Business

Environment
N a m e V. K . G i h a n
Anuruddha Sandaruwan

Subject Business
Environment
Batch - 33

Acknowledgment
I express my sincere gratitude to all the following individuals those contributed towards
the success full completion of my Business environment assignment.
At the very beginning my gratitude goes to my parents as they provide necessary
guidance and other facilities to follow my program. Then my gratitude goes to Mrs. Ganga
lecture in Business environment as she gave all necessary guidance in friendly manner.
Finally I would like to thank to staff of ESOFT as they provide necessary support during
the period of assignment.

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Executive Summary
The beginning of the CPC was made as a state enterprise act No:- 28 of 1961 at the parliament in
Sri Lanka.
The main objective of CPC is to provide continuous fuel supply to fulfil sri Lankan needs.
To do the above successfully, CPC has to import oil from foreign countries.
An also, CPC import some part of oil as crude oil and convert them into various petroleum
products at the refinery at Sapugaskanda.
The main stakeholders of the CPC are;
o
o
o
o

Ceylon Electricity Board

Port Authority
Ceylon Transport Board
Ceylon Government Railway

To attend all the things properly, CPC has to consider the environment factors, safety and welfare
of the employees.
Finally, CPC should attend to the duties by following the conditions mentioned in factory
ordinance

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Table of Contents
Task 01 (1.1)............................................................................................................... 6
Private sector companies........................................................................................ 6
Sole trade................................................................................................................ 6
Public Limited Company:......................................................................................... 7
Advantages:......................................................................................................... 7
Disadvantages:.................................................................................................... 7
Voluntary organization............................................................................................ 9
Charitable organization........................................................................................... 9
Government organization...................................................................................... 10
Cooperative........................................................................................................... 10
Task 01 (1.2)............................................................................................................. 11
Stakeholders are:.................................................................................................. 12
Customers and supplies..................................................................................... 12
Stakeholders......................................................................................................... 13
Who are they......................................................................................................... 13
How to Meeting stakeholders' needs in CPC..........................................................14
Task 01 (1.3)............................................................................................................. 14
Task 02 (2.1)............................................................................................................. 17
Different types of economies:............................................................................... 18
The Free Market Economy:.................................................................................18
Command economy:.......................................................................................... 18
The Mixed economy:.............................................................................................. 18
Transitional economies:...................................................................................... 18
Economic Approach of China.............................................................................. 19
Type of economies.............................................................................................. 20
Task 02 (2.2)............................................................................................................. 21
Impact of fiscal and monetary policy:....................................................................22
Impact of fiscal policy on ZONG:...........................................................................22
Impact of monetary policy on ZONG:....................................................................23
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Task 02 (2.3)............................................................................................................. 24
Key issues in competition policy............................................................................25
Task 03 (3.1)............................................................................................................. 26
Perfect Competition............................................................................................... 26
Imperfect Competition.......................................................................................... 27
Monopoly............................................................................................................... 28
EQUILIBRIUM OF A FIRM........................................................................................ 28
Task 03 (3.2)............................................................................................................. 32
Market Forces Shape Organizational Responses....................................................35
Task 03 (3.3)............................................................................................................. 36
Economic environment in Sri Lanka......................................................................38
Social and cultural environment in Sri Lanka........................................................39
Technological environment in Sri Lanka................................................................39
Environmental factors in Sri Lanaka......................................................................39
Legal environment in Sri Lanka............................................................................. 40
Task 04 (4.1)............................................................................................................. 40
Task 04 (4.2)............................................................................................................. 42
Task 04 (4.3)............................................................................................................. 43
Employment policy:............................................................................................... 43
2. Regional policy:................................................................................................. 44
3. Inflation policy:.................................................................................................. 44
4. Education and training policy:...........................................................................44
5. Taxation policy:.................................................................................................. 44
6. International policy:........................................................................................... 45
7. Establishing the rules........................................................................................ 45
European Union..................................................................................................... 45

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Task 01 (1.1)

Private sector companies

The part of an economy in which goods and services are produces and distributed by individuals
and organizations that are not part of the government or state bureaucracy
A variety of legal structures exist for private sector business organization, depending on the
jurisdiction in which they have their legal domicile. Individuals can conduct business without
necessarily being part of any organization.
The main types of businesses in the private sector are:
Sole trade

Partnership, either limited or unlimited liability

Private limited company or LTD-limited liability, with private shares
Public limited company shares are open to the public. Two examples are:
Franchise business owner pays a corporation to use their name, receives spec for the business
Workers cooperative all workers have equal pay, and make joint business decisions
Private companies may issue stock and have shareholders. However, their shares do not trade on
public exchanges and are not issued through an initial public offering. In general, the shares of
these businesses are less liquid and the values are difficult to determine.

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Public Limited Company:

It is one whose membership is open to general public. The minimum number required to form
such company is seven, but there is no upper limit. Such companies can advertise to offer its
share to genera public through a prospectus. These public limited companies are subjected to
greater control & supervision of control.
The standard legal designation of a company which has offered shares to the general public and
has limited liability. A Public Limited Company's stock can be acquired by anyone and holders
are only limited to potentially lose the amount paid for the shares. It is a legal form more
commonly used in the U.K. Two or more people are required to form such a company, assuming
it has a lawful purpose.
A limited company grants limited liability to its owners and management. Being a public
company allows a firm to sell shares to investors this is benificial in raising capital.

Advantages:

1. The liability being limited the shareholder bear no rick & therefore more as make persons
are encouraged to invest capital.
2. Because of large numbers of investors, the risk of loss is divided.
3. Joint stock companies are not affected by the death or the retirement of the shareholders.

Disadvantages:

1.
2.
3.
4.

It is difficult to preserve secrecy in these companies.

It requires a large number of legal formalities to be observed.
Lack of personal interest.
Different between public company and the private company

5. Minimum number of members: Minimum number of members required to form a private

company is 2, whereas a Public Company requires at least 7 members.
6. Maximum number of members: Maximum number of members in a Private Company is
restricted to 50; there is no restriction of maximum number of members in a Public
Company.
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7. Transferability of shares : There is complete restriction on the transferability of the shares

of a Private Company through its Articles of Association , whereas there is no restriction
on the transferability of the shares of a Public company

8. Issue of Prospectus: A Private Company is prohibited from inviting the public for
subscription of its shares, i.e. a Private Company cannot issue Prospectus, whereas a
Public Company is free to invite public for subscription i.e., a Public Company can issue
a Prospectus.

9. Number of Directors: A Private Company may have 2 directors to manage the affairs of
the company, whereas a Public Company must have at least 3 directors.
10. Consent of the directors: There is no need to give the consent by the directors of a Private
Company, whereas the Directors of a Public Company must have file with the Registrar
consent to act as Director of the company.

