ENVIRONMENT

Business Environment

Business Environment

AC 1.1

One of the most important things for a business owner to consider is the format of the business organization. The formats include sole proprietorship, corporation, partnership, public sector organizations and non-government organization. Every organizations exists for some purpose, and they are as follows

Sole Proprietorship

The purpose is to offer the customer personalized service like barber, cobbler or tailor.

Non-Governmental Organization

The purpose of this type of organization is to provide a community service. The organization runs on the donations it receives.

Corporations

Their purpose is to earn profit, and maximize the value for their shareholders

The purpose of the business depends upon the external factors and the objectives of the business. A business may look for profit satisficing if it thinks that expansion is too risky (Kennerley & Neerly, 2003, p.213-229).

AC 1.2

The extent to which an organization can meet its stakeholder's needs depends on the resources it has. The shareholder's can only maximize their investments in the company if the company posts profits. Similarly, government can earn more tax if the corporation posts profits.

AC 1.3

The responsibility of an organization is to provide a good or service within the remits of the law and ethics. The image of the organization is an important factor when considering their ability to deliver. They ensure that they are able to keep costs at the minimum, and maximize profits by ensuring the highest quality is maintained.

Recruitment is also a significant element of the organization's effectiveness as it leads to the employment of efficient human resources. People make an organization, and their contribution is one of the most important factors that lead to the success of the organization (Porter & Ketels, 2003).

AC 2.1

Economic system faces the challenge of allocating the scarce resources in the most effective manner. Depending on the type of economic system; command, free market, transitional and mixed. The free market looks for the market forces to allocate the resources; whatever is demanded by the economy is produced. In the command system, the resources are with the government and they are the ones that allocate the resources. The mixed economy system is the mixture of both the command and free market economy.

AC 2.2

The fiscal policy is the government spending and taxation. These are the two tools that are utilized in order to control the aggregate demand. The Public Sector Net Cash Requirement (PSNCR) is the yearly fiscal deficit in cash which the difference between public sector incomes and expenses. In build up terms this shortfall is termed as Public Sector Net Borrowing (PSNB). The government pays of its debt by taxation, and provides provision such as infrastructure development and mantainence which is essential for business.

The monetary policy is linked with the interest rates and money supply in the economy. Interest rates are lowered in order to encourage the businesses to get funds at cheap rates and increase business activities. Quantitative Easing is done in order to increase money supply so that the people have enough funds to purchase the goods and ...