Business environment concepts and framework

Business Environment

Role of Business

Business plays a critical role in economic development. As Clark & Saade (2010) note, "small business is an engine of economic growth and job creation," and has been for decades. Business contributes economic growth, innovation, better living standards, and jobs to the economy, all of which help to foster progress and development. Big businesses, it should be noted, almost always begin life as small businesses. Thus, there is tremendous support for small business in the U.S., both at the governmental level (the Small Business Administration) as well as in the financial sector (mezzanine and venture capital, for example).

The benefit that business brings to the economy relate to the core objective of earning returns for shareholders (Friedman, 1970). Profit is a strong motivator for most people, and thus the pursuit of profit often brings with it substantial spinoff benefits in innovation, jobs and economic growth. Non-profits have other motivations besides profit. They aim to minimize their financial shortfall while maximizing the outcomes that are at the core of their pursuit. Non-profits often provide services -- such as social services -- that are generally not profitable. This work, however, can add value to the economy, in addition to the direct benefits of enriching lives and improving environmental conditions. Non-profits also help to put some people in better position to succeed in the economy, and they reduce waste and inefficiency in the economy by managing social problems efficiently (Weisbrod, 1988).

Fiscal and Monetary Policy

There are two main types of policy that affect the health of the economy, and these monetary policy and fiscal policy. Monetary policy is conducted by the central bank, and takes three conventional forms -- reserve requirements, the discount rate and open market transactions. Occasionally, unconventional forms are also used, such as long-term open market transactions, and these have been used in recent years to try to combat the strong slowdown in the economy.

Riley (2013) notes that fiscal policy is government spending and taxation policy. Whereas monetary policy controls the supply of money in the economy and the price of money, fiscal policy relates to the distribution of money via taxation and government spending. Fiscal policy is part of the accounting identity for GDP, and can be used to help stimulate spending in times of economic downturn. Efforts like TARP and stimulus funding would be considered fiscal policy.

With respect to the current economy, the Fed has essentially utilized its monetary policy options. It quickly slashed interest rates down to zero, and followed this with substantial open market transactions, including unconventional purchases of long-run Treasuries, which serves to lower the spread between short-term and long-term interest rates. If the economy has not grown, it is certainly not the result of poor monetary policy response, given that the Fed's policies under normal conditions would have resulted in significant economic growth. Fiscal policy, therefore, has clearly been inadequate. Indeed, little of his has been attempted in recent years and the current path of "sequestration" is contractionary.

Global Markets

The product that I have selected is headphones. The global market for headphones can be difficult to reach, since the retailers are going to be different for each country. Thus, the strategy for going global has to involve going to one country at a time. Exporting is the best method of market entry in this situation, because the company does not need to set up a subsidiary in any country until the country has proven receptive to our headphones. We are simply selling to importers, who handle the rest of the transaction including dealing with wholesalers and retailers.

Social Responsibility

Starbucks is known to be a socially responsible company. One stakeholder is the company's employees. There are several outcomes of its social responsibility with respect to its employees. The first is that they face better working conditions than many others in the quick service industry, which in turn allows them to enjoy their jobs more and get onto a longer-term trajectory. The provision of benefits like health care is also something that is good for employees, but also for their families as well. Everybody in the community benefits when low-level employees receive benefits.