows about different kinds of market structures and the way these lead
to put their impact on Co-op Food business organisation. In the third part of study, explanation
about economic structure of UK is given along with its impact on selected firm. At the end of
project, it focuses on emerging or developing economies along with their impact on company.
Summary of UK economy, its economic system and characteristics
Economy of the United Kingdom comes at fifth largest national economy across the
world in terms of growth rate. While looking at the changes in GDP growth rate of UK economy,
it has been observed that from 2015 to 2017, GDP has declined from 0.5 to 0.3. In the current
era, in UK, situation of recession arises which lead to reduce the growth rate of economy. When
talking about the system of economy of UK then it has mixed economy which is mixture of
socialist and capitalist both. Being a developed economy in the world, mixed economy is the best
which helps to the firms in order to takebusiness decisions at their own up to some extent.
Moreover, characteristics of mixed economy system are as follows:
 Mixed economy is co-existence of two kinds of companies available in the corporate
world like private and public.
 In this, private business entities have fullfreedom to consume resources and property of
their.
 At the time of making adjustments of flow of money within economy, government of UK
takes corrective actions.
 Here, customers have authority to purchase and sell all the commodities.
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TASK 1
1.1 Explaining scarcity problem and allocation of resources
A situation of economy under which demand of vegetable items is higher by customers
but accordingly supply is not observed in the market is identified as scarcity problem. In short,
when demand is higher against supply then problem of scarcity comes into consideration in the
UK economy. In this kind of problem, company has to take an effectual decision which is like
charging more price of scare vegetable goods. Apart from this, to recover and reduce the
condition of scarcity arisen in economy, country takes initiatives for allocating resources as per
the demand of consumers (Bartoli and et.al, 2014).
In the UK economy, scarcity arisen for vegetable products up to a higher level and to
enhance supply of this management of Co-op Food needs more resources. Here, the government
has taken action and provided more number of resources and effective seeds which helped the
firm to improve their production of vegetables. Along with this, prices of available products have
been increased by the firm which led to reduce their demand. Moreover, with the help of both
strategies, problem of scarcity is to be reduced and overcome within UK.
1.2 Explanation of importance of supply and demand as well as equilibrium
Ability, desire and willingness of customers to purchase the products and services at any
cost or price is identified as demand in the economy. Apart from this, goods as well as services
provided by company in market for the purpose of selling is known as supply. Both these aspects
play a crucial and significant role in any economy which supports to resolve various economic
problems. One of the very basic functions of this supply and demand is to derive equal condition
in UK economy. (Caravle, 2012). Moreover, when the Co-op Food firm wants to derive price of
its products then it considered supply and demand of vegetables items.
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Illustration 1: Equilibrium chart
The point where demand and supply curves intersect each other, it is called as
equilibrium in the economy. In case if any factor like supply or demand changes then
equilibrium point shifts either in upward direction or downward. It plays the major role to
determine price of vegetables along with other items. In the current case, price will be charged at
P1 point at where supply and demand both curve intersect. With the help of equilibrium, firm
comes in position to know the price to which products and services are required to be sold.
1.3 Different kinds of market systems and opportunity costs
In every economy, there are different kinds of markets available under which companies
exchange their goods and services with customers. Different systems of markets have various
rules, characteristics and policies which lead to create a huge impact on company. Moreover,
explanation of such markets is as follows: Perfect competition market: When there are more number of buyers and sellers available
in economy and level of competition is also high then it is called as perfect competition
market. Power to bargain for prices is with both the suppliers and buyers in this kind of
market system (Belghitar and Khan, 2013). It is important for competing in the market
and get opportunity to generate more sales by doing bargaining. Monopoly market: Under this type of market, there is only one seller and many buyers
available and bargaining power is with the seller only. Here, company charges price and
generate profit in accordance with its convenience and desire. Along with this, it is highly
important for economy in order to cover a particular area.
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 Oligopoly market: The market under which few number of firms sell goods and services
to many buyers is called as oligopoly and in this, competition is lesser than perfect
market. To operate and earn money up to a certain level, market structure of oligopoly is
beneficial for companies (Ejdys, Ustinovičius and Stankevičienė, 2015).
