Business Environment Role of Business in Order

Business Environment

Role of Business

In order to comprehend the role of business, it is necessary to understand the meaning of business and its importance to society. Businesses are established to produce and sell goods and services to the customers. This, in result, also creates employment opportunities for candidates, customers, suppliers, and other vendors. Businesses extend their role by continuously producing new goods and services by investing in new technologies and developing workforce. This whole process must follow a path that can make the business profitable. The goods and services produced must be created while keeping the customer's needs in mind. Moreover, businesses justify their role by defining its corporate social responsibility (CSR) policy. Corporate social responsibility is a voluntary responsibility beyond the requirements of national legislation. This comprises of issues such as environmental security, human rights and civic freedom. Basically businesses are divided into two main categories. One category relates to businesses that work to make profit. These type of organizations are known as for-profit organization. On the other hand, other businesses work to serve people without making profits. These organizations are termed as non-profit organizations.

Roles of for-profit and nonprofit organizations in the economy

There lies a direct relationship between the growth of profit organization and the success of the economy. With the increase in the profits of the organization the economy of the country gradually rises. The profit organization plays a vital role in expanding trade in the global market which in turns impact the economy of the country. These organizations help to improve the economic condition by raising the value of currency. Moreover these organizations support the government of the country in reducing subsidy on the different items that are the basic necessities of life by providing more employment benefits. Profit organizations define a path for foreign investor to invest in home country which strengthen the economy.

Non-profit organizations contribute to the country economy to a large extent. Their primary purpose is to provide public with social services without generating profits. Another role relates to asset building, which means, connecting people with the resources. Higher education in private sector, health care services and hospitals, environmental societies, conservation societies, religious organizations, culture and arts organizations, and various social service organizations are non-profit organizations that offer goods and services which provide people an opportunity to raise their quality of life in their community. Even though, non-profit organizations do not earn profit, their expenditure creates a huge impact on economy (Sobolewski, 2010).

Impact of Monetary and Fiscal Policy on Economy

Unanticipated changes in monetary policy produce an effect on prices and income. In case of expansionary monetary policy, real interest rates will be reduced. As the result of low return rates financial and capital assets are less attractive. With the decrease in foreign and local investment, the demand for national currency will decline. The expansionary monetary policy results in making export cheaper, however making import expensive which greatly impacts the country economy.

Fiscal policy of the country reflects the government decision of revenue collection or taxation and expenditure or spending. The fiscal policy affects the tax rate and interest rate to control the economy. The government carries out the fiscal policy to achieve certain goals of the economy. When inflation in a country is strong, than a government takes the step to slow down the economy and imposes high tax rate to pull out the money from the economy. The fiscal policy also helps government to decrease their spending by decreasing the circulation of money. The fiscal policy affects everyone not in a different way. It depends on the policy maker to achieve their political orientation and goals. When an economy declines and taxes rise, the middle class of the country will be affected by the policy, as to pay more taxes compared to the upper class (http://www.investopedia.com, 2012).

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