11. shares : The Directors of a Private Company need not sign an undertaking to acquire the
qualification shares, whereas the Directors of a Public Company are required to sign an
undertaking to acquire the qualification shares of the public Company

Commencement of Business: A Private Company can commence its business

immediately after its incorporation, whereas a Private Company cannot start its business
until a Certificate to commencement of business is issued to it.

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12. Shares Warrants: A Private Company cannot issue Share Warrants against its fully paid
shares, whereas a Private Company can issue Share Warrants against its fully paid up
shares.
13. Further issue of shares: A Private Company need not offer the further issue of shares to its
existing share holders, whereas a Public Company has to offer the further issue of
shares to its existing share holders as right shares. Further issue of shares can only be
offer to the general public with the approval of the existing share holders in the general
meeting of the share holders only.
14. Statutory meeting: A Private Company has no obligation to call the Statutory Meeting of
the member, whereas of Public Company must call its statutory Meeting and file
Statutory Report with the Register of Companies.
15. Special privileges: A Private Company enjoys some special privileges, which are not
available to a Public Company.

Voluntary organization

A voluntary association or union (also sometimes called a voluntary organization, unincorporated

association, or just an association) is a group of individuals who voluntarily enter into an
agreement to form a body (or organization) to accomplish a purpose.
Many voluntary organizations are working in this district for socio economic development of
rural people and for promotion and dissemination of art, culture & sports.
Charitable organization

A charitable organization is a type of non-profit organization (NPO). The term is relatively

general and can technically refer to a public charity (also called charitable foundation, public
foundation or simply foundation) or a private foundation. It differs from other types of NPOs

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in that its focus is centered on goals of a general philanthropic nature (e.g. charitable,
educational, religious, or other activities serving the public interest or common good)
The legal definition of charitable organization (and of charity) varies according to the country
and in some instances the region of the country in which the charitable organization operates.
The regulation, tax treatment, and the way in which charity law affects charitable organization
also vary.
Charities and voluntary organizations share many features. They are generally:
-

Set up for charitable, social, philanthropic, religious, political or similar purposes.

Required to use any profit or surplus only for the organizations purposes.
Not a part of any governing department, local authority or other statutory body.

Voluntary organizations have a legal structure or status, being an unincorporated association, or a

trust or company limited by guarantee.
Government organization

Government company means any company in which not less than fifty one percent of the paidup share capital is held by the Central Government, or by any State Government or
Governments, or partly by the Central Government and partly by one or more State
Governments, and includes a company which is a subsidiary company of such a Government
company

Cooperative

Cooperative, organization owned by and operated for the benefit of those using its services.
Cooperatives have been successful in a number of fields, including the processing and marketing
of farm products, the purchasing of other kinds of equipment and raw materials, and in the
wholesaling, retailing, electric power, credit and banking, and housing industries. The income
from aretail cooperative is usually returned to the consumers in the form of dividends based on
the amounts purchased over a given period of time.

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Modern consumer cooperatives, usually called co-ops in the United States, are thought to have
begun in Great Britain in 1844, with the Rockdale Equitable Pioneers Society the society created
asset of organizational and working rules that have been widely adopted. They included open
membership,

democratic control,

no

religious

or

political

discrimination,

sales

at

prevailing market prices, and the setting aside of some earnings for education.

The cooperative movement developed rapidly in the latter part of the 19th century, particularly in
the industrial and mining areas of northern England and Scotland. It spread quickly among the
urban working class in Britain, France, Germany, and Sweden and among the rural population of
Norway, the Netherlands, Denmark, and Finland.

In the United States, attempts at consumer and agricultural marketing cooperatives were made at
the beginning of the 19th century. Although most U.S. cooperatives developed in rural areas,
consumer and housing cooperatives spread substantially in metropolitan areas in the late 20th
century.

Cooperatives were introduced in Latin America by European immigrants in the early 1900s; later
they were often fostered by state action in connection with agrarian reform. Marketing and credit
cooperatives have been important in many African nations, especially since World War II. During
the Soviet era, marketing cooperatives of the U.S.S.R. and Eastern Europe functioned as part of a
centrally controlled purchasing network for farm produce. Cooperative farms in those countries
were modeled on the Russian artel, in which all land was pooled and worked in common and
income was distributed according to work performed.

Task 01 (1.2)

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Stakeholder a person, group, organization, or system that affects or can be affected by an

organizations actions.
A stakeholder is any individual or organization that is affected the activities of a business. They
may have a direct or indirect interest in the business, and may be in contact with the business on
a daily basis, or may just occasionally.

Stakeholders are:

Shareholders (not for a sole trade or partnership though) they will be interested in their
dividends and capital growth of their shares.
Management and employee they may also be shareholders - they will be interested in their job
security, prospects and pay.
Customers and supplies.

Banks and other financial organizations lending money to the business.

Government especially the Inland Revenue and the customers and excise who will be
collecting tax from them.
Trade unions which will represent the interests of the workers.
Pressure groups who are interested in whether the business is acting appropriately towards their
area of interest.

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Stakeholders

Who are they

Owners

They invest

Objectives
capital in Profits, growth of

the business and get the business

profits

from

the

the

business

business
Workers

Employees of

security,

job

satisfaction

and

effort to make a business

satisfactory

level

of

successful

payment for their efforts

who give in their time and

Managers

Job

Employees

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the High salaries,

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business who manage a Job security,

business.

They

lead

and control the workers

to

achieve

Status and growth of the

business

organizational goals
Government

Government manages t
he

economy.

government

Successful

businesses,

The employments
charges created,

to

more

be

taxes,

a tax from the business follow laws

and also monitors the
working of businesses in
the country
The community

Community is

all the They expect more jobs,

people who are directly environmental

or indirectly affected by protection,
the

actions

of

the responsible

business.

and

actions

business

socially
products
of

the

How to Meeting stakeholders' needs in CPC

Combine high levels of performance with responsibility for all stakeholder groupings. The
company recognizes that its long-term development depends on maintaining a balance between
the needs of customers, employees, shareholders and the environment. This involves not only
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considering the 'individual benefit' of a particular stakeholder grouping, but also the 'collective
benefit'

of

all

the

groups.

Task 01 (1.3)

Company stakeholder responsibility requires that companies be committed to a stakeholder

approach to management on the following four levels.
Level 1 - Basic Value Proposition At this most basic level, the entrepreneur or manager needs to
understand how the firm can make the customer better off, and simultaneously offer an attractive
value proposition to employees, suppliers, communities, and financiers.