1.4 Evaluating role of opportunity cost in order to determine that in which way economies tale
decisions
Opportunity cost is the amount which can be earned by a firm in order to select one
option and give up other available with it. Through this concept, Co-op Food business entity able
to determine that from two suppliers which one provide raw materials at lower cost. When it able
to generate and earn opportunity cost then total expenses will be lower which lead to help for
making the pricing decisions. In case, it lost cost of opportunity then take decision to sell
vegetables at higher price which. Hence, it can be said that opportunity cost is one of the best
tools to make economic decisions in the grocery market.
1.5 Explanation of demand elasticity and significance of it
The term which supports Co-op Food firm in order to analyse relation among two factors
like price and quantity demanded by customers is called as elasticity of demand. By changing in
demand of vegetable products how many changes occur in the pricing factor of respective items
are to be measured with the current aspect. It helps company in order to set the level of prices
along with interacting with various market conditions in effectual ways (Chand, 2016). In the
market, some buyers demand inelastic and elastic kind of products for that price discrimination
decision also can be taken by Co-op Food firm by taking help of demand elasticity. Along with
this, for shift to the burden of taxation amount, creating chances of international trade, determine
elements which affects to prices etc. respective concept is highly supportive for the chosen
entity.
TASK 2
2.1 Explaining implications of pricing as well as corporate objectives
Implication of the pricing factor is considered as firm how much generate amount or
profit after changing the level of product prices. Chosen company when makes changes in the
prices of vegetables then it affects the objectives in a different manner. At the time of occurring
scarcity problem in UK regarding to the vegetables, the Co-op Food management charged higher
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prices which impact on the profitability in positive manner. In case, if it was reduced the price
then cannot meet with the objectives of generating more profit within market segment (Islam,
2014). Hence, it can be assessed that due to changing in price implications corporate objectives
of the Co-op Food affects up to certain level.
2.2 & 2.3 Comparing market structures in terms of determining price and how these affect to the
firm's behaviour
In an economy, when company operates and provides its services with the help of
different market structures then level of prices of same products differ. Some kinds of market
structure along with price determination and impact on Co-op Food are described as below: Perfect competition market: Here, level of competition is cut-throat and both buyers and
seller available in higher number. Moreover, it looks like as an auction market where
prices are also ups and downs quickly. When Co-op Food operates in perfect competition
market then price is to be determined in accordance with those firms which provide same
vegetables. It put a high impact on the level of performance in a positive and negative
manner.
 Monopolistic environment: Under such kind of market section, there is only one
business entity that offers goods and services to the overall buyers (Kiefer, 2011). In this,
price is determined by company under which neither any buyer can interfere nor can
he/she bargain. In case the management of Co-op Food starts operating in the
monopolistic market then it will be highly profitable for the firm as it supports in
charging price of vegetables as per the convenience.
 Oligopolistic environment: The market which is dominated by few number of firms with
higher market share is called as oligopolistic. In this condition, major power to bargain of
prices is with companies by which they are able to generate more profit. When the chosen
entity of UK provides vegetables in the oligopolistic market then it is able to generate
higher sales as well as profit. Therefore, performance ultimately affects in the positive
way within overall segment (Millán and et.al, 2013).
2.4 Evaluating impact of UK regulations on market power
In every economy, there are different regulations and rules to be framed by country’s
government and authorised members which helps the firm to run business in a smooth way. In
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the UK, under vegetable products, in case government increases tax rate on the profit earned by
food companies. Then level of profit and performance affects in the negative way and by which
Co-op Food entity has to shift from one market to another market. For instance, the management
shifts from monopoly market to perfect competition market then level of prices as well as power
to charge prices also impact (Nattrass and Varma, 2014). In monopoly market, power over
customers is high which shifts to the lower. It is because; in another type of market structure,
there is more number of companies that sell vegetable products. Apart from this, if UK
government makes changes in the rules of international trade then also, business process gets
affected. Hence, it can be clearly visualised that due to change in UK regulations, market power
and structure of Co-op Food gets affected.
