This is solution of London Academy Business Environment Assignment, discussing about the business organizations purposes.
Section 1: Understand the organisational purposes of businesses
Describe the extent to which an organisation meets the objectives of different stakeholders
Stakeholders are an important aspect of business organisations today. Each stakeholder has certain specific interest or objective in the business with which he is associated (Myers & Tauber, 2011). Hence it becomes essential for organisations to fulfil these objectives of stakeholders. There are various types of stakeholders such as
- Regulatory authorities
Organisation in present business environment take up various initiatives through which they ensure that objective of each of its stakeholder is fulfilled. For example organisation such as British Airways has dedicated business function which focuses on implementation community benefit programs. Similarly there are organisations having investor information cells to ensure that their investors are up to date about organisation’s growth. Organisations also take proactive steps to ensure that their employees get a positive workplace and various other benefits (Morrison, 2011). Hence organisations across various industries considers objectives of their stakeholders seriously and accordingly take steps to fulfil them.
Section 2: Understand the nature of the national environment in which businesses operate
Explain how economic systems attempt to allocate resources effectively
Resource allocation is an important activity in an economy system. Based on the demand and supply along with various other factors the decision is taken. Economy system. There are several economy system which exists today. However each system has its unique way of resource allocation. These are as follows:
Free Enterprise Economy System: in this type of economy system private enterprises takes decision on the resource allocation. Market forces such as supply and demand are the main drivers behind decisions related to resource management.
Command Economy System: In this type, government plays the central role in resource allocation. Planning authorities takes decision on resource management based on its requirement and various other political factors (Hopkins, 2011)
Mixed Economy System: Both private enterprise and government’s planning authority are involved in the resource allocation. However government is focused on those resources which have importance at national level such as energy based resources etc. On other hand private organisations consider supply demand factor related to various product and services and accordingly they allocate the resources.
Assess the impact of fiscal and monetary policy on business organisations and their activities
Fiscal and monetary policies are two major tools through which government controls and stimulates the economy. Each business organisation has functioning in a specific economy system is impacted by such policies. For example, if government decides to increase Value Added Tax (VAT) then it has a cascading impact on the price of an end product, which impacts on the profit margin of the business organisation. Similarly lending rate decided by the central banks have major impact on the cost of the borrowing money. Thus high interest rate means business organisations will find it hard to borrow money from banks to fund their growth plans. Hence there are several other policies which impacts business organisations (Gupta, 2014).
Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organisation
For a business organisation to succeed it is important that it operates in a business environment which provides a level playing field to compete with other organisations. Competition policies are established with aim to reduce any unethical or predatory practice being followed by any major player in the market.
One important example in this regard is the case of British Airways. In August’2007 British Airways was slapped a fine of 270 million GBP. This action was taken by UK and US competition authorities. Main reason behind such a heavy fine was BA’s admission regarding its involvement in price fixing on fuel surcharge on its long haul flights. For Office of Fair Trade (OFT) this was one of the biggest fine it has imposed on a business organisation in UK because of infringement of various clauses of Competition Law in UK. As per the case, British Airways admitted that during time frame ranging between August, 2004 and January, 2006 it colluded with Virgin Atlantic over the adding the surcharges to the ticket prices on the excuse of rise in aviation fuel. Due to this unethical practice ticket prices soared from 5GBP to 60 GBP on various long haul return flights. However Virgin Atlantic was spared from any penalty as it acted as a whistle blower and removed the lid from the case. Hence it was protected under OFT’s leniency policy. This particular case caused a lot of damage to brand image of British Airways and projected it as an anti-competitive business organisation in UK’s aviation sector. More importantly, for a time period loyal customers or BA lost their faith and trust in the airline. Thus implementation of such policies have severe impact on the growth and image of the business organisation. That is why it has become important for organisations to have a dedicated corporate accountability group which ensures that the organisation is not involved in any unethical practices. Also such policies acts as an deterrent for the large organisation to use their clout in the market, and helps in promoting growth of smaller business organisations.
Section 3: Understand the behaviour of organisations in their market environment
Explain how market structures determine the pricing and output decisions of businesses
Market structure can be defined as an environment which is driven by various market characteristics and factors. It in a way defines the entire functioning of the market. Various types of market structure and the way they determine pricing and output decisions of businesses are as follows:
Monopoly: In this structure, there is only one dominant player in the market who drives the entire market. For example in 80s and 90s British Airways had an entire monopoly in UK aviation sector. Pricing and output decisions in such condition is driven by the profit motive of the organisation, since with no other competitor customers are bound to buy the services/products.