Level 2 - sustained stakeholder cooperation

The competitive, macro-economic, regulatory, and political environments are so dynamic they
necessitate constant revision of the initial stakeholder arrangements. Each revision upsets the
delicate balance struck in the basic value propositions to various stakeholders. Managers must
have a deep understanding of how these trade-offs affect each stakeholder, the amount of
sacrifice a given stakeholder will accept, and how these current sacrifices can be compensated.
Level 3 - An understanding of broader societal issues
Todays managers must recognize and respond to a rising number of international issues, without
the moral compass of the nation, state or religion as a guide. Managers may need to take
positions on issues that apparently are not purely business related. A pro-active attitude is
necessary towards all stakeholder groups, both primary, i.e., those that have direct business
dealings with the company, and secondary, such as NGOs and political activists, who can affect
the operations of the company.
Level 4 Ethical leadership

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Recent research points to a strong connection between ethical values and positive firm outcomes
such as sustained profitability and high innovation.7 Proactive ethical leadership is possible only
if there exists a deep understanding of the interests, priorities, and concerns of the stakeholders.
Bring stakeholder interests together over time.
The very idea of managing for stake-holders is that the process of value creation is a joint
process. Companies need to show returns to its shareholders, meet obligations to debt holders,
banks, and others. Profits dont conflict with other stakeholdersthey are a scorecard indicating
how well the company is managing the whole set of stakeholder relationships. Managers must
keep these stakeholder interests in balance, hopefully mutually reinforcing each other.
The online auction firm eBay constantly updates its user interface and back office processes to
meet the expectations and desires of multiple stakeholder groupsin particular, people who use
the site to buy and sell goods. The companys ability to consistently meet the needs of a broad
range of consumers and sellersfrom small startups to leading national retail operationshas
also been of great benefit to the firms shareholders, with the stock price increasing roughly
400% from 1999 to 2006.
Recognize that stakeholders are real and complex people with names, faces and values.
We often make assumptions that business people are only in it for their own narrowly defined
self-interest. Most human beings are more complicated. Most of us do what we do because we
are both self-interested and interested in others. Business works in part because of the urge to
create things with others and for others.
Seek solutions to issues that satisfy multiple stakeholders simultaneously.
Issues and problems come at managers from many sources, in many forms. Managers need to
find ways to develop programs, policies, strategies, even products and services that satisfy
multiple stakeholders simultaneously. The first step in that process is to actually recognize the
need to look for simultaneous solutions.
The responsibility of an organization is to serve.
Every company, business, department has a duty and remit to provide a service.
An organization must operate within the boundaries of the law. Reputation and trust are
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everything, and a consumer cant have trust or faith in your ability to deliver if you
cant prove and

guarantee

youre

legitimacy.

An organization must also have strict financial control. Taking a gamble is acceptable but sloppy
mathematics in a budget isnt. Inadequate financial management is more likely than not going to
result in bankruptcy and closure, losing investors a hefty sum of money.

Recruitment is vitally important. You need reliable workers who have enthusiasm but also
intelligence; workers that are able to be creative but also to take advice and critique from
management. Poor recruitment can result in a lack of progress or the inability to develop a
rapport with prospective clients and consumers. Human Resources comes into effect here too,
because a successful workforce is a happy workforce, and vice versa. Finding out what the
employees expect of management and in terms of support and acting upon this will generate
positive momentum. A popular place to work quickly becomes a popular place to do business
with. Structured management is obvious. There needs to be a boss who hires and fires, who has
the respect of the employees and keeps the management in check. There also needs to be
managers along the way down to the base level, to act in the same manner and make sure the
workforce meets their targets that their complaints or ideas are heard, and that can provide ideas
for growth or improvement.

Marketing is the final point and is vital. People cant consume what they dont know about. A
good campaign is critical. Depending on the organizations function and aims you will choose a
medium and manage where these advertisements appear and are linked in so as to be relevant
and enticing.
Stakeholders the value of a business to society is the wealth and employment it creates and the
marketable products and services it provides to consumers at a reasonable price commensurate
with quality. To create such value, a business must maintain its own economic health and
viability, but survival is not a sufficient goal. Businesses have a role to play in improving the
lives of all their customers, employees and shareholders by sharing with them the wealth they
have created. Suppliers and competitors as well should expect businesses to honor their
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obligations in a spirit of honesty and fairness. As responsible citizens of the local, national,
regional, and global communities in which they operate, businesses share a part in shaping the
future of those communities.

Task 02 (2.1)

An economy consists of the economic system of a country or other area, the labor, capital and
land resources, and the economic agents that socially participate in the production, exchange,
distribution, and consumption of goods and services of that area.
Land all the natural resources of the earth. That includes the fish in the sea, all the minerals
found in the earth, metals, sand, stones, rocks, timber, food form the soil and so on. Economists
have a name for the reward for the income form land which is rent.
Labor all the human mental and physical effort that goes into production, this will include
people who work as street cleaners, people who are interior designers, teachers, the police,
doctors, bricklayers, architects and so on. The reward for labor is referred to as wages.
Capital all the equipment, machinery and buildings that is not used for its own sake but for the
contribution it makes to production. This includes things like office desks and chairs, computers,
Lorries, cranes, specialist machinery in a factory, the humble office coffee machine and so on.
The price of acquiring capital is referred to as interest.
Enterprise the skills needed to organize other resources into some form of production. Some
people would put enterprise as a specialist skill within labor but enterprise does have some
distinctive characteristics that merit its own category. The return for enterprise is called profit.
Different types of economies:

There are different types of economies and different countries use their different types
The Free Market Economy
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 Command Economy
The Mixed Economy

The Free Market Economy:

This approach is also known as capitalism. In this type of economy the supply and demand of the
goods and services are determined totally by market values rather than the government. This is a
type of economy where price, supply or demands are distorted by the regulations of government.

Command economy:

Also known as controlled economy. This is an economy where both the supply and price are
controlled by the government rather than the market forces. Government decides which good or
service should be produced, how should it be produced and for whom it shall be produced.

The Mixed economy:

This economy is controlled both by the government and the market. Free public hospitals are
controlled by the government as it has a social motive where as the industries are controlled by
the market as it is for profit motive but government still influences to some extent. Most of the
developed countries use this type of approach.

Transitional economies:

A transition economy or transitional economy is an economy which is changing from a centrally

planned economy to a free market. Transition economies undergo economic liberalization, where
market forces set prices rather than a central planning organization and trade barriers are
removed, privatization of government-owned enterprises and resources, and the creation of a
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financial sector to facilitate the movement of private capital. The process has been applied in
china, the former soviet union and communist bloc countries of Europe, and many third world
countries.

