A report on

“Business Environment”

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Table of Contents

TASK 2: Nature of the Operating Business Environment………………………………..…3
Introduction………………………………………………………………………………….3
1.1 Explain how economic systems attempt to allocate resources effectively………………3 1.2 Assess the impact of fiscal and monetary policy on “Lloyds Banking Group, UK”, and their activities………………………………………………………………………..5 1.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a “Lloyds Banking Group, UK”....................................................................................7

References…………………………………………………………………………………….9

TASK 2: Nature of the Operating Business Environment
Introduction:
The study discusses different types of economic systems and assesses how these economic system attempts to allocate resources efficaciously, explains the UK government policies (namely monetary, fiscal, social, and competitive policies) and assess the effect of all the above-mentioned policies on a “Lloyds Banking Group, UK”, UK based organization. The paper exposits market structure types (namely, perfect competition, monopoly, monopolistic competition, and other market structures. Finally, the paper describes the ways market structures define the output and pricing strategies of the companies.

1.1 Explain how economic systems attempt to allocate resources effectively
Economic systems are a set of institutions for assigning resources and making possibility to satisfy human wants. Resource allocation is the assignment of resources to particular tasks to deduce the basic economic choices, which are what to produce, how to produce, and for whom to produce for. Resources may be awarded by markets, by planning or mix systems. In a market economy, goods and resources are assigned according to the choice of individual producers and consumers. In a Planning economy, goods and resources are assigned according to the central directions of a government agency. Economy system is to allocate economy, command economy, mixed economy. A market economy constructs on private businesses and market tool. In market economy is spread, flexible and embrace to change. Supply and demand are to influence on determining command economy. A mixed economy is to make an effect to a mixed economy system. Lastly, the economy is slow and not upgrade because of lacking competition, achievement requires to change, to change from command to market economy. Government direct the market economy and mixed economy. The collective instrument is to reject the breach of an economy. The role of government is broadening the economy to reject lacking in production. The economy is restricted thus government needs to opportunity cost. Land and resources are to devastate because of controlling policy. Capital is to be inducted by governments’ capital (Thomas Moranian, Donald, 2012).
There are different economic systems track by the government. These economic systems are usually introduced to allocate the resources more efficiently that are shown in the following;
Command or planned economy:
In a command or planned economic system, government administer the whole economy allocating the scarce resources like soil, capital, labour etc. Here, the planning body or the government has the intense information and can take more desirable decisions for the resource allocation but this economic system mainly cannot allocate the resources efficiently. This is because the planning body does not have the full knowledge or ability to decide how much should be produced. In such kind of economic system, there is always scarcity or surplus of the inputs where a company like Lloyds Bank faces difficulties to operate the business activities properly (Edgar, 1992).
Free enterprise economic system:
In the independent enterprise economic system, all the organizations can operate the business activities with little government involvement. Here, the government has very little number of companies in the market and rules and regulations are adaptable to operate the business activities. For this reasons, there works a strongly favorable competition in the market that leads a strong efficient resource allotment. As the government does not get involved in the market organization like Lloyds bank can behave in a manner what they really want considering the demand of the market (John and James,1992).
Mixed Economic System:
A mixed economic system is like the independent enterprise economic system, but here the government has a little bit involvement with different policies like monetary and fiscal policies. The mixed economic system is shown in the following figure; Figure: Mixed economic system
Here, though the private sector has the flexibility to operate the business activities freely government makes some rule and policies to make the market stable. This economic system can expeditiously allocate the resources as there remains both the independent trade and some limitation through which the market players can operate effectively. So, in its economic system resources are efficiently allocated with small wastage. In this economic system, private companies can execute their own policies managing the government policies and regulations (Johnand James, 1992).
1.2 Assess the impact of fiscal and monetary policy on “Lloyds Banking Group, UK”, and their activities
