Understand The Impact of Changes in Economic Environment on Business
The Effects, of Changes in the Economic Environment: Economic changes have a significant impact on business organizations. It is a process of creating wealth in the country and maintains them properly without any damage or wastage. Economic environment analysis is very important for the organization to ensure its future prosperity, growth, and sustainability (Anon, 2017). The factors of the economic environment can influence business in global and national sectors which will describe more descriptively for the selected organization.
McDonald’s UK has faced various changes for economic environment change and struggles a lot to ensure its business sustainability and profitability. Those changes and effects are described below:
Inflation
Inflation is known as instability of the economic condition of any country if inflation occurs McDonald’s will be effected nationally and globally in their business operation. It can create a crisis and have an adverse effect on consumers’ buying ability (UK economy: GDP growth, interest rates, and inflation statistics, 2017). Consumers will not be able to buy more so the profitability of McDonald’s will decrease as the scale decreases.
International Trade
When the businesses across the national boundaries and start to work in the global market, this is known as international trade. There are many competitors, consumers, and culture in the international market. The frequent challenges that McDonald’s faces in the international market are rules and regulations, product quality, acceptability of their offerings, taste and other challenges from competitors (Bakker, Blair and Hitchcock, 2002). The company needs to ensure quality food and ensure that those are preferred by the consumers of all countries.
Recession in the UK Economic Market
Recession is very harmful to any economy. It declines the economic activity across the country. Industrial production, employment problem, decreases in income become huge barriers for the business (Anon, 2017). It can also create a financial crisis, external trade shock, an adverse supply shock, etc.
From 2008 to 2013 UK was in a huge economic recession for share market fall. People were unemployed so their earning was low. They could not spend on their preferred food or services. Almost 20000 business gel closed and 7million people lost their job during the crisis time (UK economy: GDP growth, interest rates, and inflation statistics, 2017).
Though McDonald is a huge company still they have to face economic stability and employee problem for few months. There were price fall and declining demand situation. As people have no money at hand and prices of everything started to seem more to them. Recession declined the price rate and sales as well.
Identify how Government Policies Impact on a Selected Business
The government imposes various policies to control the role of the business. The government can apply high sustainable growth and employment by implementing structural economic policy. The government is responsible for all the rules and regulations imposed every time for economic growth or to prevent adverse economic consequences (Bakker, Blair and Hitchcock, 2002). The government is aware of the economic policy, the competition policy, the fiscal and industrial policy, etc. UK government also imposes various policies that can have an impact on the businesses. Among all of those policies which have the most impact on McDonald’s are discussed below:
Economic Policy
Economic policy refers to all the initiatives taken by the government in the economic field of a country. The policy covers taxation, government budgets, money supply, and interest rates, etc. UK economic policies are mainly focused on the labor market and national ownership areas (Ermolina, 2016). All the rules and regulation of UK government-related economic policies impacts on McDonald’s business operations and activities. McDonald’s should be more careful and organized about their marketing activities and sales initiatives according to the UK economic policy.
Fiscal Policy
Fiscal policy and monetary policy are the two major issues of a country’s economic system. They are the major economic performance indicator of any country. Fiscal policy is influenced by the macroeconomic condition of the UK economic market (Gupta, 2013). The fiscal policy of the UK government helped McDonald to decrease its employment problem. Through fiscal policy, they also controlled the inflation problem and interest rate. So like other companies, McDonald did not have to face serious crisis and they survived the crisis period quite successfully (M.mcdonalds.co.uk, 2017). The UK government needs to lower the tax rates for dual economic growth.
International Trade Policy
The international policy is known as a commercial policy. The policy is used to describe the rules and regulations of international trade or business for the international market with many competitors and buyers. Each and every business of the world maintain the rules and regulations of the international policies to trade in the global market. McDonald’s needed to maintain the quality of its offerings and services as per buyers’ preferences. There is certain cultural rules and regulation for the international export-import for every company.
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