Economic Approach of China

China was first a Command economy but in 1990s they released majority of sectors to
enterprises. China then started to approach the free market economy. This is the type of economy
where the market economy is based upon an ideology that assumes that consumer choice will
influence market forces to ensure an optimum allocation of resources with no need for
interference from the government. The only role of government is to ensure that the invisible
hand of market forces is free to operate via the price mechanism or forces of supply and demand.
Some problem with this approach is that there is inequality of power in marketplace, Barriers
restricting entry to the market place and the immobility of factors of production and Producers
may ignore externalities

Consumers and producers take prices as a symbol in a free market. When the product prices
raises as compared to another product on the customer behalf. The purchased products should be
rationed by the consumer. In other words, every product should be treated dearly due to higher
cost at which they are purchased. A great revenue opportunity is gained by the producers when
the price of specific products goes higher. By the government there is low intervention in the
market in the free market economic system which causes waste of market forces. China has the
worlds successful economy. In china allocation of resources is done mostly by the private sector,
the producer sets the price of their products according to the demand of their product and the
chinies government does not enforce restrictions on the prices.
In china resources are allocated according to the demand. In short, the Free Market leads to an
efficient allocation of resources because prices are continually fluctuating, demonstrating
scarcity

and

surplus

through

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the

actions

of

millions

of

individuals.
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Economic systems

An economic system is one that a society attempts to meet peoples material needs and
wants through the production of goods and services. From the countrys point of
view, production of goods and services is influenced by the limited supply of such elements as
labor, land and natural resources and capital. The scarcity of supply of resources means that the
Government has to decide the allocation of these limited resources among competing claims,
given the opportunity costs associated with the decision of producing a certain products and
services within the economy systems instead of others.

Type of economies

- Different approaches or economies systems are adopted by different countries. In a free market
economy, government intervention is kept to the minimum while supply and demand and the
ability to pay influence decision making. Most decisions are based on market mechanism.
The profit motive of the free market economy, however, give rise to question of who will provide
not-for-profit goods and services and infrastructures necessary for the country to meet the needs
of the Public. On the other hands, in a command economy, resources are centrally planned and
controlled by the government. This, however, means that no freedom for individuals to choose
what they produce and what they consume. Most, if not all, countries adopt a mixed economy
today. That is, a mixed economy combines elements of both free private enterprises and
intervention, in varying guises, by the state.
Effective use of resources
-i. The extent to which the mix economies, for effective allocation of resources, between the
government intervention and private enterprises varies from countries to countries. Government
interventions are usually in the form provision or prohibition, subsidies or tax and regulation. For
example, public goods are priced low or zero to maximize consumption and increase social
benefits. Merit goods are encouraged by subsidies to increase consumption whereas the de-merit

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goods are taxed heavily to reduce social costs. Most government has subsidized heavily
education of children to ensure the less fortunate are not left out from the main stream.

Sri Lanka has a mixed economy, which are some main organizations such as main banks,
transport services, electricity board, water board, and telecom. And there are some private
organization for other products and services.
According to the four main resources Sri Lanka has enough lands to use for businesses, but there
are limited numbers of lands in high residential arias, considering about the labor, Sri Lanka has
labor more than the demand in that case Sri Lankan labor cost is very low, considering about
Capital Sri Lanka has very limited capital to invest. Because most of investors they dont like
to invest in Sri Lanka because of the unstable political background, inflation and the high
taxation in Sri Lanka. Final resource is enterprise. Enterprise in Sri Lanka is in very good level
but there are some difficulties to do those thing in Sri Lanka, such as inflation, politics, interest
rates and the taxation.

Task 02 (2.2)
In economic, fiscal policy is the use of government expenditure and revenue collection to
influence the economy. Fiscal policy can be contrasted with the other main type of economic
policy, monetary policy, which attempts to stabilize the economy by controlling interest rates and
the supply of money. The two main instruments of fiscal policy are government expenditure and
taxation.
Fiscal policy: Fiscal policy is basically used for the betterment of a society or a country or a
nation, it works for the development of the economy of any state .it generates its own funds via
taxation and the revenue generated by the government is spent on the state in its different fields
like education ,employment ,constructions and medications etc. . The amount of revenue
collected is less than the amount budgeted, the country is said to be running at a deficit and
issues debt (notes and bonds) to make up the difference. There are three types of fiscal policy
which are mentioned below
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1. Neutral fiscal policy: this is undertaken when economy is in equilibrium. Here the government
spending is completely funded by the taxes.
2. Expansionary fiscal policy: this is undertaken in recession. This is when the government
spending increase than the taxes collected.
3. This is used to pay the debt taken by government. This occurs when the tax revenue exceeds
the government spending
Monetary policy: The change in supply and demands of any states economy is known as the
monetary policy of that state. The interest rates given by any states increases or decrease by the
need of their money which makes the money available easily. Due to the availability of money
the economic activities of the state increases or decreases.

Monetary policy is the process a government, central bank, or monetary authority of a country
uses to control (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate
of interest to attain a set of objectives oriented towards the growth and stability of the economy.

Impact of fiscal and monetary policy:

The impact of fiscal and monetary policy is straight on nations economy which is being
implemented by the government of the nation. In fiscal policy money is first collected through
taxation and then spent on the nations development and its welfare, while in monetary policy the
money is directly proportional to the supply and demand. These both policies have a huge impact
on any business organization. Here I have selected ZONG cellular network company to show the
impact of these policies how they affect any business organization.

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Impact of fiscal policy on ZONG:

Fiscal policy has its own impacts on the ZONG cellular network company, ZONG is affected by
the fiscal policy in the form of double taxation which is there by implemented by the government
in which the ZONG company have to pay its tax and after that the employees have to pay their
individual tax too. If the government raises tax rates then the customer are also directly affected
by face higher rates of the product. This policy also affect the company and as well as the
national economy in the form of less investment and also less employment.

Impact of monetary policy on ZONG:

Monetary policy has its own impacts on the ZONG cellular network company, ZONG is affected
by the monetary policy in the form increase or decrease in investment, it also affects the supply
and the demand of the product .if supply is in huge quantity and there is no demand it would also
affect the company growth and if there is more demand in the market and there is lack of supply
due to investment which cannot be provided in time it would cause lack of opportunity for the
company.

The monetary policy have a huge effect on the overall economy of any nation it all also effects
business organizations by lacking them to have an opportunity to avail credits for their further
investments. in contractionary monetary policy it higher the interest rates which reduces the
supply of money and it gets harder for any business organization to be financed by other sources,
where as in expansionary monetary policy it provides lower inters rates so for any business
organization it gets easier to be financed by other sources and the organization can avail a lot of
new
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In fiscal policy the government either changes the level of taxation or the level of spending. If
government increases the level of taxation so people will be left with little disposable income so
they will spend less. As a result spending in the economy will fall. Raising taxes will also affect
the producers as well because when taxes are raised people pending falls this means the demand
for products falls and thus the revenue falls. However if the tax is reduced and the government
spending is increased people will have more money this will increase the aggregate demand in
the economy in order to cope with this high demand producers increases their operations for this
they hire more labors so with this the unemployment rate also falls. Expansionary fiscal policy
also decreases exports.

In monetary policy the monetary authorities control the money supply by often varying the rate
of interest. If government increases the interest rate so people will not borrow money from banks
for the purpose of starting new businesses or buying house etc. this is because they know that
when theyll return the loan they will have to pay a higher interest rate so as a result new
entrepreneurial activities stops.

