Business Environment of the Maldives

Market forces affect organizational responses to supply and demand, where those responses and behavior are shaped via cultural environment such as economics, socio- culture, technology, etc. In this regard if business is successful or finds it slow in expansion, it may consider globalization via international trade. In this report, the consequences of globalization and impact of EX. Policies are studied and analyzed in arriving conclusion.


The combination of internal and external factors such as: competition; clients and suppliers; improvements in technology; laws and government activities; and market, social and economic trends that influence a company’s operating situation, is known as business environment.

In its environment, buyers and sellers interacts differently forming various competitive and non-competitive structures – monopoly, oligopoly, perfect competition, monopolistic, etc.

The basic analysis of different types of markets remains the same, as the quantity emended refers to the quantity of a good or service that households are willing and able to purchase at a particular price – the effective demand.

People would like to own luxury items that they could not afford – making the demand ineffective. Pricing decision Of organizations are influenced by the behavior of its competitors and the market forces within the environment.

Professor Michael Porters “Five Forces Model” in 1980 identifies those factors which are likely to affect an organization’s competitiveness. This simple, but powerful tool undermines where power lies in any business situation. These ores can create threats to marketers. Also they generate opportunities for new products and new methods of reaching customers. In the event of slow market growth, regulatory obstacles or market saturation, organizations consider factors like industry analysis, ways of exporting, etc.

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To go global. UK organizations are known international traders, influenced by free trade policies of European Union. The persistent inability to get a grip on the current “Euro crisis” has led international attention to focus on Europe not as a promising market of tomorrow, but as a potential source of turbulence in he months and years to come (Paleozoic, 2013). Though the policies have its disadvantages, most organizations take advantages of social, employment, environment and competition policies as granted.

This report is made through research of scholarly articles, published and downloaded e-books. Some illustrations are extracted from such materials, while others are own work. A great effort is made to present the report as user-friendly, and understandable down to the lowest knowledge of readers. It is unfortunate that the report requires limited word count for such topic, where wider explanations and rich contextual is inevitable.

Lack of resources and time (being a fulfillment co-academic and administrative staff) was highly challenging. Organizational behavior in their market environment Behavior Of organizations depend on barriers to entry and the influence Of competitors. In oligopolies industry, firms display mutual interdependence. If for example, one distributor lowers its gas price, subsequently other distributor would lower its prices to stay competitive. In development of oligopolies industry, firms often merge into create a duopoly.

In more advanced situations and high concentration on profit taking, a monopoly occurs, where there is no competition and nil impact on their decisions from rivals. Market structure In describing market structure, Worthington and Britton (2006) refers to the amount of competition that exists in a market between producers, and further declares that the degree of competition can be thought of as lying along a continuum with very competitive markets at one end and markets in which no competition exists at all at the other end.

Market structure relates to the factors that determine interaction of buyers and sellers, and the level of interaction of production and selling process, by emphasizing: number of rims, nature of products, degree of monopoly power and Influence on price, profit levels, firms behaviors on competition and output levels, magnitude of entry barriers, and impact on efficiency.

Basic Market Structures: The Mammalian market structure The Mammalian market comprise of competitive market which consists producers/sellers competing with each other to satisfy needs of customers in a perfect competition with lack of product differentiation, and selling at cost or just above, and non-competitive market which comes into existence to make profit, with positive differentiation of their product or reducing number f other businesses in the market.

BP (2010) argues that the lower the barriers (obstacles that deter new firms from entering a market to compete with the existing firms, gives a degree of market power such that decisions can be made by existing firms without risking their market share) the more likely to become a perfect competition. The higher the barriers to entry and exit the more prone a market tend to be a natural monopoly. The geographical challenges and scarcity of resources anticipates higher prices, in order to cover heavy capital cost, or for simply earning high profit.

Vehicle (1976) quotes “state ownership of the means of reduction creates monopoly of economic and political power and makes unification of both under the control Of a social group personifying the state”, as summarized by Discovered. Being the public natural monopolist – the only one firm, in supplying tap-water for essentialist, MASC.. Has important consequences for both price setting and quantity produced. It has a very high barrier of capital costs (e. G. , setting up a national network of pipes and sewage systems), making it impractical to have more than one firm.

