Canterbury Christ Church University

BA (Hons) Business Studies with Foundation

Contemporary Business Environment

Circular Flow of Income

Daniel Alexandru
C100035546
Table of content:
1.Introduction
2.SMEs during the pandemic
2.1. Value System
2.2. Objective and Mission
2.3. Organisation Structure
2.4. The Quality of Human Resource
2.5. Physical and Technologies Resources and Capabilities
2.6. Labour Union and Top Management
3. Government Support to SMEs During Covid-19 Pandemic
4. Conclusions
5. References

1. Introduction
One of the most important concepts in Economics is The Circular
Flow of the Income. Basically, the term describes how money
moves in economy and its sectors. The concept may also refer to
the circulation of money between different sectors of the economy,
or between producers and consumers.
The Circular Flow of the Income is the most important business
concept that links internal business environment factors to the
external ones. In the last two years, all business sector was affected
by the coronavirus pandemic. The outbreak has taught humans a
valuable lesson, and put business sector in front of unknown
situations, new challenges, and unprecedented obstacles.
The pandemic has made companies to re-evaluate most of their
procedures, to reinvent themselves, to set new contact centres
policy, to renew customer care services, to adapt to remote work
and to the wide digitalization process.
The global Covid -19 pandemic has deeply changed our habits and
experiences, as humans, customers, entrepreneurs, and citizens.
These changes will not disappear once the threat of the vires is
over, so the companies must immediately adapt to the post-
pandemic conditions and situation. Within two years and a half,
business sector has been facing the pass from normality to
pandemic, and then from pandemic to a new reality and a new
normality.
Many companies are parts of a bigger organization. Last two years,
the pandemic and its issues, challenged all the companies, from
small SMEs to large multinational corporations. But most of all, the
small companies felt the strong effects of the pandemic. SMEs had
to find strategies to avoid closure of bankruptcy, but in United
Kingdom the government had various programmes to support the
small companies affected by outbreak and to prevent them to close
their activity.
(https://www.researchgate.net/publication/
351614047_Influence_of_COVID-19_on_business_environment_-
_example_of_Croatian_SME_Gourmet_CO2, May 2021)

2. SMEs during the pandemic

To deal with the challenges that the Covid-19 pandemic had
generated, SMEs had to recreate the internal business environment.
They also had to reshape the procedures of interaction with external
factors of the business environment. Doing that, the small
companies were able to overcome the obstacles, to survive on the
market, to avoid the closure and some of them were even able to
find new ways to success, even in the pandemic circumstances.
To understand how companies made changes in their internal
business environment, we will briefly analyse which are the most
important internal business factors and how companies adapt them
to maintain efficiency during the pandemic and in post-covid-19
period.
The main internal business environment factors are: Value System,
Mission and Objectives, Company Structure, Corporate Culture and
Style and Features of Top Management, Quality of Human
Resources, Labour Unions and Physical and Technological
Resources.
External business environment factors: political factors (such as
taxes and fees, laws on employment, competition, import-export
regulations, or intellect property rights, etc), economic forces,
social cultural, ethical, natural and legal factors, competition, and
of course, global factors, such as Covid-19 pandemic. (Shaw, 2021)
2.1. Value System
The first internal business factor is the value system of a company.
It means all the concepts, ideology, beliefs, and ethical rules that
guide the company to its path to fulfilling its goals and objectives.
The value system of a company largely determines the way
company deal with the customers, employees, and society. ( (Jee,
2022).
During the pandemic, SMEs` value system had to change
sometimes, to adapt to the new global situation. For example, the
guard and protection employees had to check medical papers, even
if their value system had been non-implication in the health
condition of the customer before the pandemic. But the new times
required new values.
2.2. Mission and Objectives
For SMEs profit organizations the main objective is to maximize
the long-run profit, meaning that the money and resources that one
invests in a business to be less than the money and resources
extracted from the results of the business.
The mission of a company is more than the profit objective. The
mission is the final purpose of the whole activity, a final goal, and
ideal.
For some of the SMEs in United Kingdom, during the pandemic,
the objective was changed, and the mission was re-phrased. Some
of them changed the selling or profit objectives (like medical
supplies companies). Some of the companies changed their mission,
and due to the dangerous situation of the citizens, involved in
humanitarian activities, not to make profit, but to make a change.
2.3. Organisation Structure
This internal environment factor refers to the board of directors,
professional management, and independent directors. Organisation
structure has the main role in decision making process. Efficiency
of the company depends on quick, smart, wise decision and
sometimes lack or delays of these may negatively affect the
company results. In the pandemic times, quick decisions were
important for every aspect of the company`s activity. The quick
changes in society, the new laws and regulations, the circulation
restrictions, the quarantine, remote work, the illness itself made fast
modifications on the business environment and the directors had to
make quick decisions. The directors had to maintain the company
in good parameters, so covid-19 forced the organisation structure to
adapt to the new circumstances.
2.4. The Quality of Human Resources
One of the most important internal environment factors in a
company is the human resource. Employees are the key to a
successful business. To thrive, a company must have employees
with skills, loyalty, capabilities, knowledge, and commitment. (Jee,
2022). The employees are divided into different groups and
departments, and the top management might have a better overview
on the company`s activity.
During the Covid-19 outbreak, human resource factor was affected
by the disease and the global situation. One of the measures with
great impact on human resource was remote work. The companies
had to customize customers service, as face to face interaction was
limited, they had to move the meetings in online, had to provide the
technical support for online communication. The top management
have also had to make clear rules and regulations on remote
working.
Companies had to develop a procedure for isolation and prevention.
They also had to protect the personnel who had high risk of
infection and to find a way to keep the company running, even
when a big number of employees were ill or in quarantine.
(https://www.garrigues.com/en_GB/new/covid-19-main-issues-can-
affect-your-business, 2020)
2.5. Physical and Technologies Resources and Capabilities

