Task 1:

1.1 Public sector is a part of an economy that is controlled by the state. Basically why companies are set
up in public sector is because their demands are cater in a more beneficial form as its all under
government control. More over many companies are subsidize by government in order to grow their
business which means they are paid some amount of money by the state with which businesses can be
easily set up or tend to grow .Along with this the corporate taxes charged to most firms in public sectors
are low which is a favorable concern to them. The firms in public sectors can get patents and copy rights
easily as compared to firms in the private sector so making them a potential monopoly and can
therefore charge higher prices. Now looking at scenario 1, this huge motorway project cant only be
done by private sector because of many negative externalities relating with it. This is why government
investments are done for these projects. Other than this all the macro aims of the market as whole are
taken into consideration because government always wants a stabilize system where there is maximum
welfare for society.

Now how this project will bring impact on an economy being in public sector is that when a project will
be started therell be much more employment opportunities for the people who are unemployed
because such a project obviously brings more of the employees to work. Secondly a sense of better
transportation is derived. Why? Because when there will be a proper way of travelling safe and in less
time, who would not want to earn benefit from it. Trading links will be created as travelling will become
easy to the various cities. More over economic development will be there as well because of good
infrastructure of the country; more employment for people will let them earn good income in order to
improve their standard of living where all their needs are fulfilled. Public services could be improved as
well. By putting up tax on motorway in form of tolls government can earn tax revenues through which
public services like health and safety, education and etc could be improved.

1.2 Basically stakeholders are those who have direct or indirect interest in your business. So in this
project of motorway there are like few stakeholders as mentioned in scenario as well; Government,
community and employees.

Government: It will have a direct link or interest in this project in a way that if they have constructed
motorway obviously they would want a benefit from it as well while giving benefits to community. So
their basic interest will be to charge toll from the travelers in form of tax revenues in order to protect
the interest of them self.

Community: They are those who will be using this motorway. Now their interest is basically to have a
safe journey while travelling and within less time. Other than this for business purpose trading links
could be developed as well which makes it easy for people to travel.

Employees: They will have a direct interest in this construction of motorway which is the amount of
money they will get in return of putting up their efforts. Thats natural anyone who put up their
complete efforts obviously want a sense of recognition and appreciation for their work or by getting
some amount like wage.

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Private company: the company will be undertaking the motorway project and will be making profits in
return. Their stake in the motorway project is the increase in market share and profits that they will
have as they undertake all projects.

Now the disadvantage or limitation which any two stakeholders will face will firstly include those
130,000 people whose houses are been demolished due to construction of motorway, natural heritage
will be lost and those people may have personal affiliation with the place they belong to.

Then the river will have to be diverted due to which natural outflow of water will be finished and a big
natural resource will be finished. It will cause a huge loss to the fishermen as they will lose their daily
sales and therefore loose profits and daily livelihood. And lastly deforestation will occur as the lush
green forest will be destroyed which will affect the environment and surroundings too.

1.3 This project will contribute positively towards the economy as its a very large motorway project and
in general every organization has some responsibilities towards those who are working with it or who
are being affected by it. Like there are few major responsibilities of an organization; .Employee
responsibility: Human resource development, Improve employee mental ability, Avoid conflicts between
employee and organization etc. Govt. responsibility: Paid correct taxes/duties to govt., obey law and
order, helps govt. to develop the nation, etc. Environment responsibility: Green House, avoid plastic
usages, release clean air from industries, plantation of trees. This is all some CSR-Corporate Social
Responsibilities.