Barriers will normally be necessary to protect a monopoly from competition. MASC.. Is the price maker. But, as it involves government and mutual interest (necessity) of the people, MASC.. Would not limit output to receive monopoly profit. Nor would allow prices to exceed incremental cost (the change in capital and operating costs arising from increasing output) to become commercially viable. Rather, would consider locative efficiency where production is at least cost and prices equal to marginal cost. To reduce the negative impact on society, government often try to limit the market power of the monopolists.

Ah alertest (2008), strongly suggests that if the market price under perfect competition would have been known, the government can ecocide on a price ceiling at that price. Then the equilibrium point is moved to the optimal point from society viewpoint. However, it is very difficult to estimate the optimal price. It may well be wrong to conclude that monopolies can charge any price they like. A monopolist has price-setting power and will look to earn high levels of profit. However the firm is controlled by the position of its demand curve, which is consequential in charging a price that the consumers in the market cannot bear.

Resultant to market demand curve being its own demand curve as a sole supplier, monopolist faces a downward loping AR (average reeve u) curve with a MR.. (marginal revenue) curve with twice the gradient of AR. Therefore, the position and the elasticity of the demand curve acts as a limitation on the pricing behavior of the monopolist. Presumptuous on firm aiming to maximize profits (where marginal revenue = marginal cost) a short run equilibrium is established as shown in the diagram below. Market forces and organizational responses Market forces affect organizational responses in supply, demand, and marketing.

Worthington and Britton (2006) justifies that the three problems of hat, and how to produce and how to distribute are solved by market forces. Supply and demand have an inverse relationship (e. G. , when new milk powder is placed in the market. The supply of the milk is greater than the demand for that particular milk – consumer will need more information of the product and time to adapt it – causing increase in the demand or product extinction). Thus organizations need to reach the equilibrium (the ideal point), where supply and demand are equal.

Marketing activity can change the equilibrium point in supply and demand, by increasing demand of a good or service, hereby shifting the equilibrium, where supply and demand meet the consumers’ needs. Market forces in the Maldives and how it shapes the responses of organizations Porter’s Five Forces Model gains insight into the competitive strength of a business’s current position, and future movements, as well. It helps in taking advantage of situational strength, avoid mistakes and improve weaknesses.

Slogan (2008) ratifies that the greater the competitive advantage of a firm, whether through lower costs or through less elastic demand for its products, the greater the rate of supernormal profit it ill be able to make. Natural monopolies like MASC.. Are incontestable and firms have no real competition. Rather, market forces are proper for an oligopolies industry whereby firms display mutual interdependence. Hence, Ordered – a telecommunication company sharing duopoly in mobile service with Diarrhea Pet. Ltd. (landlines monopolist), and internet service providing oligopoly with Arcane Online and Diarrhea in Maldives, is considered.

Redo’s pricing and output decisions depend on its barriers and behavior of its competitors – which gives firms a degree of market power such that decisions can be made y existing firms without risking their market share. If Ordered sets a price higher than that charged by others, the company can expect to lose sales. Redo’s respond towards demand Demand for a goods or services depends on a number of factors; disposable income, the price of the other goods, tastes etc. Price- Fall in the price of an item increases demand, being affordable to more individuals with lower income. Thus the overall size of the market increases.

Ordered (then Watching) penetrated market with revolutionary low price – disturbing the monopoly of Diarrhea, resulting extreme demand for their services. Substitute – People changes from one product to another, as the relative prices changes, or service becomes more functional. Ordered introduced, user specified time delivery on SMS, international credit transfer, and innovative service like emergency credit on prepaid service. According to Whaley (201 0), Innovation as an approach in competition theory; it shifts competitive advantage when rivals either fail to perceive the new way of competing or are unwilling or unable to respond.

