Business Environment Essay Example | Topics and Well Written Essays - 2500 words

Business Environment - Essay Example According to Leach (2002), the impacts of these policies on businesses can be short run or long run. Fiscal policies are used to influence levels of aggregate demand in the economy. For the supermarket case, it would be used to achieve price stability and employment regulation. If the government for instance increases its spending and decrease the taxes, then there will be an increase in aggregate demand for the grocery products in the economy (Leach). This brings economic boom to the industry. The increased aggregate demand may cause a need to increase supply hence invoking the need to increase employment. In this case, the supermarkets would at the end have to hire extra staff. When there is inflation in the economy, the government may try to stabilize the prices of the goods by reducing its expenditure, hence reducing aggregate demand forcing the businesses to reduce their prices, hence price stability in the whole economy. Crowding out effect is realized at times in this situatio n. Neri (2001) asserted that monetary policies highly influence the expenditure in an economy. When the central bank of any nation increases its lending rate to commercial banks in an economy, there will be a lag in the amount of money businesses can afford to borrow from the banks in turn due to the increased lending rates by commercial banks. Public sector spending is minimised at this time because of less money in circulation in the economy. Supermarket stores and other businesses will therefore have to reduce their expenditure since access to financial services from banks has been highly reduced (Neri). Impact of Competition Policy and Regulatory Mechanisms on Tesco Regulation of the grocery industry in the UK by nature of its competition is based on four major items; prices, location of the company, product selection and promotional procedures. The industry is regulated by the Fair Trading Act of 1973 which regulates the level of competition in the grocery industry. In analysin g the impacts of competition policy on Tesco PLC therefore, there has to be a consideration for the above four factors. In terms of entry into a market, the competition regulatory policies do not restrict acquisition. Tesco was experiencing completion in some areas and because of there being legislations on take-overs and barriers to entry, the small retailers were purchased by Tesco and therefore created more vivid market domination by this giant firm. According to the revised competition act of 1998 as indicated by a Lancaster university report†¦.†any merger, whether notified to the OFT or not, whether intended or consummated, can be referred by the Secretary of State (SoS) to the Competition Commission for investigation, provided it is above a threshold size†. It is like the act allows takeovers and mergers which kills competition from the small scale retailers. The second competition policy of great importance is the transparency policy. This is mainly applicabl e to the promotional industry. Tesco as a company uses the Tesco Clubcard to keep in touch with its customers. However, the act does not allow the company to remain discrete about its promotional contacts with its clients. This in some cases creates an implication of leaking private company information to the competitors. The third rule is on breach of regulatory rules and the consequences thereon. The Director General of Fair Trading has the express authority to investigate a breach. If a company is