Physical resources are important for an SME to thrive. The

equipment, the locations, all the physical goods that help the
employees to make their work are important for the development of
the company.
The technologies capabilities were vital during the covid-19
pandemic. Online meeting platforms, such as Zoom, or Google
Meet made online communication possible, and solved
communication issues that might have occurred due to the
pandemic. SMEs had to improve the technological assets and to
adapt to remote working, online meetings, virtual whiteboards,
online training courses and seminars.

2.6. Labour Unions and Top Management

 Labour Unions had to protect the employees in the new
regulations’ environment. The Unions mediated between the
top management and the employees and were a key factor in
solving conflicts and problems.

In conclusion, SMEs succeeded to overcome the covid-19

problems by adopting new measures, adapting to the new
global situation, improving the technological assets and
resources, adapting to a digital society and governmental
support.

3. Government Support to SMEs During Covid-19 Pandemic

There were various support schemes and programmes that help
small and medium companies to avoid business closure or
bankruptcy.
Some of the schemes that the United Kingdom Government used to
help small business and self employed will be discussed here.
Future Fund: Breakthrough programme is a co-investments scheme
that help British companies and investors. The Future Fund shared
30% of the investment.
Grants for Social Enterprise
There were many local, national, or regional schemes operated by
National Lottery Community, Kent Community Foundation, etc.
Bank schemes and support
Banks also made support schemes to help small business impacted
by covid 19, and usually loans had the government guarantee.
Recovery Loan Scheme
This scheme provided access to the finance to insure income flow
after the covid -19 pandemic.
Business had to find a way to recover and to continue to grow in
the new post-pandemic situation. These loans can be used for any
 purpose that might improve the business. The loans ‘amount is
available between £25,001 and £10 million per business.
(
(https://www.ashford.gov.uk/business/get-business-support/
coronavirus-advice-for-businesses/, 2022)
The pandemic of covid-19 created economic and social disruption.
Most of the private sector business were affected by the new
circumstances, the lockdowns, or by the disease itself.
Most of the supporting schemes and measures were taken by the
government, but some of them were implemented by the local
authorities.
4. Conclusions
Last two years brought various challenges in the business sector,
and the most affected were the small and medium companies. In
United Kingdom 5,5M companies are small business, with less that
49 employees. (Mughal, 2022).
The small and medium companies were forced to adapt to the new
business environment that the pandemic created. All internal
business environment factors were modified to synchronize with
the external quick changes.
In post-pandemic era, the reality is different than the pre-pandemic
one and the one during the outbreak. So business sector have been
pushed to adapt to three different realities within only two years
and a half.
5. References

https://www.ashford.gov.uk/business/get-business-support/coronavirus-advice-for-businesses/,
2022.
https://www.garrigues.com/en_GB/new/covid-19-main-issues-can-affect-your-business, 2020.
https://www.researchgate.net/publication/351614047_Influence_of_COVID-
19_on_business_environment_-_example_of_Croatian_SME_Gourmet_CO2, May 2021.
https://www.researchgate.net/publication/351614047_Influence_of_COVID-
19_on_business_environment_-_example_of_Croatian_SME_Gourmet_CO2.
Jee, S. M., 2022. 7 Factors Determining the Internal Environment of a Business.
Mughal, D. A. W., 2022. SMEs Contribution to the UK Economy.
Shaw, A. A., 2021. 10 External Environment Factors That Affect Business.
https://www.marketingtutor.net/external-environment-factors-that-affect-business/.