Business Studies: Competition, Controlling Imports and Exports

• The government has a lot of incentives to control and regulate the operation of businesses
• Control and regulation can be achieved in a number of ways
• In this topic we will look at economic policies of the government
• These include:
• Regulating competition
• Controlling Imports and encouraging exports

Competition

• Large businesses and monopolies can engage in restrictive practices that are detrimental to various stakeholders
• They could stifle the competition while they continue to operate inefficiently
• Oligopolies can collude and engage in practices such as price fixing
• To stop this the government has passed several laws aimed and reducing the power of monopolies and promote fair competition
• Business with large market share for example mobile network operators have to seek government approval before they merge
• Various commissions and regulators have been set up to control the operation of these businesses for example
• POTRAZ was created to regulate the said mobile operators
• The prices of such entities have to comply with the regulator’s rules and rulings
• Another example is where the number of branches of certain franchises is limited within central business districts for example service stations
• In Zimbabwe the Competition and Tariff Commission oversees competition and tariff related matters
• It was established under Zimbabwe’s competition laws
• Its main aims are to:
  1. to encourage and promote competition in all sectors of the economy
  2. to reduce barriers to entry into any sector of the economy or to any form of economic activity
  3. to investigate, discourage and prevent restrictive practices
  4. to identify monopolies
  5. to advise the government about level of competition in the country and whether current competitive laws are working
  6. to provide information about competitiveness to those seeking it and give them any necessary aid
  7. to undertake investigations and make reports to the Minister of Industry and Commerce relating to tariff charges, unfair trade practices and the provision of assistance or protection to local industry
  8. to monitor prices, costs and profits in any industry or business when asked by the government and to report its findings to the government

Controlling imports

• For various reasons including to protect local industries, health and safety reasons, to balance the Balance of Payments etc
• The government can also wish to control imports
• Various methods can be used to control imports into the country:
• Including the use of fiscal and monetary policies to reduce demand
• More specifically the government can:
• Introduce import quotas
  • This means restricting the quantity of imports through the use of import licences
  • This quota can be on certain products for example chicken and eggs or on products from certain countries or a given region i.e. countries outside the Southern African Development Community (SADC)
• Import duty/tarrifs
  • This is a payment levied on imported goods
  • It can be levied on certain products/ classes of products or products from certain countries
  • It is usually expressed as a percentage
  • An example is the import duty on all used cars (colloquially known as ex-Japs)
• The government can also make use of an embargo/ban
  • This is when the government bans certain products or products form certain country
  • This is an outright ban

Encouraging exports

• Exports allow the government to get foreign currency into the country and boosts the balance of payment
• This can be done by setting up trade fairs such as the Zimbabwe International Trade Fair
• Encouraging local companies to participate in trade fairs and expos of other countries such as technology expos
• The creation of Export Processing Zones
• EPZs are small favorable investment and trade conditions that are created in-order to attract export oriented industries
• You can learn more about Export Processing Zones here
• Offering tax incentives to exporters
• Allowing exporters to keep at least part of the foreign currency they earn
• Faster processing of international payments for those that are in the export business

To access more topics go to the O Level Business Notes