It does so with greater speed being based in real market needs. Complementary products – customers are fond of free and complimentary items. Ordered introduced free credit on prepaid subscription, free minutes, free data, family remuneration packages, and organizational packages with inter organizational free calls (e. G. Police package). Redo’s respond towards us apply Supply depends largely on price. If a product can be sold at a higher price, businesses will supply more of that product.

Change in technology – leads to introduction Of new products, changes (in methods of production, in quality of resources and products, in ways of distributing the product) and new ways of storing and disseminating information (Worthington and Britton 2006). Developments which reduce costs of production will increase the quantity of a product supplied at a given price. Costs of making the product -To expand, run and sustain in a geographically scattered nation with lowly populated communities, Ordered need to pay wages, build network towers and number of distribution base stations, which is costlier than single large scale setup.

Ordered has strategically steady policy in this regard, gradually covering the mobile and internet web around the country. According to Ordered (2014), they have launched G in Mafiosi and G+ in Diffuses along with 30 additional islands. How the business and cultural environments shape the behavior of MASC.. The forces of marketing environment, surrounds the customer and the marketing mix. It can create threats to marketers, and can generate opportunities for new products and new methods of reaching customers as well.

Political environment: Government is responsible for providing a stable framework for economic activity and, in particular, for maintaining and improving the physical, social and market infrastructure (BP, 2010). Worthington and Britton (2006), allege that the government’s exercise of power and the ideological foundations helps to indicate the nature of the lattice system and its likely approaches to the resolution of conflicts. However, Infancy of the political situation (multi-party system) has its complications and uncertainty over regulatory systems in Maldives.

MASC.. Being government monopoly, and regulatory body of water and sewerage system, it has controlled and maintained a quality service. Its decisions are publicly trusted. Economic environment: consists of external factors in a business’ market and the broader economy that can influence a business, playing a critical role in determining the success or failure of a business. For example, high interest rates lags borrowing for business expansion, high unemployment rate may obtain cheap labor, while too high, may result in a recession and less consumer spending causing in insufficient sales to keep the business going.

Exchange rates can either help or hurt the exporting of products to specific foreign markets, and tax rates will take a chunk of the income. Socio-cultural environment: can clearly be defined as behavior that exists within a population in the mean of beliefs, customs, and practices. This has much influence on International companies (e. G. International companies often include an examination of the socio-cultural environment prior to entering their target markets and set their approach as closely to the culture Of new environment), influencing on demand and supply.

The type of products being produced or sold, the markets they are sold in, the price at which they are sold and a range of other variables are highly influenced by the cultural factors. People are a key organizational resource and a fundamental part of the market for goods and services (Worthington and Britton, 2006). Since MASC.. Operates in its mother culture, the influences are naturally defined. But, they are yet to calculate demographic values more recesses in accordance to the development projects in wider geographical locations.

It has to implement strategies opposite to its industrial context and immediate response is urged under growing scarcity of fresh water in certain islands around the country. MASC.. Exercise segmentation profits, by dividing market into domestic users and institutional users, and applying variable prices system. Technological environment: increases output by gains in productivity, reducing cost and producing new items and changes in workplace (e. G. Social networks, virtual meetings, enterprise software packages, etc. ).

It removes boundaries and reduces human errors of work and stress, by facilitating information at the workplace which accelerates quick decision making, and transforms business activities involving the collection, handling and analysis of information. Changes can be resisted if same production processes for many years or a large number Of Veteran employees being used. Proper training and adaptation must be exercised for new production technology to be welcomed – by demonstrating how it will make their jobs easier in the long run.

MASC.. Must consider proper technology, for being lawfully responsible for wellbeing of community, to face arioso challenges of natural disasters, scarcity of fresh water, regulating and monitoring desalination and sewerage procedures in tourism industry, maintaining quality assurance of various bottled water producers in the country. Significance of the global factors that shape national business activities Profitability is of crucial importance for most private-sector businesses.

