Mixed economy system and the allocation of resources 2
Whitbread and Burberry in the mixed market system 3
Fiscal and monetary policy 4
Fiscal and monetary policy impact on Whitbread and Burberry 4
A competitive environment 5
Benefits of fiscal and monetary policies for local brands in the UK 6
Works Cited 7
The research will look at how government intervenes in a mixed market system so that there is proper allocation of resources among people. The intervention from government is required so that the resources are utilized efficiently rather than only on things that give the maximum value to only a small group of wealthy people. The role of government fiscal and monetary policy plays a huge role in total spending by the business sector. The research paper will look how the government’s fiscal and monetary policies impacts luxury brands like Whitbread and Burberry during harsh economic times like the global recession that occurred just a few years ago.
Mixed economy system and the allocation of resources
Mixed economy is a mixture of a free market and planned economy. In a mixed economy, sellers continue to sell products and services at a price that is both convenient for the buyers and sellers. Resources are allocated to people that have the necessary means to purchase it (Urrutia and Yukawa 33). However, there are some commodities that are scarce or become scarce with time. If these commodities do not have a close substitute then the government takes action to equally distribute the resources among people. Government intervention is a very important element of a mixed economy and if it was not to be then the sellers would only be willing to sell to people ready to pay the highest price for their products and services (Ikeda 119). The government is involved in various ways. At times, the government does not allow the sellers to sell above a particular price.
For example, basic commodities like wheat, eggs, sugar and bread are not allowed to be sold above the agreed price between the government and the sellers so that it stays affordable to everyone in the economy. The aim of a mixed economy is to allow people to consume according to their wants and needs. There are no restrictions placed on the sellers and they can possibly sell anything to earn profit (Ikeda 119). In some countries, the government takes control of some of the services like electricity, gas and other important energies. Taking control of such services allows them to distribute energy between everyone in the society. In a mixed economy, the government does not provide services in order to make profit but to make sure that everyone receives the services.
Whitbread and Burberry in the mixed market system
Whitbread and Burberry are luxurious products and services. The upper class people in the society mostly consume them. Some of the products from Whitbread like Costa Coffee and Beefeater Grill and some of the products from Burberry like their expensive fragrance are only consumed by people that have the wealth to afford a luxurious lifestyle. In a mixed economy, the seller provides these products and services as they have a high demand by the high-income earners in a society (Ikeda 121). When there are ample resources in a country, government does stop the manufacturers from utilizing resources in order to produce these commodities. However, in times of recession a government looks to efficiently use all its resources so that everyone in a country gets a due share of resources (Rees 153). Thus, in a mixed economy allocation and distribution depends on the state of the country.
Fiscal and monetary policy
Fiscal and monetary policies are important as they directly affect companies. Fiscal policies are concerned with government spending and government tax policies. When the business sector does not spend too much then the government comes forward so that there are plentiful of products and services available in the market. Similarly, tax is increased or decreased to encourage or discourage the business sector to spend (Cottarelli, Gerson and Senhadji 41). Since the global recession that occurred in early 2008, many people in the UK have given up on luxury brands consumption. Since 2009, Whitbread and Burberry saw a massive decline in sales as customers became wary of spending money. The profit levels for both the companies massively declined that led Whitbread to also lay off employees in some of its business chains (Cottarelli, Gerson and Senhadji 48).
Fiscal and monetary policy impact on Whitbread and Burberry
Since 2010, the government has eased its tax policy towards luxury brands and Whitbread and Burberry are no exception. Both of this corporation heavily relied on middle class earners but the recession took the luxury from the middle class earners to spend on these products. The low taxing policy of the government of UK has bought down the prices of Burberry products in the UK. As the economy is improving so is the level of spending by the citizens (Cottarelli, Gerson and Senhadji 53). Still the two companies are not making super profits but are reasonably doing well under the low tax policy from the government as it allows them to be more competitive with the lesser known brands. The government of the UK also has a very positive monetary policy favoring the people. When the global recession was at peak between the years 2008 to 2011, the government of the UK allowed corporations to borrow at low interest rates. Whitbread is not known to have borrowed large sums of money but Burberry utilized the facility of borrowing at low interest rate. The borrowing led to more capital at hand which saw Burberry invest in leather bags, belts, watches and colognes for men and women in 2012 and after (Martinez 122).
A competitive environment
The government of the UK allows a competitive environment as it helps to keep and maintain quality of products and services. In order to do so, each brand of foods and other consumer products have to go through a quality check. These quality checks ensure that all the manufacturers maintain quality and compete with one another to provide the best buying experience for the consumers. Whitbread and Burberry compete with some of the best local and international products in the market (Rees 113). Example of some of these for Whitbread is Espresso and Starbucks and for Burberry some of them are luxurious brands like Armani and Versace. These other local and foreign products give good competition to the market as the government of the UK keeps a strict eye on the quality basis through which brands are competing in the market.
Benefits of fiscal and monetary policies for local brands in the UK
However, the fiscal and monetary policy comes to the rescue of the local consumer brands like Whitbread and Burberry. The prices of the products offered by Whitbread and Burberry are comparatively lower than the international competition (Rees 135). The government of the UK taxes Armani, Versace, Zara and other international brands more. Therefore, the international brands sell for a higher price in the UK making it more expensive than the local brands.
In conclusion, the government plays a very important part in the business sector. The government ensures that resources are allocated efficiently and that everyone receives it rather than only the people that can afford to pay a high price. The government comes to the rescue of the business sector when the economic business activity is low by granting loans at a low interest rate. It encourages the business sector to spend more by availing loans.
The taxing policy also plays a crucial role and in the days of global recession, the government of the UK was found to go easy on corporations functioning inside the UK. Whitbread and Burberry are examples of such government policies. The two companies are big brands that mostly the high-income earners demand. During the recession, consumers spent less towards these brands but the government also decided to place less tax to bring the total cost of their commodities down. These government policies helped Whitbread and Burberry survive at a very sensitive time.
Urrutia, Miguel and Setsuko Yukawa. Development Planning in Mixed Economies. London: United Nations University Press, 1998. Print.
Cottarelli, Carlo, Philip Gerson and Abdelhak Senhadji. Post-crisis Fiscal Policy. Boston : MIT Press, 2014. Print.
Ikeda, Sanford. Dynamics of the Mixed Economy: Toward a Theory of Interventionism. New York : Routledge, 2002. Print.
Martinez, Pepe. The Consumer Mind: Brand Perception and the Implications for Marketers. London : Kogan Page Publishers, 2012. Print.
Rees, Judith Anne. Natural Resources: Allocation, Economics, and Policy. London : Routledge, 1990. Print.