The monetary policy sets by regulating the funds rate. It affects short-term and long-term rates, including credit-card rates and loans. Governments describe fiscal policy sets by taxation, law and regulation for strength to the environment. Fiscal and monetary policy affects organizations directly and indirectly though competitive factors and management performance are important factors. Businesses go over cycles of development, decline and regaining (Robin Sharma, Hornby W, 2001). Monetary and fiscal policies affect the timing and size of the cycles. The economy develops, customer expenditure increases, increases interest rates to inflation. Works shut down, employment losses increase and business sales decrease. Government spending is to recharge the economy. The business cycle continues with a new development level. Impact of the fiscal and monetary policy on the business organizations and their activities are given below Fiscal policy involves government taxation, spending and policies. Lower taxes more income for customers and more cash for businesses to invest in research, education and new infrastructure business. It is short-term in nature; help to drive business demand by making short-term jobs; help to bring the unemployment levels down over the long term. Over time business activity is to increasing income. It is to bear long-term growth (Grunewald, Richard C, Reidenbach, 2012).Monetary policy involves actions to affect a nation’s money supply; changes in short term interest rates impact long-term interest rates such as loan rates. Low interest charges mean lower interest expense for businesses, higher income for customers, controls inflation and higher business profits. High interest rates impact for businesses higher interest expenses, lower sales to customers and lower profits. Interest rate changes can impact customer expenditure (Kim Et Al.Bobo, 2009)
Government makes different monetary and fiscal policies to control the economy and the business organizations. These policies are taken by the government bodies considering theeconomic positions that also have a god impact on the business activities of a company that are shown below;
Changes in the interest rate: When government changes the interest rate through the monetary policy then it has an impact on the business activities. If interest rates rise then Lloyds bank will face difficulties on financing as the cost of capital will increase while the customers will reduce their consumption level that will reduce the sales volume of Lloyds bank. On the other hand, If Interest rate reduces then Lloyds bank will be able to get more financing at lower cost. This will help Lloyds bank operate the business activities.
Changes in the reserve requirements: if monetary policy changes the reserve requirement then it will also have an impact on the overall business activities. High reserve requirement will push the interest rate high that will influence the consumers to deposit more rather than consumption. So Lloyds bank has to change the business activities as its sales volume will reduce (Stoudmann, et al., 2006).
Changes in the exchange rates: If exchange rate changes then it will also affect the activities of Lloyds bank. If pound appreciates then the business sector of Lloyds bank that is operating in other countries will face problems while home country sales will increase more value for Lloyds bank.
Changes in the tax rate: If government changes the tax rate through the fiscal policy then it will affect the business activities from different perspective (Edgar, 1992). If tax rate is reduced then Lloyds bank will be benefited and company may increase the quality of the products without considering the changes in the price. Or Lloydsbank can increase more expenses on the advertisement or other sector as reduction in the tax rate has made the company more profitable.
Changes in the government spending: If government increases the government spending indifferent sector than a business organization will face reduction in the sales volume. On the other hand, reduction in the government spending will increase the demand for the private sector so is it for Lloyds bank.
1.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a “Lloyds Banking Group, UK”.
Competition puts businesses under constant pressure to offer the best possible range of goods at the best possible prices, because if they don't, consumers have the choice to buy elsewhere. In free market, business should be a competitive game with consumers as the beneficiaries. Competition policy is to make businesses compete. It inspires business effectiveness for customers and helps reduce costs and develop quality. Impact of competitive policy and regulatory mechanisms of Lloyds bank in the following Low price is to gain a high market share; in a competitive business, price are down; competition is inspires businesses to improve their quality of products and services to attract more consumers and enlarge market share; in a competitive business, businesses make their products that offer the balance between price and quality to customers; to provide and produce better products, businesses need to innovative in their product models, plan, manufacture procedures, servicesetc.; to hold their better competitors in global markets (Samuelson P Economics, 2001). Economic regulation and strategy is to examining the impact on business performance and contribute both to developed economic performance and to poverty decreases. Developing a technique for evaluating the impact on regulation which can process of regulatory policy is to making and contributes to better regulatory policy. To develop the role of regulation in improving economic performance and poverty improvement; to contribute better regulation policy making over the spreading of research (Dawes B International Business, 2005).

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