Significant business growth may only be possible through international expansion, while home market becomes difficult because Of slow market growth, regulatory obstacles or market saturation. As reparability depends on competitiveness, globalization may reduce cost in a competitive international market, increasing scale of production and enabling company to achieve reputation. Organizations require self-evaluation of its determination and readiness against the factors affecting globalization: International Trade: affects livelihood of the present world.

It is huge, and growing faster than countries internal economies around the globe. It is the exchange of goods, services, and capital among various countries and regions. The international trade accounts for a good part of a country’s GAP, ND is one of the important sources of revenue for a developing country. The biggest challenges for business organizations in the UK is learning how and where to trade overseas. International trade is an economic necessity in an interdependent world. Being an open economy, UK established information center on international trade opportunities.

It provides dedicated market support with services tailored for each organization’s needs in order to effectively interact in international trade: market research information export promoters professional help various methods of conducting business particularly in a specific country help tit cultural requirements coordinating in bringing key contacts to the LIKE helping I-J organizations market themselves overseas by granting visit to countries and exhibiting at international trade shows Significance of international trade to UK business organizations International trade can be made in a mutually beneficial manner, provided each country has comparative advantage to manufacture products to be traded.

F-or example, England can produce cloth for lower prices than Maldives, while Maldives can produce tuna fillets for lower prices than England. Accordingly, both England and Maldives can consumer maximize amounts of cloth and nun fillets if they focus on producing products within their relative advantage in engaging in international trade. Market Opportunities: A potentially favorable condition in which a business can capitalize on a changing trend or an increasing demand for a product by a demographic group that has yet to be recognized by its competitors.

For a market opportunity to exist, a company must be able to identify who its potential customers are, the specific needs that need to be met, the size of the market, and its capacity to capture market share (Investigators, 2014). Global Growth: A positive change in the bevel of production of goods and services by a country over a certain period of time, where nominal growth is defined as economic growth including inflation. Real growth is nominal growth minus inflation. The economic growth is usually brought about by technological innovation and positive external forces. Impact of the European Union policies on business organizations In recognition of the benefits of free trade within the E, the member countries signed the Single European Act of 1986.

This sought to dismantle all barriers to internal trade within the EX. By 1 993, and create a nine ‘single market’ (Slogan, 2008). The member countries are required to follow several policies: Competition policy is basically about making sure that companies compete with each other on an equal footing – on the basis of their products and prices – with no unfair advantages (European Commission, 2012). Its reforms allow markets to work more efficiently for the benefit of consumers and drive sustainable economic growth. EX. Growth Program prioritize investment in innovation, including research and development, skills, low carbon, employment and social inclusion. European society is being hanged in the influences such as technological progress and the globalization of trade.

The employment, social affairs and equal opportunities policies contribute to improving people’s living conditions with a view to sustainable growth and greater social solidarity. In the early asses EX. Committed to the environment: for protection of air and water quality, conservation of resources and protection of biodiversity, waste management and control of activities which have an adverse environmental impact, at both Member State level and internationally, through corrective measures or cross-cutting measures. Ordered, if being operated under EX.

Policies, the barriers would have been justified, of higher market share allowing recovery of costs for establishing landlines. The growth and employment opportunities would adverse through MME regulations and free movement. Provisions ensures free competition, rather than cartels and monopolies sharing out markets and fixing prices, which would enhance consumer satisfaction – conveying expansion of business and growth in job market, and profit minimization.


While monopoly telecommunications revenues are protected, the risk Of alienating both the business sector and the growing numbers of electrification subscribers in EX. Is high. Carriers need to develop and maintain a forward-looking plan to rebalanced domestic tariffs and renegotiate international tariffs so that both become more cost-based in the face of competitive and political threats.

At the same time that new carriers enter, there will be opportunities for unavoidable carriers to acquire firms in related markets or to form alliances with these firms. By developing new service offerings, if necessary with outside partners, they can continue to be the carrier of choice. The markets where margin between costs and prices is likely o remain at above-normal levels, profit margins may be earned in international value added services for business customers, and may be international gateways and international transmission via satellite.

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Business Environment of the Maldives. (2018, Jan 31). Retrieved from

Business Environment of the Maldives
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