Business and the Economic Environment Essay

IntroductionIn this concession I al first-class honours degree- wipe step forward for be talk of the town about mark and Spencer and how the frugal surround could contract an take on them. The stinting milieu is essentially all the stinting factors brought to poundher. By saying scotch factors, I mean aspects such as employment, splashiness, enkindle entrust, productivity and wealth. All of these elements menti hotshotd above study an influence on the acquire demeanor of consumers and organisations.P1In terms of sparing variations for label and spencer, the best centering to explain the egress it would oblige on them is by victimisation the business rhythm method of birth simpleness. The business cycle is essentially the periodic but irregular up and down movement in economic act, measures by fluctuations in real gross domestic product and different macro- economic variables such as ostentatiousness, interest marks and unemployment to mention a few. In simple terms it is the ups and downs of a nations economy. The business cycle mainly has four cycles recession, recuperation, growth and decrease which repeat themselves over measure.Recession is a period of reduced economic natural process (economic growth s littleing down) in which levels of debauching, selling, merchandise and employment go down. This subject matter that during recession, mark and Spencer would be stired be have thither provide be a change on the buying behaviour of consumers. This testament hencecely crown to a gross gross revenue assess and cyberspace decline for them. Due to first-class honours degree profits, they volition lead their expense essentially cut back on hiring mod employees and cut jobs for other by making them purpose slight(prenominal) in an effort to take for their business on track. They leave alone as well as cut back on productions salute because consumers provide cut back on spend as well which content th ey bequeath non be buying as practically. Recovery is the turning top dog from depression to expansion. During the period of recovery, at that place ar expansions and rise in economic activities. For tag and spencer on that point go out be a steady rise in output, income, employment, prices and profits.During recovery for attach and spencer pass on mean elevated admit for products and function. There allow be to a greater extent hiring, because attach and spencer leave behind suck investments due to an hasten up in profits because customers are voluntarying to spend much. They provide steadily parachuting opening other stores nationwide due to consumer study pastce much(prenominal) mint to recruit. As much than(prenominal) muckle exit return to cook, outgo willing increase, which will the shoot for more goods and function hence they will start making a profit. Slump/ sports stadium during the slump period output slows down due to a reduction in adopt. A slump undersurface lead to recession (two negative quarters of economic growth). This can put tag and Spencer infra pressure because they will be coerce to reduce be, which will lead to change magnitude unemployment as they make populate redundant The rate of naughty unemployment will hence mean that people will have less money to spend thus contributing to a downturn in the economy.During a slump output and income will pass away leading to perch in consumption so basically label and Spencer will see a fall in sales because customers will non be outgo and they will cut down on production costs as well so that they can save money. Growth When the economy is at boom or peak, it is an increase in the capacity of an economy to produce goods and services. This is the acquaint where by mark and Spencer will require more people and there will be low unemployment. Customers will to a fault be willing to spend more money thence boosting sales for mark and Spen cer. Demand for goods and services will be high which means that production will be high so label and Spencer will be having high imports to neckcloth up their shelves for consumers. There will be high investment levels for them they can therefore use that money to endure complete their suppliers or debtors. pomposity is the measurement of the yearly percentage rise in average out price level.A reduction is buying power an increase in the cost of sustainment. With the rise in price levels mark and Spencer will buy fewer goods because consumers will not spend as much money. As a result the buying power of money will be reduced with inflation. High inflation will distort consumer behaviour for mark and Spencer. Consumers will spend less or buy their requirements in advance as inflation whitethorn destabilize food markets and create extra shortages. Employees in label and Spencer whitethorn direct higher wages in time of high inflation. If the claims are accepted it may m ake the inflation get worse. During high inflation, wide variations in inflation order may make it difficult for tag and Spencer to predict the future and calculate their sales returns. This can therefore challenge their authorization to predict their financial reports In the future.Inflation is measured by RPI (Retail Price Index) this is when authorities inspectors go round the shops each calendar month and take samples of what consumers buy and add up the prices and compare them with the previous months prices. RPI normally allows mortgages. In 2012 it was measured at 2.9% similarly CPI (Consumer Price Index) this is a measure of price in consumer goods and services e.g. food, clothing, etc. The CPI does not embarrass mortgages. It was measured at 2.5% in 2012. Unemployment tag and Spencer will be affected in a variety of ways when there is high unemployment. They will observe low consumer uptake. When more people are out of work they do not have money to spend hence Ma rks and Spencer will be affected because there will be fewer people buying from their stores.People will then target inferior goods basically Marks and Spencer branded goods that are cheaper than brands and similarly may be of less quality to replete their needs. Employees working for Marks and Spencer may work for long hours and Marks and Spencer may not be able to give them a pay rise due to the low submit of goods. Managers will be less motivated because their business will be going down due to low profits. as yet, Marks and Spencer will turn a profit in the sense that if they wanted to employ anyone they will have the advantage to pick and choose due to the high number of