How Economic Systems Allocate Resources Effectively

Executive Summary

Learning outcome two comprises of three questions. The first question speaks about economic systems; it will be explained in the research how these economic systems attempt to allocate resources effectively. According to Samuelson (n.d.) these three economic systems are: Mixed economy, command and free market. ‘Mixed economies may have a distinct private sector, where resources are allocated primarily by market forces, such as the grocery sector of the UK economy. Command economy: ‘Markets enable mutually beneficial exchange between producers and consumers, and systems that rely on markets to solve the economic problem are called market economies. This method is referred to as central planning and economies that exclusively use central planning are called command economies. In other words governments direct or command resources to be used in particular ways’. These will be thoroughly explained in the research. The second question speaks about fiscal and monetary policies, fiscal policy is basically a tool used determine rules with respect to the expenditure of a government. Monetary policy influences the extent of money supply in an economy. Ghuman (2005). The last question speaks to competition policy and other regulatory mechanisms in an organization.

Background/ Rationale

The aim of the research is to provide the researcher with an understanding of different organizations, the influence of stakeholders and the relationship between business and the local, national and global environment. On successful completion of learning outcome two, the researcher will understand the nature of the national environment in which business operate. The researcher will understand how economic systems attempt to allocate resources effectively, the researcher will also understand the impact of fiscal and monetary policy has on business organizations and their activities and also the impact of competition policy and other regulatory mechanism and the activities of an organization.

Profile 1

Mission Statement: To provide business planning and marketing strategy consulting services to help businesses become even more successful.

Bryan’s consulting Firm

Contact Information:

Email Address: bryan@yahoo.com

Fax Number: 9044765

Office Number: 9086712

Bryan’s consulting firm was founded in 1993. This company is under the supervision of Miss Chinelle Bryan and Cyril Mathiaz. They are located on the tropical plaza in half way tree Kingston. Bryan’s consulting firm is a partnership organization. They are assisted by a staff of fifteen well trained and educated workers. A few of these workers are Jada Fyffe,Janae Chung and Aaliya Ftffe,who are under the fields of communication and knowledge and information interaction and human resource management. Bryan’s consulting firm targets small struggling businesses. The services offered by the company are to provide enrichment and fulfilment, create solutions to problems and help businesses develop effectively. The company is unique `because of their superior customer service, they think both internally and externally, and they are the only consulting firm in Jamaica that opens 24 hours. Their prices and their guarantee also make them unique. The goals and objectives of Bryan’s consulting firm are: superior customer service, growth, efficiency, retention, support opportunity, building amazing service, have happy customers, increase revenue, increase profit and build the community. Miss Bryan and Cyril Mathiaz were inspired to create this business because of their personal struggles with their small business in the past..”You push the limits, we measure it”.

Profile 2

Chixae’s variety store

Contact Information:

Email Address: chixae@yahoo.com

Fax Number: 9092145

Office Number: 9017123

Mission Statement: The mission is to build permanent habits through daily practices. This mission is to make a profit that will not only benefit our company but to give back to the community.

Chixae Variety Store was established in 2010. This store is governed by Chinelle Bryan and Xae Boreland. Their store can be found on the Springs Plaza in Half Way Tree Kingston. This is a partnership organization. Chinelle Bryan and Xae Boreland are assisted by ten well trained and oriented workers who are under the departments of: Cashier, Sanitization, Assistance- customers, and collector- Collection of bags when entering the store. The company is unique because it’s a store that everything is offered under one roof and their prices are unbeatable. The goals and objectives of Chixae’s variety store are: to give back to the community, have happy customers, and a superior customer service. This store was created by because Xae and Chinelle wanted a place where one can purchase almost everything under the same roof at an affordable price and that’s exactly what is offered at Chixae’s variety store. Chixae’s variety store targets both old and young people. The mission is to build permanent habits through daily practise; to indicate to customers that they can get all they want under the same roof, at an affordable price and getting good quality for their “little money”. However, they are now facing some difficulties because of the lack of communication and knowledge and information interaction skills.

Objectives

• To identify how economic systems attempt to allocate resources effectively
• To assess the impact of fiscal and monetary policy on business organizations and their activities
• To evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organization

Methodology

Qualitative research is designed to reveal a target audience’s range of behaviour and the perceptions that drive it with reference to specific topics or issues. It uses in-depth studies of small groups of people to guide and support the construction of hypotheses. The results of qualitative research are descriptive rather than predictive.

The research consists of the secondary research method. The research is qualitative based, reason being, interviews will be carried out with stakeholders, this type of research is more efficient, less time consuming and inexpensive. Secondary sources entail the usage of internet sources. The limitation the researcher had are some information seemed old or the internet may provide different answers to a question which posed difficulties for the researcher as the researcher would not know which of the answers are correct.

The information collected was controlled, processed and evaluated in order to meet objectives of Chixae’s variety Store. The research questions will be analysed critically giving examples matching the organization that was assessed.

LO2- Understand the nature of the national environment in which businesses operate

2.1 Explain how economic systems attempt to allocate resources effectively

Mixed economies

‘Mixed economies may have a distinct private sector, where resources are allocated primarily by market forces, such as the grocery sector of the UK economy. Mixed economies may also have a distinct public sector, where resources are allocated mainly by government, such as defence, police, and fire services. In many sectors, resources are allocated by a combination of markets and panning, such ashealthcare and, which have both public and private provision’ (Samuelson n.d.)