The positive contribution leads to a great chance of increase in employment as ample of people will
have job opportunities after seeking employment in this project. The effect of this employment factor
will be improvement in living standards of people as they will earn some good amount of money to
spend a better and affordable life. And poverty will be reduced in the country as over all because much
of the workers will be employed for this project for a longer period of time as motorway doesnt take
days to get build up so it will bring a positive effect on countrys poverty rate. Secondly, there will be
better transportation in the country and this will make easy access for the people to use motorway for a
lot of benefits like travelling will be now in lesser time as before people had to face long routes which
were not safe even and it will be more safe travel now. Then, trading links will be developed and trade
between cities & different towns will become a great deal for the reason that containers or trucks of
different goods will be reached timely at their destination and no delays will be done like before.
Moreover infrastructure of the country will get better as well and leads to economic development
because infrastructure services enter production as an additional input, and second, because they raise
total factor productivity by reducing transaction and other costs thus allowing a more efficient use of
conventional productive inputs. The countrys GDP will set out towards improvement and brings up a
positive change in economic growth due to which overall countrys national income will increase and it
will become more stabilized in its resources.

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2.1 Resources are allocated in public and private sector differently.

Private sector is the part of economy that is not state controlled, and is run by individuals and
companies for profit. Whereas, public sector is the part of economy that is controlled by government or
state and their basic aim is to maximize welfare for the society.

Private sector allocates resources for those projects in which they can earn more profit. In private sector
they produce maximum output with least cost and limited resources this is how efficient allocation of
resources is done. Public sector allocates resources for those projects which are very essential for
economy. If these businesses are handed over to private sector they retard welfare. Government
allocates resources even to those projects which private sector cant run. Government spends money on
different projects up to that level where marginal social cost is equal to marginal social benefits.
Sometimes private sector even hesitate to invest money in such projects where they have to face
externalities.

Private sector firms will emphasize on making profits whereas public sector firms will emphasize on
making social benefits.

Private sector firms undertake human investment in the form of training and development and
therefore polishing the skills of employees. They also undertake job rotation specialization which
enhances labors skills.

As the private sector firms are profit motive they will carry out economies of scale and minimize cost
therefore increasing average productivity.

However firms in public sector do have some drawbacks as well because the public sector allocates
resources through government directives and not by the forces of demand and supply. Such allocation is
likely to be inefficient as it is based on what the government wants not what consumers want. As a
result, there is likely to be shortages or surpluses resulting in allocative inefficiency in public sector.
Moreover, there is lack of competition which discourages firms to improve production or minimize
wastage of resources as they do not fear rival firms driving them out of business.

2.2 Monetary policy involves changing the interest rate and influencing the money supply. Whereas
fiscal policy involves the government changing tax rates and levels of government spending to influence
aggregate demand in economy. (Reference by Tejvan Pettinger on September 16, 2011)

Government spending is also known as public spending. And these can be in form of transfer payments
as well. For example, giving unemployment benefits to the people. Those who are unemployed but able
to do a job government will benefit them with a amount of some money in form of salary which can
help them in their living until they dont find next job. Then there are widow benefits where government
financially support all those who are not able to earn for them and their children and social security
benefits are also provided by state which includes home, shelter, food for those people who doesnt
afford to have them. And then to firms in the form of subsidies. It can provide subsidies to infant

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industries and research grants to innovative firms. It might also protect its industries by imposing taxes
and restrictions on rival imported products.

Government tax firms profits which has an impact on the ability and willingness of firms to invest.
Direct taxes are the taxes levied on a persons or a firms wealth or income. They are called direct tax
because the people or firms are responsible for paying the tax and have to bear the burden. Whereas
indirect taxes are those taxes levied on spending. For example sales tax is imposed when products are
sold and excise duties charged on certain domestically goods produced like tobacco and alcoholic drinks.

Fiscal policy is effective to stimulate economic growth in an economy, by reducing direct taxes nominal
income of people will increase which increases aggregate demand in economy. Now overall increase in
aggregate demand will lead the output/GDP to increase as shown below in figure:

Reduction in indirect taxes will lead to increase in real income of the country which ultimately increases
aggregate supply in an economy. Now by the time aggregate supply increases the production cost
decreases and production/output of the economy increases. This will result in better employment for
people which improves their standard of living and they will be able to spend more in order to satisfy
their needs.