Oligopoly: In this type of market structure, the market is dominated by few business organisations, who control the entire market. For example retail sector of UK which is dominated by Tesco, Asda, Sainsbury’s etc. In such situation the pricing and output decision is based on demand from consumers, as well as competitor’s strategy.
Perfect Competition: This is more of a theoretical market structure which is not possible in practical life. However in such market structure there are numerous competitors who are involved in production of products and services which are homogenous in nature (Harrison, 2013). Pricing and output decision is driven purely on the basis of demand of the product.
Illustrate the way in which market forces shape organisational responses using a range of examples
There are various market forces which impact business organisations. Any factor which has capability to impact the business in both positive as well as negative way can be termed as a market force. For example, economic recession, supplier’s bargaining power, consumer’s bargaining power, change in demographics, market regulations etc. For example recently one of the major supermarket chain in UK had some issues with a famous food brand which it used to sell through it store. Due to issue, there was poor supply of the item, in order to tackle this the brand decided to launch its own in-house brand. Similarly due to recession there was slump in the travellers in aviation sector. In order to beat the recession, companies such as Virgin Atlantic and British Airways, came up with innovative pricing for various popular routes. Demographics also is one of the major market force today (Wild et al, 2014). That is why organisations do a detailed demographics research before they launch their product, so that it reaches the right audience.
Judge how the business and cultural environments shape the behaviour of a selected organisation
Both business as well as cultural environment have major impact on organisations. Considering case of Tesco Plc. Changes in both external business environment as well as cultural environment has played major role. For example change in consumer behaviour related to their spending pattern in retail sector has impacted Tesco’s strategy. Today customer seeks all the items under one roof, rather than scouting for different products at different stores. This has resulted into change of Tesco’s strategy as they have increased their product portfolio significantly over a period of time. That is why today Tesco has become Walmart of UK selling almost everything in their stores.
Business environment also have major impact on the organisation. For example economic recession resulted into drop in customer visits to the retail stores and customer focused more on essential spending rather than casual spending. Hence both cultural as well as business environment are crucial aspects which decide how a business organisation responds to the change.
Section 4: Be able to assess the significance of the global factors that shape national business activities
Discuss the significance of international trade to UK business organisations
International trade involves two or more than two countries which are involved in trade of products or services among them. UK business organisation such as British Airways, Virgin Atlantic etc. are some of the example of aviation sector which are benefiting from international trade (Johnson, 2013). For example today British Airways has significant presence and base in various other countries apart from UK, hence its operation is not just focused on UK based routes but various other intermediate routes as well.
Similarly international trade is important for companies such as Tesco and Marks and Spencer. These companies have been investing significantly in growing markets, this has been possible only due to trade agreement and foreign investment policies of various countries. Hence international trade has helped companies to expand their presence, increase their profits and revenue and also mitigate the risk posed by uncertain business environment.
Analyse the impact of global factors on UK business organisations
Globalisation and global factors associated with it has impacted UK business organisations as well. For example post 2008 recession there has been severe market slump in UK market in terms on investment received from foreign investors. Due to poor economy, investors from other countries avoided investing in a volatile period which resulted into lack of growth and development of businesses in UK post 2008. There are several positive impact also of global factors. For example today growing market are huge opportunities for companies. Virgin group today has major presence in countries such as United States and various other Asian countries. Technology as a global factor has also helped organisation to curtail their operational cost and maximise their profits. Overall it can be said that global factors have major impact on how organizations prepare their business strategy today.
Evaluate the impact of policies of the European Union on UK business organisations
European Union has been established with an objective of bringing a uniform cultural and economic environment in the Euro region. There are various commerce and trade related policies which have impacted UK business in both positive as well as negative way. For example Common Trade Policy (CTP) prohibits member states of EU to get into direct trade and commercial agreement with a non-member country. This policy at times becomes a road block for several companies in UK who have been willing to setup their international operations in other countries. Similarly Free Trade Policy (FTP) establishes a common commercial tax system which is same across all the member states (Jura, 2012). This allows the companies in UK to freely trade among the member states by following a common taxation system.