This Business Environment Open Case Study Help is aiming to identify an organization of our choice and then provide a critical evaluation of the business environment and provide a better understanding of the organizational purpose and at the same time it is aiming to demonstrate an understanding of the national environment in which it is operating. This task will also provide a clear and concise picture of the way an organization behaves when they are in a market condition. There are various global factors which help in shaping business strategy of an organization for any particular country and ensure that this strategy is very dynamic in it can be changed with changing external environment. In this assignment there are 4 different tasks and each task have different learning objectives which will be fulfilled through different organizational level analysis. Organization which is chosen for this assignment is Infosys technologies limited which is an IT major. It is a company with Indian origin and now they are a global major company with more than 25 work centres and offices in more than 70 countries round the world. Infosys have a global delivery model of business and their annual revenue is in tune of 8 billion US dollars and their market capitalization is 30 billion US dollars in year 2013 (Infosys fact file, 2013).
1a) State and describe the different categories of Organisation, emphasising their unique characteristics and their purpose. You should include your chosen company in the discussion and elaborate on the mission, goals, and the strategic objectives of your chosen company.
Ans:-There are various categories of organizations and types which can classify them. Each type of categorization is based on a particular variable or a set of variables. On the basis of profits related approach organizations can be classified into for profit organizations and non profit organizations. Organizations which are working to gain commercial benefits and profits for its share holders are for profit organization while organizations which are working for the benefit of society or working towards a social, environmental or community related cause without expecting any profits from venture then it can be called as a non profit organization etc(Dev and Rao, 2009).
Second category on which organization can be divided is as per their sector like they can be a government body, a private organization or a joint venture between a government and private organization as it can be said that it is a PPP (public private partnership). Similarly organization’s can be classified as a sole trader ship organization with the purpose of doing trade in a market and one person managing the entire business. A partnership organization would have more than one person who owns the business in different percentages and they are collectively managing the business process. Third category of organization is the company category where many shareholders own a company and they collectively appoint directors who give direction to the business. Such companies can be listed on stock exchanges or it can have shareholders among a group of individuals only. Directors appoint CEO and other senior officials of company as well (Dicken, 2003).
Infosys is a “for profit” organization and it is a publicly listed company with listing in more than one share market. They are listed in Bombay stock exchange and National stock exchange in India while in US it is listed in NYSE. Infosys is one of the few Indian global companies which are listed in NY stock exchange. Infosys is an IT and IT enabled services. Tag line of Infosys is “building tomorrow’s enterprise”. Vision statement of Infosys is "To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people." Mission statement of Infosys is “"To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society at large."
As it can be clearly observed from their mission and vision statement they are not looking for just commercial profitability but at the same time they are trying to build long term relationship with their customers, their environment and their employees at the same time. Strategic objectives of Infosys are to become the biggest IT services provider globally and improvise its performance on a continuous basis. It is aiming to increase its shareholder value while at the same time ensuring that they uphold highest standards of ethics, morals and transparency in their business. Infosys is very well known for its knowledge management approaches and its employee empowerment strategies and they emphasise that employees are the biggest asset which Infosys as an organization have (Infosys, 2013). To know more click: effective organizational structure
1b) State and explain the ‘Stakeholder’ concept and their influence and impact on the responsibilities of the Organisation.
Ans:- a stake holder can be explained as any person or any entity which can be affected or effected by a business or it process in any manner. The word stake holder was first used in year 1963 in Stanford research institute and they described a stake holder as “"those groups without whose support the organization would cease to exist. Further theory of a stake holder and its concept was developed and propagated by Edward freeman in year 1980 and he broadened the term to as anyone who has any interest in a matter is a stake holder. For example an organization can survive without watchdogs and social organizations which is forcing them to be a better corporate citizen but they will have interest in a company so they are a stake holder too (Polanyi, 2004).