TASK 3
3.1 Analysis of change in economic structure of UK and its impact on Co-op Food
The structure of UK economy changed from previous to 21st century which affects the
corporate world up to a high extent. Before 21st century, growth rate of UK economy was lower
and considered as thus, it was considered as a developing nation in the world. As the years
passed, more number of companies comes in existence which helps to increase the growth rate
on consistent basis. Therefore, after 21st century, it turns into developed market structure which
lead to affect the Co-op Food company in positive manner. Previously, when it was comes under
developing structure then selected entity not able to generate more number of profit
(Deschryvere, 2014). Apart from this, after 21st century, the business environment of Co-op Food
affected in positive ways. When the corporation starts to operate under developed country then
resources will be allocated in adequately and plenty which helps to increase production and
revenue. Hence, it can be clearly assessed that due to change in the economic structure of UK
economy, Co-op Food is able to improve its performance in the industry up to certain extent.
3.2 Evaluation of economic tools
Basically, two kinds of tools are available within economy which are monetary and fiscal
through which companies affect up to the certain extent. Both these policies are helpful for the
UK economy in order to increase growth rate and arise situation of full employment. The tools
are such as follows:
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 Monetary Policy- In this kind of policy, there are interest rates, cash reserve ratios (CRR)
and statutory liquidity ratios (SLR) considered in which changes are made by the central
bank of UK. It helps the government in order to manage flow of money and equal
allocation of monetary resources. Such kind of tools directly affect the company in an
inverse direction like if interest rate is enhanced by bank then profitability condition of
Co-op Food declines. Along with this, if CRR and SLR rates get increased then bank not
able to give higher amount of loan which lead to reduce availability of fund of the
company (Faridimehr and Niaki, 2012).
 Fiscal policy- Apart from monetary policy, the tools under which government makes
changes are considered as the fiscal policy. In this, taxation rate, tariffs and export import
rates are included which lead to create an adverse impact on Co-op Food. For instance,
when tax rate is enhanced by the UK government then selected company has to give
more amount in terms of taxation by which profitability and performance of it in industry
goes down.
3.3 Evaluating government's policies success in order to meet macroeconomics objectives
In the macroeconomics there are different kinds of goals and objectives included which
are achieved by the government using some policies. Some objectives of this type of economics
are like boost up growth rate or GDP, reduce inflation rate for CPI (consumer price index),
increase productivity of the companies, improve employment rate and living of standards of the
people etc. Along with this, other objective is to make finances and budgets of the government
highly sound.
Theses all the objectives of macroeconomics achieved with the help of fiscal policies in
which tariffs, tax rates etc. things are modified. Due to making changes in such aspects, the
government can increase or decrease flow of money in the market. Therefore, such kinds of
objectives easily achieved in proper and smooth direction.
3.4 Evaluating economic performance of UK
When the researcher is going to analyse about the economic performance of a country
then three indicators are mainly to be considered like GDP, inflation and unemployment rate. In
the present study, performance of UK is to be discussed with the help of some elements which
are as follows:
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GDP growth rate
Illustration 2: UK GDP rate
Inflation rate
Illustration 3: UK inflation rate
Unemployment rate
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Illustration 4: UK unemployment rate
From the above mentioned charts, it can be found that from the end of financial year
2012 to 2017, GDP rate of UK economy declines from 3.1% to 2% which is the sign of reducing
its performance (United Kingdom GDP Annual Growth Rate, 2017). Apart from this, inflation
rate increases from FY 2012 to 2015 which is a sign of improving the condition of economy.
After the year 2016 to 2017, rate of inflation increases on consistent basis by which situation of
recession comes into consideration within UK. When talking about the unemployment rate then
continuously reducetion is observed from 2012 to 2016 by which it can be clearly said that UK
economy not performs well from past two fiscal years.
While linking with the performance of UK economy with business entity, then there is
positicve relationship. The reason is that if economic condition of country is poor then flow of
money reduces in the hand of local community which lead to reduce buying power of people
(Yazdani-Chamzini and et.al, 2013). When the purchasing power of people goes down then Co-
op Food is not able to sell more number of products. In opposite to this, with improved
performance of UK economy, Co-op Food can generate more sales and profit within industry.