There will be also downward pressure on spending in the economy. This will hit the producers as
well because they will face a fall in demand and thus fall in revenue. High interests will also
attracts great inflows of money because people from outside will put money in banks of that
country in order to get higher rate of return on it. Same will be the case with domestic people
they also will put money in banks for high return and this again will decrease the spending in the
economy. However if the interest is lowered so people will start taking loans from the banks and
they will start investment, this also will increase the spending and producers or firms will
experience an increase in their demand. As a result the unemployment rate will also fall because
the producers will hire more labors in order to cope with the demand.
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Task 02 (2.3)

Different types of organization have different purposes. According to Draft R. L. all

organizations exists for a purpose this purpose may be referred to as the overall goal, or mission.
Organizations can be categorized according to several categories. Firstly it can be divided
to public and private sector organizations. Usually public sector organizations have more nonfinancial objects than the financial objectives.

Private companies can be divided into many organizational types like sole traders; private limited
companies (Ltd), partnerships, public limited companies (PLC).These have mainly financial
objectives. However, nowadays all organizations understand the importance of introducing nonfinancial objectives to their portfolio.

Modern Organizations especially large multinational companies set their objectives not only in
economical perspective, but also concentrate on social, environmental and customer perspective
&etc. Triple bottom line is a criterion for measuring organizational success in economical,
ecological, and social aspects. Anglo Americans objectives too involve triple bottom line. Anglo
American have six guiding values and SMART objectives which help them to achieve its
business strategy which focuses of sustainable development. Therefore Anglo American similar
to any other multinational companies in the modern world.

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The motivation and design of Italys competition policy have made it a strong foundation for
market-oriented regulatory reforms. This role for competition policy institutions is particularly
significant, in light of the magnitude of the challenge that Italy faced in improving market
functioning. Its traditional policy framework for market regulation took little note of competition
principles, and thus competition policy faced a host of constraints imposed by the government
itself.

Key issues in competition policy

The nature of the competition policy problems Italy faces has evolved, along with its institutions.
Today these include:
A multitude of controls on entry and market conduct, through concession and licensing
Requirements and other regulations, especially in services and professions;
Devolution of responsibilities to local governments, which apply many of these constraints, and
which are responsible for delivering services in traditionally monopolized sectors, but which are
not always sympathetic with the objectives of competition-based reform;
Delayed reform of retail distribution, as regional governments have stalled the process of
implementing national legislation, with the effect of maintaining constraints on new entry;
Reform of local utilities and public services, through legislation now being developed.
Implementing details need to be worked out carefully, to ensure that local and regional
government action does not dilute the success of large-scale infrastructure reforms;
Occasional direct interventions in markets, by laws controlling prices or market shares,
suggesting doubt about the commitment to market methods;
Completing the restructuring of traditional infrastructure monopolies;
Developing enforcement capacities to deal with secret cartels.
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Task 03 (3.1)
The popular basis of classifying market structures rests on two crucial elements, (1) the number
of firms producing a product and (2) the nature of product produced by the firms that is whether
it is homogeneous or differentiated. The price elasticity of demand for a firms product depends
upon the number of competitive firms producing the same or similar product as well as on the
degree of substitution which is possible between the product of a firm and other products
produced by rival firms. Therefore, a distinguishing feature of different market categories is the
degree of price elasticity of the demand faced by an individual firm.
Perfect Competition

As is evident from the above Table, Perfect Competition is said to prevail where there is a large
number of producers (firms) producing a homogeneous product. The maximum output which an
individual firm can produce is relatively very small to the total demand of the industry product so
that a firm cannot affect the price by varying its supply or output. With many firms and
homogeneous product under perfect, competition no individual firm is in a position to influence
the price of the product and therefore the demand curve facing it will be a horizontal straight line
at this level of the prevailing price of the product in the market, that is price elasticity of demand
for a single firm will be infinite.

Imperfect Competition

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Imperfect competition is an important market category wherein individual firms exercise control
over the price to a smaller or larger degree depending upon the degree of imperfection present in
a case. Control over price of a product by a firm and so the existence of imperfect competition
can be caused either by the fewness of the firms or by the product differentiation. Therefore,
imperfect competition has several sub-categories. The first important sub-category of imperfect
competition is Monopolistic competition. In monopolistic competition a large number of firms
produce somewhat different products which are close substitutes of each other. The second subcategory is oligopoly without product differentiation which is also known as pure oligopoly.
Under it there is competition among the few firms producing homogeneous or identical products.
The fewness of the firms ensures that each of them will have some control over the price of the
product and the demand curve facing each firm will be downward sloping which indicates that
the price elasticity of demand for each firm will not be infinite. The third sub-category is called
differentiated oligopoly. It is characterized by competition among the few firms producing
differentiated products which are close substitutes of each other. The demand curve under this
kind of oligopoly is downward sloping and so firms would have control over the price of their
individual products.

Monopoly

Monopoly means the existence of a single producer or seller which is producing or selling a
product which has no close substitutes. And as such it is an extreme form of imperfect
competition. Since a monopoly firm wields a sole control over the supply of product, which can
have only remote substitutes, the expansion and contraction in its output will affect the price of
the product. Therefore, the demand curve facing a monopolist is downward sloping and has a
steep slope.
EQUILIBRIUM OF A FIRM

Firm is said to be in equilibrium when it has no tendency either to increase or to contract its
output. Firms equilibrium level of output will lie where its money profits are maximum. Now

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profits are the difference between total revenue and total cost. So in order to be in equilibrium,
the firm will attempt to maximize the difference between total revenue and total cost.
An old method of explaining the equilibrium of the firm is to draw the total revenue and total
cost curves of the firm and locate the maximum profit point. But, with the appearance of
Marginality Revolution, equilibrium of the firm is explained with the aid of marginal revenue
and marginal cost curves.
Equilibrium of the Firm by Curves of Total Revenue and Total Cost Profit is the difference
between total revenue and total cost. Thus the firm will be in equilibrium at the level of output
where the difference between total revenue and total cost is the greatest. Figure 8.1 depicts shortrun total revenue and total cost curves of the firm. As a firm starts from zero output and increases
its production of the good, in the very initial stages, total cost is greater than total revenue and
the firm is not making any profit at all. When it is producing OL level of output, total revenue
just equals total cost and the firm is therefore making neither profits, nor loss, that is, the firm is
only breaking even. Thus the point S corresponding to OL output is called break-even point.
When the firm increases its output beyond OL, total revenue becomes larger than total cost and
profits begin to accrue to the firm. It will be seen that profits are rising as the firm increases
production up to output OM. At OM output, the distance between TR and TC is the greatest and
so the profits will be the maximum. Thus the firm will be in equilibrium at the OM level of
output. The firm will not produce any output larger than OM since after it the gap between TR
and TC curves goes on narrowing down and therefore, the total profits will be declining. At OH
level of output TR and TC curves again intersect each other, which means that total revenue is
equal to total cost at output OH. Thus point Q is again a breakeven point.