In this task we would be evaluating the different environments and systems which are working in close coordination and interaction with each other. An organization cannot work in vacuum and they have to interact with external environment on a daily basis and maintain a balance. There are different systems which affect an organization like economic systems, taxation systems, regulatory systems, labour systems, banking systems etc
2a) State and comment on the economic systems and their influence/impacton Organisations.
Ans:- economic system can be explained as the general economic environment in a country or a market which is created by the demand and supply of products and services in the market, its growth rate, availability of funds in market, inflation rate of currency which is accepted in the country etc. An economic system can be explained as a system which is producing and distributing goods and services in any society while allocating the resources available for an optimal usage. There are various agencies and institutions which collectively give rise to an economic system and consumers are the focal point of each economic system (Castells, 2010).
These economic systems determine the way an organization can establish itself in market and how it explores it. Manufacturing capacity of a unit, presence of labour, cost of raw material, human resources and taxation system are all dependent on the economic system of the country and collectively they define the overall cost of production for an organization. Many organizations like Infosys which is selected here, they have to serve a global market and their profit margins are dependent a lot on valuation of their home currency with respect to international currencies like US dollars, Euro and British pounds etc. Economic systems determine the exchange value of a currency and they eventually impact the organizations in a very strong manner. Demand for a product or a service is also dependent on the economic systems of a market or country. A progressive economy with a healthy growth rate which is also liberal in its relations with foreign economies is bound to have a higher demand of products and services while a closed up economy working in isolation would have organizations which can only cater to domestic demands and they have a saturation point of both demand and supply at a lower level. Thus it can be said with some confidence that an economic system and an organization are directly proportional to each other and betterment of one result into betterment of other. It is also observed that interaction between different economic systems and it’s by products also impact the business growth and development. For example if economies globally are liberating and lowering their boundaries and barriers so that there is a faster movement of products and services then it would eventually impact all organizations and given them an opportunity to grow in an exponential manner (Kiely, 1998).
2b) State and discuss (briefly), how taxation, inflation, labour force and business behaviour factors impact the UK economy.
Ans:-UK’s economy is a liberalized economy and it is very closely integrated with global economy and its movements. London stock exchange or LSE is one of the prominent stock exchanges in world and it is initiating point for many stocks and economic decisions on a daily basis for entire European market. UK economy is the 6th largest economy in world in terms of nominal GDP and their annual GDP is close to 2.4 trillion dollars in year 2012-13. If we consider import and export related capacity then it is 10th largest exporter in world and 6th largest importer, thus essentially it is a net importer of products and services. In UK’s economy service sector play a major role and contributes for the 78 percent of revenue collection. In year 2008 UK economy entered in a recessive period and its growth practically came to a standstill even till year 2012. In year 2008 to 2009 there were 6 consecutive quarters in UK when growth was negative for the country and it also shrank the UK economy by 7.2 percent overall. Recent economic recession made a lot of changes in the way government was spending the revenue and they made some drastic changes in government spending in year 2010 when conservative government came in power. Taxation system of UK is a two tier system where revenues are collected by both local government as well as her majesty’s revenue service which is a central taxation system. Taxation in UK is fair but it is considered as slightly on the higher side and many authors are of opinion that it is the dual system of taxation in UK which is causative reason of exit of many manufacturing units to other locations and countries where there is a uniform taxation practice. Benefit associated with dual taxation is that there are two regulatory parameters to control anyone who is trying for a taxation fraud and it also helps in controlling internal trading activities easily. A better controlling and monitory system is developed in UK because of its dual taxation system (Letto-Gillies, 2011).
Labour force in UK is governed by the employment laws and regulations of UK and they have a minimum wage act applicable which ensures that any employee would get a minimal 6.30 pounds per hour if he or she is 21 years and above and working as a full time employee. Labour force is mostly unionized in UK and they have norms regarding work hours, offs, minimum and maximum working hours and pay scale for skilled, semi skilled and unskilled labour. In terms of well being of employees and maintenance of rights of employee UK is a very better but on the other hand labour force of UK is expensive as compared to labour in other manufacturing destinations like China and India. Inflation rate of UK in December 2013 was -2 percent which is helping economy to recover from its depressive period. A negative inflation is advantageous because it reduces the prices of products and services and gives relief to the population but at the same time it is indicating that economy is now growing because a positive inflation rate is a indicator of growing economy. Thus it is very important that inflation rate should be positive but with in control to help an economy (Alamgir, 2008).