Free Markets

‘Markets enable mutually beneficial exchange between producers and consumers, and systems that rely on markets to solve the economic problem are called market economies. In a free market economy, resources are allocated through the interaction of free and self-directed market forces. This means that what to produce is determined consumers, how to produce is determined by producers, and who gets the products depends upon the purchasing power of consumers’. (Samuelson n.d.)

Command Economics

Another solution to the economic problem is the allocation of scarce resources by government, or an agency appointed by the government. ‘This method is referred to as central planning and economies that exclusively use central planning are called command economies. In other words governments direct or command resources to be used in particular ways’. (Samuelson n.d.)

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2.2 Assess the impact of fiscal and monetary policy on business organizations and their activities

According to Ghuman (2010), ‘Fiscal policy instrument determines the rules and regulations with respect to the nature and extent and taxation and expenditure by the government. The extent of tax collection and government expenditure in different domains significantly impacts the profit position of a business entity’.

Monetary policy: ‘This policy influences the extent of money supply in an economy. Depending on the requirement of a country to give boost or control inflation, its government makes modification in monetary policy. These changes impact both the availability and the cost of funds for business organizations. The monetary policy also influences the value of the national currency in the international market, the impacting profit position of the companies operating in the global market. Ghuman (2005)

2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organization

The selected organization is the Office of Fair Trading (OFT). Established by the fair trading Act 1973, is a non- profit organization of the United Kingdom. The Fair Trading Act basically requires competition law and protection. OFT’s main objective is fairness. They make sure markets work well for consumers, ensuring that there is fair competition among all trading firms. Its role power changed with the Enterprise Act which was passed in 2002. ‘Department for Business Innovation and Skills (BIS) announce further reforms to the UK consumer and competition regimes. In accordance with the provisions of the Enterprise and Regulatory Reform Act 2013, the Competition and Markets Authority (CMA) was established in April 2014 and combines many of the functions of the OFT and the Competition Commission and replace both’. (Office of Fair Trading 2014). Competition commission was a public body who was responsible for investigating market merges and other things related to regulatory industries that are a part of the competition law in the U.K. The Business Innovation and Skills (BIS) announced further reform to the UK consumer and competition regimes. The competition market authority (CMA) which was established in April 2014 combined many of the functions of the OFT and competition commission and replace both. (Office of Fair Trading 2014), ‘Competition Commission Monopolies and Mergers Commission replaced on 1 April 1999. It was created by the Competition Act 1998, although most of its powers were governed by the Enterprise Act 2002’.

The competition commission was removed on the first of April in the year 2014 and was replaced by the competition authority (CMA), this took over many responsibilities of the OFT.

Conclusion

In concluding, on successful completion of learning outcome, the nature of national environment in which business operate was looked at.

Learning outcome focused on three questions. The researcher first spoke about economic systems; it was explained in the research how these economic systems attempt to allocate resources effectively.

Samuelson (n.d.) Mixed economy, command and free market. ‘Mixed economies may have a distinct private sector, where resources are allocated primarily by market forces, such as the grocery sector of the UK economy. Command economy: ‘Markets enable mutually beneficial exchange between producers and consumers, and systems that rely on markets to solve the economic problem are called market economies. This method is referred to as central planning and economies that exclusively use central planning are called command economies. In other words governments direct or command resources to be used in particular ways’. The three were explained in the research. The researcher then went on by talking about fiscal and monetary policies, fiscal policy is basically a tool used determine rules with respect to the expenditure of a government. Monetary policy influences the extent of money supply in an economy. Ghuman (2005). Lastly, the researcher gave a brief outline of competition policy and other regulatory mechanisms in an organization.

Recommendations

The uttermost goal of any organization is to make a profit and have a long term business. In order for Chixae’s Variety Store to be around for a long time, it is recommended they understand the business environment. Chixae’s Variety Store should understand the nature of the national environment in which they operate. The researcher would recommend that they understand the economic systems to allocate resources effectively. The three are: Mixed, free market and command. The one that would be recommended for this store to allocate their resources is free market. Reason being, In a free market economy, resources are allocated through the interaction of free and self-directed market forces. This means that what to produce is determined by consumers, how to produce is determined by producers, and who gets the products depends upon the purchasing power of consumers’. (Samuelson n.d.) The researcher recommends this because with a business like Chixae’s Variety Store, whatever they plan to do depends on their stakeholders, and to be successful, it is important they satisfy them. Everything coincides with these people, as (Samuelson n.d.) stated, ‘what to produce is determined consumers, how to produce is determined by producers, and who gets the products depends upon the purchasing power of consumers’. Lastly, the researcher recommends that Chixae’s Variety Store is knowledgeable about fiscal policy. Reason being, Fiscal policy is ‘the extent of tax collection and government expenditure in different domains significantly impacts the profit position of a business entity’. Ghuman (2010). If this is a term that explains the impacts the profit position of the business then it would be wise for every business to know what it is.

References

Samuelson,n.d., Economic systems. [ONLINE] Available at:http://www.economicsonline.co.uk/Competitive_markets/Economic_systems.html. [Accessed 05 November 2014].

Ghuman, K G, 2010. Management: Concepts, Practice. 5th ed. West Patel Nagar, New Delhi 110008: Tata Mcgraw Hill.

Office of Fair Trading, 2007. [ONLINE] Available at: http://www.termpaperwarehouse.com/essay-on/Evaluate-The-Impact-Of-Competition-Policy/279493. [Accessed 07 November 2014].