Business is all around us nationally and internationally, they are what made our economy grow. Some business are growing fast as technology advance, however some business are weakening in the slow economy. Roles of Business in the Economy The economy relies on business to provide goods or services within the nation. If there were no businesses, consumers would have to create, sell and produce products on their own. Many people would struggle with obtaining their need and wants in their everyday lives.
Many different types of business create jobs which keep money flowing in the economy. Business replies on four factors of production, factors like natural resource material, capital, human resource and entrepreneurship. Natural resources are material that a person can’t create on their own like land, water, wind, and mineral deposit (Kelly, 2012). The value of such material can be at high demand or really low supply. Capital are technology, machine and tools use to provide goods and services (Kelly, 2012).
Business usually uses their revenue to acquire, maintain, and upgrade their capital. Human resources are anyone who works for businesses in the economy. Entrepreneurship is any who take a risk to start their own business (Kelly M. , 2012). All those factors are essential to economy. Business goes though a different cycle that impacts the economy. If there is a high level of consumer spending profits will be greater for businesses and new jobs could be created. If there is recession, it means lower profits for business.
In a recession, business cut back on spending and employees could lose their jobs. Another cycle is a depression which much company may go out of business and unemployment rates start rising fast. The sign of a recovery cycle is business start to see positive outlook like an increase in revenue and unemployment stop growing at a high rates. For Profit and Non Profit Organization There are two main types of business in the business environment, for profit and non-profits organization.
Nonprofit and for profit business have the same business and management techniques (“Not for Profit” 2013). For profit organization main focus is to gain profit for the product or services they provide. For profit organization generate revenues to pay their employees, other business expense such state and federal taxes and the owner/s of the business keep the rest for wealth. Nonprofit organizations are typically reglious, charitable or educational organizations. The primary goals of nonprofit companies are to fulfill their organization mission and help the community.
Nonprofit companies generate profit just like for profit companies, however nonprofit organization is run majority by volunteers and has a few paid staff. The revenue made in a nonprofit, does not have to pay taxes so after operation cost, the rest of the profit continue to fund the programs mission. Many nonprofit tend to reply on support from the government funding and large charitable donations from for profit companies. But in a slow economy, for profit are experiencing low level in profits and the government is cutting back on spending levels.
Also, many people lose their jobs and are seeking help from nonprofit company for support, like services from food banks. Even though all business has the main goal of gaining profit, the usage of the revenues is different. Impact of Current Fiscal and Monetary Policy on the Economy In 2008, the nation went into an economic crisis, many American lost their jobs and homes which resulted in high unemployment rates and decrease in property values. Also the stock market lost about third of its value during that time, the feds tried to prevent an economic crisis (Kelly M. 2012)
The Federal Reserve board lowered interest rates to bail out major banks and two of the biggest US automobile industries with billions of dollars in loans and proposed an economic stimulus package for about two years (Kelly M. , 2012). The current economy, this year caused a budget deficit meaning the government spending is higher than the revenues and the government must borrow or cut spending. There are two different types of economic policies that are controlled by the government and the Federal Reserve’s known as the fiscal policy and the monetary policy.
The fiscal policy is referred to the government decision on adjusting the spending levels, imposing taxes, and curbing inflation rates and boosting employment rate in the nation’s economy (‘ What is Fiscal Policy,” 2013). The monetary policy is controlled by the Federal Reserve System; the feds lower interest rates and increase the money supply (Kelly M. , 2012). The main goals of these policies are to control and promote growth in the economy. Every year the government meets to create a budget from the revenue received from taxes and fees to outline spending by the government.
The government controls spending and increase taxes to get money out of the economy. The current fiscal policy could have negative affect that are not the same for everyone and may only affect the middle class, meaning they must pay higher taxes than the wealthier class of people(”Effect of Monetary Policy”2013). Strategies for Reaching the Global Market Business can access the global market by many different global marketing development options like foreign outsourcing, importing, exporting, foreign licensing and franchising also foreign direct investment.
Strategies for Mc. Donald’s to gain the opportunity in the global market would be foreign franchising and foreign direct investment. Foreign franchising for Mc Donald’s is less of a risk for the company because the franchisor pays a startup fee and the only thing Mc. Donald’s has to do is offer management guidance, marketing support and some financing if the franchisor is struggling (Kelly M. , 2012). Direct investment opportunity for a Mc Donald is a little more risky, it costs a lot to set up facilities from ground up.
Business also could face a lot of challenges in the global market (Kelly M. , 2012). The sociocultural is different in some countries, so Mc. Donald’s customize menus to cater to the local culture like in United Kingdom a menu option of a five “toasted deli sandwich” (Kelly M. , 2012) Companies have to also consider the local economic and the infrastructure of the country. Mc. Donald’s remains at the top of the global restansunt market in 119 countries. (“Profile, 2013).
Those may be the best strategies for Mc. Donald, but a different type of services or products may not benefit. Social Responsibility Social responsibility is important to a company reputation. Consumers are going to most likely use or purchase a product from a company that social ties in the communities or globally. Ben and Jerry’s Ice Cream, Inc. is an example of a company with social responsibility. Ben and Jerry’s company, social mission benefits many of their stakeholders like their employees, and community not just their shareholders.
Ben and Jerry’s company belief in “linked prosperity” that as the company grows the owners are going to share the wealth with not only their share holder but the community and employees (“Who are We”, 2013). Ben and Jerry’s was the first company to publicly issue, an annual social performance report (“The Journal of Applied Business Research”2013). In the mid 80’s, the company started a public stock to support the growth of the company, Ben and Jerry’s created a Ben and Jerry’s Foundation which Ben donated 50,000 shares and board of director commits about 7.5 % of the pretax profit from the company annual profit to the foundation(“Who are We”,2013). The main goal of the foundation was to give away the profit that Ben and Jerry’s ice cream company generated. Later on the Ben and Jerry’s had major change in the ownership structure and now is owned by Unilver. However, even with new ownership the foundation still gains support from Unilver to continue to foundation fund the grants. The Ben and Jerry’s foundation receive about 2 million dollars in 2009 from Unviler.
Ben and Jerry’s Foundation continues to be dedicated to their employees and gives back to the Vermont communities. Conclusion Ours economy replies business to provides good and services. Company accessing the global market is not just good for our economy but for other nations as well. Nonprofit and for profit help each build our economy. The current fiscal and monetary policy control our spending and funding obtain from the government. Social responsibility benefits everyone not just shareholders.