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Equilibrium of the Firm by Marginal Revenue and Marginal Cost

The firm will be making maximum profits by expanding output to the level where marginal
revenue is equal to marginal cost. If it goes beyond the point of equality between marginal
revenue and marginal cost, it will be incurring losses on the extra units of output and therefore
will be reducing its total profits. Thus, the firm will be in equilibrium when it is producing the
amount of output at which marginal revenue equals marginal cost. It will be earning maximum
profit at the point of equality between marginal revenue and marginal cost. Therefore, the
condition for the equilibrium of the firm is that the marginal revenue should be equal to the
marginal cost. In Fig. 8.2 firms marginal revenue curve MR is sloping downward and firms
marginal cost curve MC is sloping upward and they cut each other at point E which corresponds
to output OM. Up to OM level of output MR (Marginal Revenue) exceeds MC (Marginal Cost)
and at OM the two are just equal to each other. The firm will be maximizing its profits by
producing OM output.

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The equality between marginal revenue and marginal cost is a necessary but not a sufficient
condition of firms equilibrium. The second order condition requires that for a firm to be in
equilibrium marginal cost curve most cut marginal revenue curve from below at the point of
equilibrium.
Only at the equilibrium price, wishes of both the buyers and sellers are satisfied. If prices were
greater or less than the equilibrium price the buyers, and sellers wishes would be inconsistent. If
prices were greater than the equilibrium price, quantity supplied would exceed quantity
demanded. It means some of the sellers will not be able to sell the amount of the goods they
wanted to supply. These sellers would try to dispose of the unsold goods by bidding price down.
The price will go on declining till the quantity demanded equals quantity supplied. On the other
hand, if prices were lower than the equilibrium price, the quantity demanded would exceed
quantity supplied. Some buyers would not be able to obtain the amount of the goods they wanted
to purchase at the prevailing price. They will therefore bid price up in their effort to get all that
they desired to buy. The price will go on rising till the quantity demanded and quantity supplied
are again Equal. The market period is a very short period in which the supply is fixed, that is no
adjustment can take place in supply conditions. In other words, supply in the market period is
limited by the existing stock of the goods. In this period more goods cannot be produced in
response to an increase in demand. The price prevailing in the market period is called market
price which changes with the nature of the commodity many a time within a day or a week or a
month. In reality, market price is that price which is determined by the forces of demand and
supply in the market at a point of time. The determination of market price can be explained
separately for the perishable and the durable goods.
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Determination of Short-run Price

In the short period, price is determined by the forces of demand and supply. The point of
equilibrium is located where demand and supply curves intersect. In the short period the firms
will keep on producing even if they are not able to cover the average total cost but are able to
cover only the average variable cost. If they stop production they will be losing their fixed costs.
It is only when these firms do not get the price sufficient enough to cover their variable costs that
these firms stop production. The equilibrium price in the short period is called the short period
normal price, which is determined by the intersection of the short period normal supply and
normal demand curves.

Determination of Long-run Normal Price

Long-run price is also known as normal price. Long-run price or normal price is determined by
long-run equilibrium between demand and supply when the supply conditions have fully
adjusted to the given demand conditions. Given the demand, a price will tend to prevail in the
long-run when supply has fully adjusted and that price is known as long-run price or normal
price.

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Task 03 (3.2)
There are varieties of market forces may need to be addressed by your organization; there are
three common ones that affect businesses today; customer responsiveness, information demand
and cost pressure.
Quickness in anticipating and responding to customer demands will continue to be an important
ingredient of competitive advantage. Even today, many organizations are eager to collect your
payments for the purchase of products or services, but when it comes to returning those products
to terminating those services, they make it a challenge to receive a refund-sometimes requiring
extensive submissions of paperwork, long delays to receive a check back by mail or limiting the
return/refund period to a short timeframe.
The relationship between demand and supply underlie the forces behind the allocation of
resources. In market economy theories, demand and supply theory will allocate resources in the
most efficient way possible.
Market forces shape organizational responses through a very basic economic principle: Supply
and demand.
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A company or organization will always try and predict demand for its product or service,
and ensure that demand is met by implementing a cost effective strategy.

Market forces, by definition, can have an effect on that demand - and as such, will have an affect
on the supply chain and strategy used by an organization.
We could make a never ending list of market "eventualities" and examine how they impact
supply and demand, but actually it's safer to just stick to the well-established concept of Porter's
Five Forces:

likelihood of new entry,

powers of customers,

power of suppliers,

degree of rivalry

substitute threat

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Market forces describe the interaction between supply and demand within a market.
Organizational response is the reaction given by a company or business to an economical or
business circumstance. An organizations response to market forces is key in any circumstance as
it will have a direct impact on the companys profits and reputation. In terms of supply and
demand the most successful companies will have appropriate market research and analysis in
place to ensure that they are able to supply a product or service to meet the demands of its
customers.
If a company has judged the market demand for their product correctly then they will keep their
customers happy by ensuring they supply the product or service requested by their customers in
the appropriate quantities. It will also increase profits as the company will have judged their
margins correctly to be able to supply and sell as much of their product as possible, without over
stocking, bringing added finances to the business. Poor judgment could lead to a
misinterpretation of market forces, either leaving customers empty handed as not enough product
has been supplied, or leave their business overstocked as customers do not want the quantities
supplied. In both scenarios a companys profits would be greatly affected, and the organizations
reputation may be tarnished.
The relationship between market forces and organization response is therefore paramount in
terms of business success and customer satisfaction. For this reason, market research is key in
order to determine market forces so that an organization can respond correctly to the market they
are operating in. It is also important to continue in monitoring market forces to ensure that an
organization can respond to any changes in market conditions. More or less product may be
needed to match customer demand during different market seasons.

Market Forces Shape Organizational Responses

Countries

that

use

Economic

Systems

The Economy of England are the largest economy of the four countries of the United Kingdom.
England is a highly industrialized country. It is an important producer of textiles and chemical
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products. Although automobiles, locomotives and aircraft are among England's other important
industrial products, a significant proportion of the country's income comes from the City of
London.
Since the 1990s, the financial services sector has played an increasingly significant role in the
English economy and the City of London is one of the world's largest financial centers. Banks,
insurance companies, commodity and futures exchanges are heavily concentrated in the City.
The British pound sterling is the official currency of England and the central bank of the United
Kingdom,

the

Bank

of

England,

is

located

in

London.

United

States

The US has abundant natural resource, a well-developed infrastructure, and high productivity. It
has the world's sixth-highest per capita GDP (PPP). The U.S. is the world's third-largest producer
of oil and second- largest producer of natural gas.
It is the second-largest trading nation in the world behind China. It has been the world's largest
national economy (not including colonial empires) since at least the 1890s. China
the Socialist market economy of Peoples Republic of China (PRC) is the world's second largest
economy. It is the world's fastest-growing major economy, with growth rates averaging 10% over
the past 30 years. China is also the largest exporter and second largest importer of goods in the
world. It is the world's fastest- growing major economy, over the past 30 years. China is also the
largest exporter and second largest importer of goods in the world.