2c) State and evaluate the UK governments Competition policy and Regulatory Mechanism.
Ans:- competition in UK is governed by competition commission and it is established by a law known as competition act 1948. It was earlier known as monopolies and mergers commission. It is known as competition commission from year 1999. Primary role of competition commission is to ensure that all the referrals which are made by the director general of fair trading, DTI and main utility regulators are properly reported. They also hear appeals against nay prohibition which is governed under the competition act 1998. Aim and objective of competition policy which is developed by UK government is to ensure that competition is promoted in a healthy and safety manner and market works in a better manner. They also aim to ensure a higher level of efficiency in individual markets like UK and enhanced competitiveness of UK businesses within the European Union single market.
There are four fundamental blocks in competition policy of UK and they are namely antitrust and cartels, market liberalization, state aid control and merger control. Thus policy forming is the job of competition commission while regulatory bodies like office of fair trading and European Union competition commission are enforces of regulations in UK market. In UK market competition policy ensures that no one entity should have a more than 40 percent of market share until and unless it is a utility company or a government organization. Antitrust policy is used to ensure that even if an organization is having a dominant position in market then also it is not abusing that power and making unreasonable profits.
Predatory pricing is also one of the practices which is banned by the competition commission. In this policy company with sufficient financial muscle keeps the prices below the average cost of a product and services and hold that position till no one in market can survive that pricing. In this game company with highest financial muscle would win and then they can recover the losses when they are only player in market by keeping prices higher than normal. Price fixing, cartel formation and territorial exclusivity are some other practices which are not allowed in UK market and it is fully monitored by the regulatory bodies that any offender should be punished appropriately (Egger and Pfaffermayr, 2004).
Policies which are adopted by UK government are very effective in neutralizing any unfair practices and over competitiveness in market. Thus such policies are creating a market which is closer to the efficient market hypothesis. However the problem with current market situation is that it is competing with markets in other countries and they do not have same level of regulations and norms. This difference gives the unregulated or poorly regulated market a competitive advantage over UK market in longer term (Adam, Kosma, and Mc Hugh, 2003),
3a) State the 6 Market types included in your syllabus and comment on their impact on the behaviour of Organisations.
Ans:- A market can be explained as a place where buyers and sellers meat with each other to exchange goods and services with each other in exchange of money (mostly). A market can be physically present in one location or it might be a virtual market which is not specific to any location. There are different types of market which are discussed in this syllabus. First type of market is a physical market. Such markets are those where a buyer and a seller physically meet each other and negotiate on terms of trade and then if agreed upon exchange product or services against money. This is a physical market and it is observed in every city, town and village in world. Second type of market is called as online market or virtual market. Such markets are a virtual space where different buyers and sellers can interact with each other and demonstrate their products, services and come to common terms and conditions (Ghosh, and Yamarik, 2004).
Third type of market which is discussed in syllabus is a consumer market. In such markets actual or end users of a product or services come and make their purchase. These consumer markets are usually situated in high street shops and market complexes where sellers are basically re sellers or retailers who are selling products of manufacturers or stockists. Fourth type of market is an industrial market. In an industrial market people who are making a purchase of a product or services so that it can be converted into another product or services interact with the sellers. Such markets are also known as b2b or business to business markets. None of the purchasers in an industrial market are actual users of the product or services. Fifth type of market is a capital market where financial support or fund is sold or purchased. Such markets are regulated by banks and financial service organizations. A capital market consumer can be both individuals as well as companies. Sixth and last type of market is a commodity market where products and services from their primary sector is purchased or sold to them. In each type of market organizations behave different because they have different set of consumers and different type of profit margins acceptable in each market. Companies also differ in the way a consumer is interacted and type of business terms and conditions are kept in market. For example in a industrial market a period of time for payment is a normal practice while in a retail market giving time to customers for payment is only at discretion of seller.