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If the government implements monetary policy it needs to have a lot of money reserves to alter demand
and supply for money which a developing country such as Pakistan may not afford .Moreover by
implanting fiscal policy the government can earn tax revenue which it can further invest on people to
correct market failure by providing public and merit goods. Furthermore, implementation of monetary
policy takes a maximum time for monetary policy measures to influence aggregate demand and supply.
For example, a change in the rate of interest is unlikely to immediately influence
consumption and investment plans. Other than this implanting fiscal policy increases
consumption of merit goods through subsidies and direct government provision.

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Task 2:

2.3 Competition policy seeks to promote competitive pressures and prevent firms from abusing their
market power. Their aim is to encourage competition and make markets work for better and contribute
towards improved efficiency in market. The impact of competition policy on Tesco will be following:

By keeping low prices Tesco will gain a high market share; in a competitive business, prices are normally
lower and competition inspires businesses to improve their quality of products and services to attract
more consumers and widen their market share. In a competitive business, businesses make such type of
products which shows a balance between their price and quality to provide and produce better products
for their customers so that they have stability among the quality they are producing and price charging.
In order to compete globally, Tesco need to have innovation in their plan, manufacture procedures and
service. More over they need to have a wider consumer choice for their consumers. So consumers feel
easy to have all under one roof.

Secondly the regulatory mechanisms are the power of government and few people appointed for it to
check whether the rules and regulations are being followed in the market and the outcomes for how
market works for both consumer and producers.

They have few aims and these will affect Tesco in a way that prices are being monitored and regulated.
Tesco should make sure that they dont charge excessive prices in order to exploit monopoly power and
unnecessary prices charged to consumers. Then they should meet standards of customer service
because being such huge business this is very important for them as some companies fail to do so. And
ultimately their licensed is taken away if they do not fulfill customer requirement which is very essential
for every business.

So these are policies which Tesco need to undertake in order to gain success and good image.

Task 3:

3.1 There are several different market structures in which organizations can function. The type of
structure will influence the companys behavior and the level of profit it can generate. The structure of
market refers to the number of businesses in the market, their market share and other features which
affect the level of competition in the market.

Market structures can include perfect competition, monopolistic competition and oligopoly. Perfect
competition is a perfectly competitive market where competition is at its greatest level. Perfect
competition will produce the best possible outcomes for consumers in society, rather than looking up
the cost and benefits for producers. In this market, no single company can influence over the market
price and conditions over the market. There will be large companies and number of organizations in this
market.

Secondly, there is another market structure, oligopoly. An oligopoly is a market structure in which few
organizations dominate. When a market is shared among few firms, then its said to be highly

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concentrated market. As it is written in scenario 3, there are only two competitors and both of these
companies provide different services in terms of market segments that they are dealing with.

Furthermore, there is monopolistic competition which is also a form of market structure. In this market
structure, there is only one producer or seller of a product. Monopolists have the power to exploit their
consumers by charging higher prices or creating artificial shortages of the product they produce. In
monopolistic competition, the monopolist decides what to produce and how much to produce.

Marginal revenue is equal to marginal cost.

If the firm is profit-maximizing, it will always produce a level of a output at which marginal revenue is
equal to marginal cost. That is the profit maximizing point. At every other level of output, the firm could
increase profits by changing its level of output. If the last unit produced generated additional revenue
more than additional cost, then the firm could make more profit by producing even more. If the last unit
produced generated additional revenue less than additional cost, then would make more profit by
producing less.

A Monopolist is a price maker because he does not face any competitors. Therefore demand is price
inelastic. A monopolist will seek to maximize profits by setting output where MR = MC.This will be at
output Qm and Price Pm. If the market was competitive the price would be lower and output higher.

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In perfect competition the market price is set by the supply and demand forces of the industry
(diagram on right).This sets market equilibrium price of Pe. And a firms maximizes its profit at Q1
where MC = MR.

