Inflation in Global Business: UK Government Strategies & Analysis

This report examines the impact of inflation on the global business environment, focusing on the strategies employed by the UK government to mitigate its effects. It defines inflation as an increase in the price of goods and services, reducing purchasing power, and discusses how interest rate policies influence inflation by affecting borrowing costs and consumer spending. The report suggests key measures for the UK government, including raising interest rates to curb consumption, decreasing government expenses to save money, and promoting consumer savings to reduce the money supply. The conclusion emphasizes that high inflation reduces buying power and that the UK government must take proactive steps to manage inflation effectively. Desklib provides access to similar reports and solved assignments for further study.

Global Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Inflation.......................................................................................................................................3
Impact of Interest rates policy on Inflation.................................................................................3
Major steps to be considered by Government of UK..................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6
Books and Journals.....................................................................................................................6

INTRODUCTION
Business environment refers to the factors and forces that affects the companies
performance to maintain successful operations or to build strong customer relationships
(Cherunilam, 2020). Business environment is combination of all conditions such as economic,
political or social aspects in which company operates. Global business environment refers to the
challenges and barriers that company has to face while operating their business at international
market (Hamilton and Webster, 2018). Global environment has broad world wide factors which
are beyond the control of any community or business enterprise. Political factors has huge
impact upon the functional areas of businesses and its profitability ratio. This report is based on
the inflation factor of political environment and how government of UK respond to overcome the
issues related with economy.
MAIN BODY
Inflation
Inflation refers to the increase in the price of products and services in economy. It reflects
the situation in which price increases and customers buys fewer products and represents the
condition of reduction in purchasing power of money (Juraev, 2020). Inflation is the increase in
price over a specific period of time. Inflation term occurs due to inequality between demand and
supply of money, changes in manufacturing cost and distribution prices or may be increase in the
tax of products.
Impact of Interest rates policy on Inflation
Interest rates are the amount that is charged against the principal amount by lender to
borrower. High interest rate reflects higher borrowing costs and consumers will eventually starts
spending less (Qi, 2020). After that, goods and services demands will reduce and lead inflation to
fall. When interest rates imposed by government are low then consumers plans to take loan due
to which flow of money in market increases with also rise in supply. If government imposes high
interest policies and higher prices then customers are no more interested in taking loans any
more. These behaviours of customers and their purchasing power are result of high interest rates.
Government should make balance between interest rates and policies to reduce the chances of
inflation (Sieroń, 2019). Government of United Kingdom should take necessary measurements to
keep interest rates and inflation in control.

Major steps to be considered by Government of UK
Some necessary steps to be taken by UK government in order to increasing inflation are
as -
 Increase in the interest rates can be a good consideration to control the inflation in
country. Increasing in the interest rates will lead to lower consumption of products and
services by customers and reduces the price also. This could be an most effective way to
control the inflation among country.
 Decrease in the government expenses can also lead to control inflation factor.
Government can reduce their expenses occurred and the same will save lot of money to
over come the decreased flow of money in country.
 Government of UK can also adopt the strategy of consumer savings. People of United
Kingdom should start saving money and this will result into less supply of money and
inflation tends to decline naturally.

CONCLUSION
From the above report, it has been concluded that high inflation rates can reduce the
buying power of customers and affects the economy in country. This report also described some
necessary steps to be initiated by UK government to overcome the impacts of high inflation.

REFERENCES
Books and Journals
Cherunilam, F., 2020. International business. PHI Learning Pvt. Ltd..
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Juraev, E.S., 2020. INFLATION RISK. Мировая наука, (1). pp.29-33.
Qi, Y., 2020. Financial Market and Inflation. International Journal of Economics and
Finance, 12(6). pp.1-90.
Sieroń, A., 2019. Money, inflation and business cycles: The Cantillon effect and the economy.
Routledge.