Business Environment the Growth of Assessment
- Length: 9 pages
- Sources: 10
- Subject: Business
- Type: Assessment
- Paper: #50298448
Excerpt from Assessment :
UK National Environment
In UK, the allocation of resources is purely based on the forces of demand and supply. This form of economy is a free economy in which competition is embraced and firms have to become efficient to increase their level of competitiveness. The government only intervene to provide the necessary infrastructure and to ensure that consumers are not exploited by the businesses. Besides, the government will formulate policies that ensure fair competition and collect revenues for the country development agenda. With these, businesses must ensure that they operate within the law and abide by the regulations that are set by the state. Barr Company can therefore conduct business in a competitive industry without government interference on what form of business to do or the amount of prices to charge on their products. The management has large latitude of choice to make on how to produce, what to produce, and who to receive the output of the process. This has therefore given Barr an opportunity to determine the strategies to use to win the confidence of their customers in the highly competitive marker.
Government policies and its Effects on Business
The government through their economic policies also affects the operations on any business within the jurisdiction. In the case of Barr, both the monetary policies and the fiscal policies that are formulated by the state will affect the way to conduct business and the amount of profits the company will post. Monetary policies are the policies that are formulated by the central bank to determine the money supplied in an economy. The tools used in controlling the money supply, as interest will influence the cost of doing business hence affect the capital structure of the firm. When the interest rates rise, the cost of borrowing increases hence leading to an increase in the interest expense of the business Kangas, 2003.
This would reduce the amount of profit that a company will report. The reduction in the level of interest rates by the government for instance led to reduced interest expense in 2012 making the business increase the profit. Monetary policy may therefore make the company change the capital structure decisions.
Fiscal policies are the government policies that are formulated to control the amount of money available with the public through altering taxes or increasing the amount of government expenditure to stir economic performance Shubik, 2009 .
An increase in the amount of taxation will deprive businesses their profits and reduce the earnings available to the shareholders. For example, the increase for government VAT, made Barr record decline in the profit posted. On the other, hand the government extension of credit allowance to firms also made Barr realize a reduction in the tax expense. At the same time, government through alteration of their expenditure will affect the level of demand of goods or could increase the price levels. When the government increases the amount spent, Barr will realize an increase in the goods consumed making the profit rise.
The competitive nature of the business in the soft drink industry determines how the operations of Barr are conducted. The fact that the market is competitive ensures that the Barr make efficient their manufacturing process. Competition has also made the company reduce the cost of operation to make the company sell their products at low cost Welford, 2012.
The forces of market and supply and not any other means therefore determine prices. It has also ensured that the quality of the soft drinks n of Barr meet the high quality to ensure the public prefers them. The business has also had to operate within the set legislation and rules to make the company avoid unnecessary costs.
In a competitive industry, the market forces will also influence the types of products manufactures by the businesses. Businesses, Barr included, will have to remain innovative on the manufacturing of products to meet the consumers need. The business will have to be competitive in their sourcing of goods and in making payments to their suppliers and employees as a way of retaining their customers and keeping secret their strategy from competitors 2003.
Consumer loyalty if attained will make the business record repeat purchase and guarantee long-term business profitability.
Global Factors and Barr's Performance
All business, whether local or international, are affected by the global economic conditions. In the competitive industry where there are no barriers to international trade, businesses have to monitor the impact of international competitors on their operations and performance Hughes and Taggart, 2001.
Some of the international businesses that operate in the soft drink industry are coca-cola and PepsiCo. The products of international businesses affect Barr sales and they should therefore ensure that they make their product quality conform to the international standards so that they continue to realize sales.
Moreover, the business will be affected by the fluctuations in the foreign exchange rates. This is because the firm imports some of the input use in production from other countries where payments are made in different currencies. If exchange rates move adversely, Barr will incur additional losses. The foreign exchange risks can however be mitigated by exploring the hedging techniques as currency swaps or invoicing in the home currency.
European Union Policies and UK Business Performance
Finally, European Union policies further influence UK firms' performance. Policies like changes in the tax rates, currency rates, removal of bureaucracy and other trade procedures and wavering of trade barriers would motivate the growth of businesses and reduce the cost of conducting businesses Agraa, 2007.
At the same time, EU block provides an external market where sales can be made to increase the earnings and profits of UK organizations. Besides, policies that promote integration and business partnerships can be exploited to ensure businesses succeed.
Barr Plc strategies have made the business thrive in a highly competitive market characterized by both internal and international competition. The changing economic environment will call for continuous monitoring of the competitors and analyse the industry performance to ensure their performance remain above that of the market rate. Government regulations and other international corporations will therefore make the business achieve its strategic fit if well controlled and analysed.
Given the good performance in the UK industry together with the increase in profits and revenues of Barr, the following can be recommended:
The company should ensure they maintain the quality of their products in the market to ensure they retain and attract new customers. This would also promote customer loyalty of their customers hence guarantee long-term success of the firm.
Global factors affect how businesses are conducted. This makes it necessary that the Barr remain alert on the strategies that arte pursued by international soft drink companies to gain dominance in the local market. Actions and strategies that strengthen the firms control of business is mandatory
Furthermore, the facts that free market characteristics are exhibited in the market, the management of Barr must emphasis on efficiency and effectiveness and eradicate all the factors that deter growth.
Lastly, performance review would be necessary to determine if the business performance and management is in line with the long-term strategic objectives. The business must then take measures to correct the adverse deviations. Such deviations can be detected from the analysing the financial performance and results.
2003. Soft drinks in the UK, London, Euromonitor.
A.G., B.P.L.C. 2012. a.G, Barr plc financial results 2012 [Online]. Available: http://www.agbarr.co.uk/agbarr/newsite/ces_docstore.nsf/wpg/1B9A74B86C552270802579CD00485134/$file/Final%20results%20announcement%20January%202012.pdf.
AGRAA, a. 2007. The European Union: economics and policies (8th ed.), Cambridge, Cambridge University Press.
BOTHA, a. & KOURIE, D. 2008. Coping with continuous change in the business environment:knowledge management and knowledge management technology, Oxford, Chandos Pub.
HUGHES, M. & TAGGART, J.H. 2001. International business: European dimensions, Houndmills, Basingstoke,, Hampshire, Palgrave.
KANGAS, K. 2003. Business strategies for information technology management, Hershey, IRM Press.
KASH, R. 2001. The new law of demand and supply: the revolutionary new demandstrategy for faster growth and higher profits, New York, Currency/Doubleday.
NEILL, K. 2009. The environment and international relations, Cambridge, Cambridge University Press.
SHUBIK, M. 2009 Strategy and market structure; competition, oligopoly, and the theory of games, New York, Wiley.