Task 03 (3.3)
When considering CPC activities in Sri Lanka, CPC should adopt to below mention criteria.
1.
2.
3.
4.
5.

Political factors in Sri Lanka

Economic factors in Sri Lanka
Social cultural factors in Sri Lanka
Technological factors in Sri Lanka
Environmental factors in Sri Lanka

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6. Legal factors in Sri Lanka

Political environment in Sri Lanka
Political environment can affected any business in the country, especially countries like Sri
Lanka. Sri Lanka has very unstable political parties in that case Sri Lanka cant enter in to
international agreement. In this case Sri Lanka doesnt have petroleum in that case Sri Lanaka
has to import everything. Other thing is Sri Lanaka doesnt have any barging power because Sri
Lanka is a very small buyer when comparing with other countries.
In Sri Lanaka CPC control by the government in that case political changes are directly affect to
CPC.
"The end of armed conflict provides Sri Lanka with a historic opportunity to achieve a dual
transition from a low income country in conflict to a middle income country in peace," the bank's
latest economic update on the country said.
"For longer-term stability needed to bolster the investment climate it would be necessary to
address minorities underlying grievances."
Government forces defeated Tamil Tiger separatists in May, ending the 30-year ethnic war, and
creating anticipation of an economic revival.
But underlying Tamil grievances on sharing political power that triggered the war remain
unresolved leading to fears Tamil Tiger extremists might try to revive the conflict.
The World Bank report said that in terms of devolution of power to provincial councils, the Sri
Lankan government has announced further devolution will only be considered after the
forthcoming elections.
Parliamentary and presidential polls are anticipated next year.
The World Bank said that preliminary estimates suggest that Sri Lankas long-term potential
growth rate is around six percent.

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"The post-conflict boom may help Sri Lanka to return relatively rapidly to growth rates in this
range, but is unlikely to significantly increase the long-term potential growth rate, unless a
significant structural policy agenda is implemented."
The bank said that prospects for enhanced foreign direct investment inflow would depend on an
improvement in the overall investment climate, elimination of the security threat, improvement
in debt sustainability prospects and continuation of low inflation.
"In the short-to-medium term, prospects for the Sri Lankan economy look positive," the report
said.
"First, there are increasing signs that the global economic crisis is bottoming out.
"Prospects of a global recovery would provide enhanced growth impetus through recovery in
exports, increase in tourism and possible greater FDI inflow."
In a low-inflation environment, the real effective exchange rate can be expected to support export
competitiveness, the World Bank said.
"The tourism sector is already showing signs of reaping the end-of-conflict dividend, with July
and August arrivals having risen substantially."
But the bank said that sustaining the positive investor sentiment will be a key challenge in the
coming months.
"A still-weak global economy, uncertainty about the continuation of the preferential access for
Sri Lankan exports to the EU market under the GSP+ scheme and persistently high fiscal deficits
are risks to the outlook."
On the other hand, the World Bank said, reconstruction spending in the war-affected north is
expected to provide a short-term stimulus, while the lagged effects of the recent monetary
stimulus would also act as a fillip.

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"In the longer term, movement towards a sustainable political solution to the underlying causes
of the conflict will be key, as will decisive moves on the structural policy agenda to unleash Sri
Lankas full growth potential."

Economic environment in Sri Lanka

Sri Lanka has a monopoly economy to petroleum business in that case CPC doesnt have any
competition in their business.
Sri Lanka is one of the fastest growing economies in the world and an emerging investment
hotspot. Over the last two decades, substantial steps have been taken to diversify the economy,
and open it up to trade. The Governments 10-year development plan envisages the key role in
promoting economic growth, with a focus on harnessing resources to the less developed regions.
Key policy documents advocate infrastructure development and livelihood support in rural areas.
The economy grew by 8.3 per cent in 2011, the highest in Sri Lankas post-independence
history, following a growth of 8 per cent in 2010. Improved consumer and investor confidence
arising from the peace dividend, favorable macroeconomic conditions, increased capacity
utilization, expansion of infrastructure facilities and renewed economic activity in the Northern
and Eastern provinces underpinned this growth. The expansion in economic activity was
reflected in the unemployment rate, which declined to the lowest level of 4.2 per cent in 2011.

Social and cultural environment in Sri Lanka

When considering social and cultural environment in Sri Lanka, mainly there are four religions
in the country such as Buddhist 69.1%, Muslim 7.6%, Hindu 7.1%, Christian 6.2%, other 10%.
But in Sri Lanaka the Buddhist is the main religion. In that case when considering social and the
cultural environment probably Buddhist cultural will be apply to the most of the situation. And
there are nine provinces in Sri Lanka, such as Northern provinces, central, north central,
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northern, eastern, north western, southern, uva, sabaragamuwa, western, according to the
province there are some social and cultural attitudes will be apply.

Technological environment in Sri Lanka

Technological environment in Sri Lanka is very low comparing with the other countries.
Because in Sri Lanka charge lot of taxes on everything in that case people doesnt like to move
to new technology because it takes lots of money.
Environmental factors in Sri Lanaka

Sri Lankas main income is agriculture. Sri Lankas income base on their agricultural income. In
that case Sri Lanka has to maintain good environment to do agriculture. Sri Lanaka has to reduce
the environmental pollution. In CPC business CPC has to import high grade oil to Sri Lanaka.
But now also CPC import very low quality diesel to Sri Lanka, is euro standard 2, but most of
the countries they use euro standard 4 diesel. Using those kind of low quality material is directly
affected to Sri Lanaka environment.
Legal environment in Sri Lanka

According to the Sri Lanaka law no one cant enter in to the CPC businesses. That is a good
advantage to the CPC. There are some rules in Sri Lanaka law, CPC should follow those rule
when doing their day today activities. Such as
1. Employee law, under employee law if the any employee who working as a permeant employee
CPC should give EPF, ETF, funds to the employee and as a basic salary CPC should pay at least
the minimum salary amount. And employee who is working more than the working hours CPC
should pay the overtime to the employee.
2. Government pricing control. CPC should follow the government pricing control. CPC cant
apply their own pricing.
3. Business registration. CPC should be under Sri Lankan government and government control.
CPC cant privatize.

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According to the PESTEL analyze this is the six types of environment CPC should face in Sri
Lanka.

Task 04 (4.1)

One of the biggest challenges for business organisations in the UK is learning how and where to
trade overseas. In an interdependent world, international trade is an economic necessity.
However, there are marked differences between trading in a national economy with known
markets and known parameters, and trading on an international basis. Business organisations
require

support

to

enter

markets

as

well

as

to

sustain

their

activities.

This case looks at British Trade International and its aim to help UK firms compete successfully
overseas.
British Trade International is the joint Department of Trade and Industry/Foreign and
Commonwealth Office operation which has lead responsibility within the Government for trade
promotion and development.

