BUSINESS ENVIRONMENT ASSIGNMENT

Business Environment Assignment

[Date of Submission]Business Environment Assignment

Part 1

The Determination of the Output Decisions of Businesses & Pricing by Market Structures

The behaviour of competitors and the barriers to entry is the two factors on which the output decisions and pricing of the firm depends upon. The behaviour of a firm can be easily influenced by the action of its competitors. Mutual interdependence is displayed by firms in an oligopolistic industry (Besanko & Et.al, 2009, pp. 211). The new firms cannot enter into the market and compete with the existing firms due to barriers to entry as a degree of market power is given to the existing firms who without risking their market share can make decisions. Initial capital cost, exclusive patents and rights, government legal barriers and restrictions, and availability of key resources are the most common types of barriers to entry.

It is important to note that the pricing decisions of firms can be determined by the degree of barriers of entry. Maximising profit, price of competitor, perception of prices of customers and brand loyalty are the factors that must be considered in addressing the marketing aspects of pricing. To look at the output of individual firms, a basis for beginning is provided by the assumption of profit maximisation. When either losses are minimized, or profit is maximized, it determines the optimal level of output. In the short-run is the maximization of profits is opted by a firm, then the firm can achieve its objective through two ways, either the firm can produce at the point where the difference between marginal cost and marginal revenue is equal to zero or the firm can produce at the point where the difference between the total cost and total revenue is at a maximum.

The Way in which Market Forces Shape Organisational Responses

The interaction between demand and supply within a market is described by the market forces. The reaction given by a business or company to a business or an economical circumstance is known as organisational response. In any circumstance, the key to market forces is an organisational response due to its direct impact on the reputations and profits of the company. To assure that the demands of the customers are met by adequate supply of service or product, appropriate market analysis and research will be conducted by successful companies in terms of demand and supply.

Through assuring that the service or product is supplied in accordance to the appropriate quantities demanded by the customers, the company will be able to keep its customers happy, and if the market demand of their product has been judged correctly by them. Without bringing added finances to the business or overstocking, if the margins of selling and supplying of products are judged correctly, then the profits of the company can be increased. However, misinterpretation of market forces can be led by poor judgment, either leaving the business overstocked due to inappropriate quantities supplied to the customer or leaving customers empty handed due to insufficient supply of ...