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The Business Environment

In: Business and Management

Submitted By lovinlife5676
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The economy is a financial and social system of how resources flow through society, from production, to distribution, to consumption. (Kelly and McGowen, 2012) Without businesses, there would be no flow of resources and the economy would not grow. In order for resources to be produced into goods and services, several different businesses have to contribute to the production and distribution. It may start with a farmer growing produce, that is then shipped out across the country to all sorts of different other businesses and they all play an important role in the economy. In the United States, our economic system is capitalism, also known as a “private enterprise system” or a “free market system” and is based on private ownership, economic freedom, and fair competition. (Kelly and McGowen, 2012) We are free to start a business and keep our profits and have fair competition. This helps the economy grow by putting money back into people’s pockets which results in saving money and spending more money on products and services and this makes the economy. Businesses have to be fair and competitive in pricing and with the products they sell. You can buy milk from any grocery store but the store with the best price on their milk is going to be more attractive. Nonprofits and for-profit organizations both play an important role in the economy, both in similar and different ways. Both organizations contribute to the community and they often do that by working together. Nonprofits are business-like establishments, but their primary goals do not include profits. (Kelly and McGowen, 2012) Nonprofits are not in business to make money, but they do provide goods and services like any for-profit business. Both businesses and nonprofits rely on factors of production to achieve their objectives. (Kelly & McGowen 2012) They both make and need money to stay in business and to be able to provide the goods and services they do. However, nonprofits do not keep the profits they make. Nonprofit organizations are not prohibited from earning a profit or paying salaries and wages, but they must devote any surplus to the organization. By being a nonprofit organization, the government gives tax breaks where a for-profit business would not get these breaks. It may seem like that is not fair when a lot of for-profit businesses are small businesses owned by one or two entrepreneurs and they might could use a tax break but they are keeping their profits and making money where nonprofits are putting their profits back into the organization or community. Also, nonprofits rely heavily on volunteers who do not get paid for the work that they do. This can make it difficult to keep people coming back to help and a lot of people volunteer because they have a passion to do so but they still need something like recognition to keep them coming back. Nonprofits are like for-profit businesses because they do still have paid employees who get a salary but not everyone is a paid employee like for-profit businesses. Fiscal policy and monetary policy are both important in the US economy. Fiscal policy is controlled by the government and uses tax and spending changes to impact the economy. Fiscal strategies are closely tied to political philosophy, but regardless of politics, most economists agree that lower taxes can boost the economy by leaving more money in people’s pockets to spend or invest. (Kelly & McGowen 2012) The federal budget is the primary spending mechanism, and the primary means for funding the budget is taxation. When the amount of revenue collected is less than the amount that is budgeted, the country is said to be running at a deficit and then the government issues debt (notes and bonds) to make up the difference. Monetary policy impacts the economy by changing the supply and demand of money. The Federal Reserve manages the monetary policy and changes interest rates and deposit reserve requirements that increase and decrease the amount of money available. Economic activity increases or decreases according to the supply of available money. There are several different strategies for reaching global markets. Which of the strategies a company uses is going to depend on what kind of products and\or goods that company produces and depends on what kind of risk they are willing to take. A company I am familiar with is Yankee Candle. They specialize in all different kinds of candles, oils, air fresheners, and even home décor. Yankee Candle is a US company that has stores throughout the country. However, I do believe that with the right strategies they could expand globally and their company could grow tremendously. First, I would start advertising online and if possible in other countries. Once the name Yankee Candle becomes known in other countries and people want to buy the products, I would start to export goods to different countries that do not have a Yankee Candle store that they could go to locally and shop by using the internet. Using the internet can make exporting very easy. For instance, you may live in France and cannot go to a Yankee Candle store. If you visit YankeeCandle.com you can place an order right online and have the products shipped right to you. This would expand the company and their brand internationally and make more profit but not have a great risk. Once business picks up internationally and people in other countries start knowing the Yankee Candle name, I would look into Foreign Franchising. Foreign franchising is a specialized type of licensing in which a firm expands by offering businesses in other countries the right to produce and market its products according to specific operating requirements. (Kelly & McGowen 2012) The risk will be higher once you start opening stores internationally but if there is enough demand for the product in certain countries, foreign franchising would be a great way to go to make more profits internationally. I believe once Yankee Candle goes international; there are unlimited possibilities for profit and company growth. Every business has a social responsibility to contribute to society. However, depending on the business’s values, mission, resources, and management philosophy determines it they have no contribution to society, a proactive contribution, or somewhere in between. (Kelly & McGowen 2012) I work for Langley Federal Credit Union in Virginia and not only am I an employee, I am also a member. Our business relies on our members. Without them, we would not be able to do business and I would not have a job. I would say that our members are our biggest stakeholders. Our social responsibility is extremely important to our stakeholders. We contribute back to society by offering lower rates and fees than a traditional bank and better service to our members. We also raise money for several different organizations each year, such as CHKD, Make a Wish, the United Way, the American Red Cross, and the list goes on and on. We try to do our best when it comes to serving our member and helping in the community and by doing so, our members stay with us for years and years and they spread the word about our credit union which brings in new members. This helps our credit union grow each and every day. Not only are we getting more business but we are able to expand our products and services and serve our members in an even better way. Our members are truly happy and as our biggest stakeholders, they have a big say in how we do business and we listen to what they say. When our members are happy, we are happy and it is great for business.

References Kelly, McGowen, (2012) BUSN, Fourth Edition

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