British Trade International helps businesses make the most of global trading opportunities. With
over 800 staff in the UK and over 200 diplomatic posts overseas, British Trade International
supplies various information, from basic advice - such as for a small business which may be a
first time exporter to Dublin - to highly specific niche market information, i.e. a small specialist
market.
Within the UK, British Trade International provides dedicated market support including:

advice/information services for initial market research

professional help from export promoters who have widespread export experience
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information on various methods of conducting business in a specific country

help with meeting language and cultural requirements

assistance in bringing key contacts to the UK

Helping UK organizations market themselves overseas, including grants for visiting

countries and exhibiting at international trade shows.

Services tailored for each organizations needs are provided by British Trade Internationals
overseas offices, which can supply direct support for each exporter.

British Trade Internationals Export Market Information Centre possesses an extensive range of
publications and statistics relating to businesses worldwide. It may be accessed in person, by
telephone, fax or e-mail. Making the most of IT and the Internet is another major step in
improving services to UK businesses.
A new Internet service, Trade UK, provides information on sales leads gathered by overseas
offices. This is instantly fed into the system so UK companies can respond more rapidly than
their competitors to new business opportunities.
UK businesses can obtain details of all the leads together with full details of five leads free every
month. To access Trade UK, a business has to be part of the National Exporters Database. This
is a free Internet-based directory of UK firms, with 54,000 exporters on it at present. Posts are
able to search Trade UK to answer enquiries from potential customers, as can those with Internet
access who search the database themselves. The aim of this service is to provide global exposure.

A presence in overseas markets will help business organizations to achieve:

increased growth leading to the benefits of economies of scale -

larger production runs reduce costs

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a competitive edge - exposure to intensive competition, new products and ideas, more
efficient technologies and better working practices

higher earnings where margins in some markets exceed those in the domestic one

the ability to spread risks while sales in the home market may be in decline those in
overseas markets may be booming.
The size of the business does not matter, nor does the product sector. What is important is:

the product meets local demands

regular training of overseas sales teams

developing long-term relationships

establishing new markets to compensate for less buoyant ones

good marketing and customer service

Having a quality product strong enough to compete within overseas markets.

Task 04 (4.2)

Politics, economy, society, and technology are the 4 key global factors that influence UK
businesses.
The impact of global factors on the UK economy and UK business can actually be explored by
breaking down the various strategies businesses in the United Kingdom employ, and then
looking at the factors that influence and affect those strategies.
To start, we can look at the following UK business strategies that have a reliance on international
and global markets:
- Export to foreign markets
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- Association with trade blocs

- Partnering with strong international markets
- Establishing overseas competitiveness
The following are seen as factors that can influence the success rate of the aforementioned
strategies:
1. Politics
2. Society and culture
3. Economic stability
4. Technology
These are known by the acronym PEST, and are a well-established group of factors that can
impact not only UK business organizations, but also the economy of any sovereign state that
takes part in international trade or the free market.

Task 04 (4.3)

Employment policy:

Governments play a major part in trying to stimulate employment. For example, the present
government is keen to encourage business efficiency so that UK businesses are competitive in
international markets and therefore create jobs. For those who have difficulty finding work, the
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government has created what is termed 'The New Deal', offering people the opportunity of
developing training and experience on government funded and sponsored employment
programmers.

2. Regional policy:

At European Union level, funds are made available to support regions of high unemployment
and social deprivation such as large areas of Southern Italy and rural France, as well as the
Highlands and Islands of Scotland. Regional policy sets out to compensate for the fact that with
the development of the more prosperous parts of the European Union, jobs have been lost in
other areas.

3. Inflation policy:

The government seeks to make sure that there are no sudden general rises in prices. They do this
through the Monetary Policy Committee (MPC) of the Bank of England which sets interest rates.
Interest rates are put up if there is a danger of people borrowing and spending too much, thus
pushing prices up. Raising interest rates makes it more expensive for businesses to borrow
money. It also makes it more expensive for consumers to borrow money. They then have less to
spend, which helps to force down prices.

4. Education and training policy:

Education and training is seen in the UK as having a valuable contribution to make to business
life. The government plays an important part in forcing through education and training changes,
for example by creating more Vocational Subjects in the school curriculum.

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5. Taxation policy:

Businesses can make a valuable contribution to the community by the taxes they pay. In return,
the government can help businesses by spending money on projects like airports, roads, aid to
developing countries and many other items.

6. International policy:

The government can promote trade, encourage sales of British goods abroad (exports), or
discourage goods coming in from other countries (imports).

7. Establishing the rules

Many of the laws of this country have been in existence for a long time. Others are much newer.
New legislation can be made at a European Union, national or local level. These laws set out
how people can and should behave towards one another, and particularly, how business should be
conducted. They are very important in setting 'the rules of the game'.

European Union

The European law making it compulsory for coach passengers to wear seatbelts was costly for
bus companies because it forced them to fit safety belts - but it also makes passengers a lot safer.
European Union regulations are directly binding on all Member States without the need for
national legislation to put them in place.

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European Union directives bind Member States to the objectives to be achieved within a certain
time-limit, but leave national authorities to decide on how to implement them. Directives have to
be implemented in national legislation.

References
de Mooj, M. (2003) Convergence and divergence in consumer behaviour: implications for
global advertising, International Journal of Advertising, vol. 22, no. 2, pp. 183202.
Hofstede, G. (c. 2007a) A summary of my ideas about organizational cultures Geert
Hofstede's Homepage [online] http://feweb.uvt.nl.center/hofstede/page4.htm (accessed 15
December 2007).
Hofstede, G. (c. 2007b) Geert Hofstede Cultural Dimensions
Hofstede, G. J. (2007) Gert Jan Hofstede's

, (accessed 14 May 2008).

(accessed 14 May 2008).

Hofstede, G (1980) Motivation, Leadership and Organization: Do American Theories Apply

Abroad: From Organizational Dynamics, summer 1980, pp. 42-63, reprinted in Organization
Theory Selected Classic Readings, edited by Derek S Pugh, fifth edition, Penguin Books,
2007. Copyright Geert Hofstede BV.
McSweeney, B. (2002) Hofstede's model of national cultural differences and their
consequences: a triumph of faith a failure of analysis, Human Relations, vol. 55, no. 1, pp.
89118.
Morrison, J. (2002) The International Business Environment, Basingstoke, Palgrave.
Pugh, D. S. and Hickson, D. J. (2007) Writers on Organizations, pp. 88-94, 'Geert Hofstede'
and pp. 170-71, 'Edgae H Schein', published by Penguin Books, 2007.
Pugh, D. S. (2007) Organisation Theory, London, Penguin Books.
Trompenaars Hampden-Turner (c. 2007) The three layers of culture, Trompenaars and
Hampden-Turner's web pages [online], (accessed 14 May 2008).

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Williamson, D. (2002) Forward from a critique of Hofstede's model of national

culture, Human Relations, vol. 55, no. 11, pp. 137395.

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