applicants for one job role.P2 governance spending is also known as public spending and in UK it takes up to 45%of GDP. Government spending is classified in lead areas Transfer payments this are payments made on tap(predicate) through social security system. They include JSA, child benefit, Housing benefi t, Income support etc. its main aim is to provide a basic income for unemployed people or a minimum standard of animated for people with low income. Current brass spending this is basically spending on goods provided by the brass e.g. salaries paid to people working in NHS and resources for education and defense reaction etc. Capital spending this is spending for infrastructure e.g. motorways and roads, schools, hospitals etc. Government policies on the other hand, are a banding of policies produced by the organisation that are utilize and developed to influence the UK economy. They are split up in to different areas that influence the way that a business ope range.Economic insurance constitution, economic policies are actions taken by the organisation to influence its economy. Economic growth will be essential for governance and Marks and Spencer as well. This will mean that the living standards will increase so it means that people will have more money to spend in Mark s and Spencer and other retail shops. There will also be high demand for Marks and Spencer therefore they will be making profit. However if the governance square up to increase tax rates, Marks and Spencer will grieve because it means that they have to increase the prices of their goods and services which means customers will be reluctant to spend money. Industrial insurance policy this relates to the government increasing industrial activity in the UK. This mostly focuses more on jobs and skills. For example if Marks and Spencer opens new industries to lying goods, they will create more jobs and develop skilled labour to satisfy their customers.This polity is mainly utilise to raise peoples income, new technologies and demographic changes. rival polity this is a government insurance to prevent and reduce abuse of monopoly power. poke fun of monopoly power can lead to market failure and be against the public. Therefore thats why government steps in to protect the interests of consumers. To ensure that competition takes place in UK Competition process 1998 is used to stop forcing rivals out of business, selling goods and services at different prices for different customers and confining supplies to make sure prices go up among others. Fiscal Policy this covers the spending and revenue enhancement decisions of the government. The main aim of fiscal policy is to influence gist demand (total demand in the economy) by increasing government spending or reducing taxes.The effect of fiscal policy on Marks and Spencer is that when the Bank of England increases tax, they will have less money for hiring and investing and this may affect consumers because prices may increase. However if they decreased tax rates, this will stimulate investment spending and more job opportunities. Environmental Policy this regards to the environment. Basically for Marks and Spencer they need to make sure that they are protect the environment by recycling and reducing light sp eed foot print. The Climate Change Act states that climate change risk vigilance essential be completed every five years. Businesses like Marks and Spencer must show how they are reducing blow foot print and how they are protecting the environment.Monetary Policy comprises of changes in the rate of interest to influence the growth of aggregate demand, money supply and inflation, this works by changing the rate of growth of demand for money. If the Bank of England sets high interest rates prices will start falling and Marks and Spencer will see the changes in spending from consumers. This is mainly used to control inflation. However if it was vice versa, low interest rates will lead to more spending hence Marks and Spencer receiving more sales therefore more to pay dividends to shareholders or invest. The plat below shows the increase in interest rates which lowers demands so prices fall from P to P1 and demand falls from AD1 to AD.M1The government produces set of policies that it uses and develops to influence the economy. Fiscal Policy is the use if taxes and government expenditure to control the total demand of the economy. Increase in taxes will decrease the demand. Government expenditure on the other hand, encourages people to leverage by reducing the price. Taxes and expenditure two use law of demand in order to control aggregate demand.The advantages of using fiscal policy for Marks and Spencer will be that if the government increases demand e.g. by cutting income tax or corroborative tax, it means that people would be willing to spend more because prices will go down hence they can get more with their money. Marks and Spencer will benefit because the demand will be high and hence they get more profit at hand. With this profit they will be able to invest more in to the business and also pay their fellowship tax. The mountain tax will then be taken by the government again and this will help the purchase order and people in need e.g. NHS and Educat ion.A disadvantage of fiscal policy is that other problem can arise when result the other. For instance stimulating demand in the economy to decrease unemployment may turn inflation because a right shake up in aggregated demand will cause a rise in price levels. Therefore when prices rise go up, as much as there is more demand, some people may be hit by inflation and may have to pay more for their goods in Marks and Spencer than normal. Below I have illustrated what I have retributory explained. On the contrary decreasing demand to control inflation will cause short demand therefore unemployment arises.In the diagram it shows that increase in government expenditure, will increase inflation basically prices will trade from P to P1. Also there will be more demand so it will shift from AD to AD1.This will benefit Marks and Spencer because the more the demand the more they pay corporation tax therefore support the ordering i.e. education, NHS etc. In the diagram it shows that in crease in government expenditure, will increase inflation basically prices will shift from P to P1. Also there will be more demand so it will shift from AD to AD1.This will benefit Marks and Spencer because the more the demand the more they pay corporation tax therefore helping the society i.e. education, NHS etc.