TASK 4
4.1 Competitive advantage theory
The concept under which company has to offer differentiated and unique products at
lower prices to customers is considered as competitive advantage theory. With the help of this,
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Co-op Food is able to enhance its revenue and gain competitive advantage in the industry of
vegetables and grocery items. In this generally two terms or strategies involved which are like
cost and differentiation. Under the first tactic of competitive advantage theory, the company
focus on costing aspect and try to reduce in the workplace. Through declining total costs it able
to sale products and services at the lowest prices which lead to attract more customers.
According to other strategy i.e. differentiation, the management of an entity focus to produce
highly innovative services and products. Higher the innovative and differentiate items lead to
attract more people. Henceforth, the firm easily able to meet with competitive advantages in the
industry.
Globalisation put a huge impact on Co-op Food in a positive and negative manner both.
Because of this reason; entity is able to enter in the international market and earn foreign
currency which is beneficial for it. On the other side, it has to offer innovative products at lower
rate to attract customers and gain competitive advantage which is a negative aspect of
globalisation.
4.2 Merits and demerits of the free trade
Moreover, Free trade is the area under which any kind of taxation and boundaries on
export or import of goods are to be made.
Benefits of free trade:
 Basic benefit of it is that Co-op Food enterprise not need to pay tariff and tax rate as well
as it is able to exchange goods and services with international firms without following
any rules and regulations (Belghitar and Khan, 2013).
 Through this, entity able to gain comparative cost benefits in the relevant industry.
 Free trade area is supportive entering in new markets and expand business with lower
cost and issues.
 Apart from this, it able to import its products and services at the cheap rate which is sign
of increasing profitability.
Demerits of free trade:
 Limitation of free trade is that, due to this trade more than two countries integrated and if
economic condition of one country reduce then it directly affects to another.
 It is not beneficial to local business entity or manufactures in the form of high profit
margin.
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 Therefore, free trade believe to force-fully working to the employee with-out high pay
and less basic facilities of daily life (6 Advantages and Disadvantages of Free Trade,
2016).
 Competition included under this free trade and it is unfair or unhealthy. Poor nation
cannot fight with advance country.
4.2 Analysing impact of developing economies
Emerging economy is that which is on the path of development and growth rate as well as
other aspects grow consistently in the world. Under BRICS, emerging or developing countries
are included which are like Brazil, Russia, India, China and South Africa by which developed
countries affect up to the higher extent. This community provides vegetables and other products
at lower price as compared to developed economies by which consumers always try to purchase
goods from BRICS (Islam, 2014). Due to this condition, sales of developed countries reduce
which is one of the negative impacts. Along with this, there are other positive and negative
impacts created by BRICS on developed economies up to a certain level. In the current era,
domestic economic condition as well as global both are in the declining condition and not
growing in positive way. Emerging or developing type of economies affects to the Co-op Food
company in positive ways because as the economy grow then support to it in same direction.
4.4 Influences of recent domestic and global economic shocks on the economy
In the economy of any country different kinds of issues and problems arise which lead to
create impact on the overall UK economy in different ways. The domestic shock comes in the
UK when case of Brexit incurred. Due to this, all the companies of economy lost free trade area
where unable to enter in new or international market easily. Along with this, taxation and tariff
amount also has to pay in more quantity. Further, imports cost and expenses enhanced which
lead to reduce firm's capability in terms of earning sales and profit. Therefore, they unable to
contribute in GDP of the UK economy by which growth of it affects in adverse direction.
In the year 2007-08 huge financial crisis comes into consideration in the world economy
which is one kind of global shock. After that, before 2 years currency war comes where China
did devaluation of its currency at the global level. Due to such shocks in global economy, growth
rate of UK economy affects highly. Impacts of UK's GDP rate from global shock from the year
1989 are shown through graph which is mentioned below:
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Illustration 5: Estimated impact of world shocks on UK’s GDP
(Source: Chowla and et.al., 2014)
CONCLUSION
It can be concluded from the business economics report that when growth rate of UK
economy reduces then it directly affects business entity of UK in the same direction. When rules
and regulations as well as monetary and fiscal policies of UK economy changes then market
power and structure of Co-op Food entity also affects up to the higher extent. When looking at
the economic performance of UK, it has been identified that from last 2 years, economy is not
growing due to recession. Moreover, BRICS which is the community of emerging nations affects
to the developed countries and business entities both.
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