3b) Explain the market forces of supply and demand, elasticity of demand, economies of scale and cost and output decisions.
Ans:- supply and demand are the fundamental of market in any economy. Demand means the requirement of products and services which is present in a market. Supply on the other hand can be explained as the availability of products and services in a market against its demand.
Elasticity of demand can be explained as a measurement of change in demand of a particular product or services in response to a change in its price. Or it can also be said that how much percentage change in demand of a product or service would be seen with change of one percent in price. Economies of scale can be explained as the cost effectiveness or efficiency which can be achieved in manufacturing of a product or creation of a service if it is done in large numbers. There is a certain limit upto which any product facility would work efficiently and with increasing number of products and services it’s per unit cost would reduce. However this is applicable only up to a limit after which cost of product would increase. This point is known as optimal production point and all out decisions are taken considering this optimal production point and cost of per unit (Alho, 2003).
4a) Briefly assess the significance of the global factors that shape national business activities.
Ans:- There are various global factors which helps in shaping the national business strategy or activities of an organization. One such factor is global economic growth and development. If globally economy is growing and healthy and it is progressively enhancing business then each and every nation would have a positive outlook towards business and they will shape their business activity in such a way that it contributes in that global growth.
Second such factor is trade blocks or bi lateral trade links in a market. Many countries or regions globally have trade pacts and they created a block of trade areas where taxes would be abolished or preference would be given to product and services from a particular country. In such situation countries have to change their business strategy and activities in such a manner that they can compete with such blocks and groups on a global level.
Third such factor is international growth and demand creation. Emerging economies and rapidly growing markets fuel the global economic growth and they form the biggest market in themselves with a huge potential. Rest of the countries and organizations of those country need to develop and create their strategy in such a manner that they can respond to these markets and provide them with products are services which are suitable for their needs (Giddens, 1991).
Fourth factor which helps in shaping of national business activity is a group of factor which can be explained as PESTLE analysis. This includes political factors, environmental factors, economic factors, technological factors, legal factors and social factors. All these factors of entire market help in determining the national business activity.
4b) Assess the role and impact of EU policies and directives on the businesses, including your chosen Organisation.
Ans:- creation of EU or European union is a matter of debate among authors even today. Many authors and experts are of opinion that EU creation is a protectionist policy and it is aiming to protect the countries belonging to European Unionfrom the competitive environment of rest of the world. It is obvious that most of the countries in EU were going through a tough financial time with their growth rate flat lining and their economies having a large leverage and debt. They were increasingly becoming non competitive on a global scale and their currencies were deteriorating and governments were supporting them artificially. EU developed a group where business policies would be similar and norms to be followed by each country would be same. They also adopted a common currency known as EURO. Ever since creation of EU business has been impacted negatively because growth centres and drivers of economy are shifted to Asian markets now and by creating tougher norms for their business environment EU has isolated itself from the main stream business. Many countries are realising now that they were better off without creation of EU and its protectionist policies because even if they are individually competitive in some areas they cannot freely trade because of norms and regulations applicable (Czinkota, et al. 2009).
In case of organization Infosys which is an IT giant impact of creation of EU did not had any major impact on their business. Since Infosys is a global leader and they are providing their services in such a cost effective manner that even with protectionist policies of EU, none of the European IT companies are able to match them in pricing. Infosys is getting a regular stream of clients form EU as different companies are increasingly outsourcing their IT services requirement to cost effective solution providers in India. One negative set back which can be observed on Infosys was limiting the number of employees which can be sent by Infosys to it’s off shore clients and resistance of unions in EU regarding outsourcing of IT services (Ramasubramanian and Jagadeesan, 2002).
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