------------------------

3.2 In the case, if the new change goes through, then there will be a change in market structure from
oligopoly to monopolistic market. Company 1 earns annual income of 1.79 million while company 2
earns 0.7 million. These statistics shows that company one earned highest income and also, the market
share is 77.25% which means company one plays the role of monopoly in the market. If the new change
goes through as transport sector will develop market segments of hoteling industry, steel industry will
open up. As transport sector will develop people will travel so demand for hotels and restaurants will
rise making it a potential profit making industry. Moreover for the construction and development of
transport sector raw material like cement and steel will be required so this is also a potential and profit
making industry.

As stated in scenario 3, that more firms are introduced in the market by European Union. Therefore, the
government is offering tax reductions and subsidies for all new businesses in this industry. This shows
that there will be no monopoly left as new buyers and sellers are going to enter the market. Eventually,
competition will arise among firms due to which they need to lower down their prices competitive to
other firms so that they can achieve maximum profit.

The approach which a firm can adopt is consumer sovereignty where they will determine what goods
and services are to be produced. In order to have a successful approach, firms need to see the
individuals demand because consumers are the best judge of what product benefits them the most.
Here, in this market the prices are set where the market forces of Demand and Supply intersects each
other.

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3.3 Business and cultural factors have a significant impact on the transport industry. Over the years the
economies have moved from developing to developed and so from primary to tertiary sectors.
Therefore demand for services have increased and as retirement age has decreased the participation
rate in labor force has increased therefore more people are willing to work and so the need efficient
transport to move to offices. The increase in demand for transport has caused the tertiary sector to
develop.

Cultural factors are basically those factors which include our local culture effecting transport industry. In
these factors it will include that seating arrangement in public transport for women and men should be
separate so that there should be a comfort level for them while travelling. Other than this it can include
business trains as well that these are only for business class people and specific culture is developed that
high class people can travel in it. So this will effect transport industry in a way that if they specify their
transport in different category than theyll be able to generate more amount of revenue from the
consumers.

Task 4:

4.1 International trade is the exchange of capital, products and services across borders. Advantages of
international trade include greater utilization of resources, importing products that cannot be produced
locally, and increasing the variety of choice to consumers. However, international trade may be
associated with disadvantages as well such as loss of local jobs and high level of dependency on foreign
markets. Significance of international trade to UK business organization can be explained through the
theory of comparative advantage. In this theory comparative advantage means that the conditions in a
foreign market allow for much cheaper production costs. Things like low labor costs, lower income taxes
and raw material cost. If you can get the products or materials you need at a considerably cheaper rate,
importing is a quick and easy way to cut costs and boost your profit margins and this will benefit UK
organizations in this way that those products which they cannot produce locally can be imported by
other countries in cheap prices and less cost due to which cost of UK business organization can be saved.
More over if due to importing higher quality products are available to UK and in lesser price than
nothing like it. If the goods or materials you need have top quality sources outside of your countrys
borders, it pays to have them imported. This way UK business can deal with the best materials right

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from the start and make sure that the best quality and most marketable end products are being
produced. Ultimately this will lead them to become profitable businesses.

More over Exports are significant to UK business organizations as well. Your business can create a
competitive edge through exporting their goods in this way that trading your products internationally
can give you an advantage over competition. If the domestic market is already flooded with similar
products, then overseas markets may just be the best source of profitability through selling your
products outside the country. This especially benefits your products which arent widely available
overseas and UK business can produce them so obviously more demand and more of the sales and more
profit earned. As the international market for your good gets bigger and sales increase which gives you
an advantage over others in your industry. Furthermore UK organizations can have access to new
markets as well. It gives you an opportunity to understand how varied market trends can affect your
business. By entering new markets lead your business to have much more profits and business growth.
More over off set seasonal demand will affect the UK businesses too that Companies products or
services that are used only in certain seasons locally may be able to sell their products or services in
foreign markets during different seasons. Besides, if theres depreciation in the value of pound it will
make UK exports cheaper and it will make imports to the UK more expensive. This means that other
countries will find British goods much cheaper to buy and this will bring increase in their sales and
profits.

4.2 Global factors are a major issue for organizations that are operating internationally or only in their
home country. Impact of global factors on UK businesses will be that if theres international
competitiveness in the market then it will be difficult for them to operate because this leads to high
competition in market and for that they need to lower down the prices in order to meet competitor
price which might affect their profit internationally. Exchange rate is another important global factor
which for which companys ultimate revenue is affected. A sudden change in UK exchange rate is a big
threat for companies trading with UK. Imports and exports might be affected through this. If the global
markets tax and tariffs are high, this will impact UK businesses too. It will bring affect on the production
market that they need to pay income tax on every production batch they produce due to more of the
profits. Secondly through tax and tariffs consumers will hesitate in importing products from UK because
they will find it more expensive. Due to this they will prefer buying it locally from their own markets.
More over PEST factors also bring an impact on UK businesses. PEST analysis consists of Political,
Economical, Social and Technological factors. Political factor affects the UK firms through political
stability that is the country politically stable. This means that country might have political issues which
lead to bad impact on the condition of country. So to make sure we need to analyze the stability of
country politically. Other than this it includes labor laws that are the laws for labor being followed in the
country in order to avoid protests and trade unions impact on businesses which lead to bad image of
them in market so its important that a country should protect its labor laws. Political factors also affect
tax policy as well. There should be stable taxes set by the government so there shouldnt be any
drawbacks faced by the businesses.

Then there are economic factors which include economic growth in the country through increase in
GDP. Interest rates should also be stable in order to increase spending and saving for the people.

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Inflation rate in the country has to be stabilized so that there should be affordability for the people to
spend which increases spending in the country and relation between demand and supply stay equal.

Social factors even affect the country that in UK there is some culture sensitivity like language problem
in businesses. That there is lot of different people who doesnt understand different languages so in
order to avoid this one universal language should be followed which a maximum number of people can
understand. Other than this it includes working population as well. That if there will be highest rate of
working population in UK than the country will be efficient in their workforce.

Lastly, there are technological factors. Technology do affect in negative & positive way both. If extend
of technological availability increases then this will surely increase efficiency in UK firms and their
production level will boost up as well but this will replace lot of labor with capital.

4.3 European union has some rules and regulations that the member countries have to maintain while
operating different business activities within and outside the home country. (Burnes, 2009).

Here are some major policies made by EU which impacts UK business organizations. Employment policy
is one of them. This impact UK business in a way that there should be opportunities of employment
functions in labor market, UK firms should create jobs for the employees in order to maintain their
incomes and standard of living, job quality and working conditions should be improved at work place so
that the employees feel comfortable while doing their work.

Then there is taxation policy. This includes whatever the certain policy regarding tax EU has decided; UK
businesses have to follow it. Either it results in negativity or positivity for them. Furthermore there are
many policies like international policy, regional policy and etc. All of these policies have a direct impact
on UK business activities. They have to consider all the policies imposed by EU otherwise these
businesses will face under the common law of violating agreement of EU.

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References:

Fernando, A. (2011). Business environment. Chennai: Pearson.

Open Learn, (2015). Business organizations and their environments: Culture. [Online] Available at:
http://www.open.edu/openlearn/money-management/management/business-studies/business-
organisations-and-their-environments-culture/content-section---references [Accessed 1 Jan. 2015].

Economics. (2008). New Delhi: Susan Grant.

OMAFRA.GOV.ON.CA

Roles and Responsibilities of Organization Directors

Bibliography: Omafra.gov.on.ca, (2015). Roles and Responsibilities of Organization Directors. [Online]

WORTHINGTON, I. AND BRITTON, C.

The business environment

Bibliography: Worthington, I. and Britton, C. (2009). The business environment. Harlow, England: FT
Prentice Hall.

WETHERLY, P. AND OTTER, D.

The business environment

Bibliography: Wetherly, P. and Otter, D. (2011). The business environment. Oxford: Oxford University
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