London School Unit 1 : Business Environment

Task 1

Types of Organization and their purpose

An organization is a logical and social arrangement of all the resources together having a common and collective goal, also having a well-defined framework and boundary which separates the organization from its external environment and counterparts. (GROSS, Julian, 2009)

Organization can be divided into types depending on what is the purpose they want to achieve and what are their goals and objectives. Thus there are 4 types of organizations depending on and differentiated on the basis of objectives and purpose of the organization, they are: - (GROSS, Julian, 2009)

  • Commercial: - The commercial organizations are those which have the sole motive on profits and financial returns from the business, helping others and doing humanitarian work comes last in their list of priorities and in most cases it is not found only. Thus commercial organizations are backed with the purpose which are following:-(CARSRUD, Alan L. et al., 2007)
  1. Earn financial gains and profits,
  2. Give a better living standard to the owner/owners of the business,
  3. Increase the scale of business activities,
  4. Act of helping others are a part of corporate social responsibilities only and not the main purpose of the business.

There can be different forms of business in the commercial organization namely, sole proprietor, partnerships, corporate, limited companies etc.

  • Not- for profit: - The organizations falling under this category has the sole motive of helping others and bringing out causes and not to earn profits like the commercial organizations. Non-profit organizations are mostly the charities, NGO’s etc. who are backed although by few commercial organization or government organizations, however the sole purpose is to help humanitarian and bring out a sustainable life for everyone, they believe in collective growth and collective wellbeing rather than self-growth which is an objective of commercial originations. (CARSRUD, Alan L. et al., 2007)
  • Government sector:- This type of organization have a combination of commercial goals, as theory have to earn profits and grow, however the emphasis is largely on taking actions and coming up with activities which are in the interest of public at large. The government organizations also have following purposes:-(STANFORD, Naomi, 2010)
  1. Work for the interest of public at large,
  2. Emphasis is on profits but profits are only the second purpose first being collective growth,
  3. Plans are effected by regulations and laws framed by legal bodies,

The government organizations are the ones funded by the government bodies, thus they have to think, plan and act as per the guidelines set by the government.

  • Cooperatives: - Cooperatives have the purposes which are very close to the government organization’s purpose of social up lifting and public support and also Not-for profit origination’s purpose of social wellbeing and up lifting, these bodies or organizations are generally a part of profit organizations or government organizations and their main aim is to bring autonomy and independence in the members actions and also to educate, train and develop society at large.(CARSRUD, Alan L. et al., 2007)

Objectives of stakeholder’s and the extent to which an organization meets them

A stakeholder is an individual or a group of individuals who have a direct or indirect, financial or non-financial interest in the business or organization. (JEFFS, Chris, 2008)

Stakeholder’s of an organization have differentiated needs and requirements, thus an organization in order to meet the objectives or needs of the stakeholders have to work effectively and plan for eachclass of stakeholder’s, various stakeholders for Tesco and how it meets their needs can be mentioned as:- (KOONTZL, Harold and O'Donnel, Cyril, 1964)

Tesco is a giant in retailing in UK and now it has spread itself to more than 11 countries worldwide, the different stakeholders for Tesco are:-

  • Shareholders: - Shareholders have the sole objectives of earring profits by increasing the organizations sale and thereby finding an increase in the share value of the organization. Thus their goal is mostly financial and earning better returns from the organization.
  • Customers: - The customers have the goals of getting the best and quality products and that to an affordable price.
  • Employees: - The employees have the objectives of getting paid well, having employee friendly conditions to work.
  • Suppliers: -Suppliers have the goals of supplying more raw materials to the organization which also means increase demands for suppliers and also getting paid for the supplies on time.
  • Government bodies: The sole and basic purpose of these bodies is to see if there organization performs as specified sand also all the rules and regulations are followed by the organization or not.

In addition to these prominent stakeholders there are other less important ones as well, namely local bodies etc. (JEFFS, Chris, 2008)

Tesco now uses the following methods to meet the goals of its stakeholders:-

  1. Tesco has appointed a team of well skilled and efficient financial analysts who constantly looks at every opportunity to earn high and also maintaining the value of Tesco’s share and also has placed a team of shareholders grieve cell in place where in any issue of the shareholders are taken up and solutions are provided for the same, thus Tesco maintains a healthy relation with its stakeholder’s.
  2. Tesco has come up with the concept of customer question time, where in customers are surveyed and asked regularly about there in store experience and what changes would they be wanting which makes Tesco a customer centric organization
  3. Tesco has its core value which states “ Treat people they want to be treated” and it is according to this core value that Tesco gives importance to relations with suppliers and employees thus the objectives and needs of the suppliers and employs are given due importance as well.
  4. Tesco gives due importance to each government regulation and also imbibes each of these regulations in the regular functioning of the organization, also regular and constant audit reports etc. are also given by the organization thereby making the organization a pro government organization.

As the stakeholders of different organizations have different priorities and also different organizations have different systems in place to meet these priorities, an organization has to stake the right balance to meet the needs of each stakeholder’s rather than giving importance to any one of them.

Responsibilities of the organization and how to meet them

Organization has responsibilities towards many, namely shareholders, employees, customers, suppliers, distributors, support staff etc. Also the organization has responsibilities towards itself like continuation of business etc. Thus the organization has to meet these objectives and also try and achieve and strike a right balance so that responsibilities towards each class and section of the organization is met and effectively followed. (BALIGH, Helmy H., 2006)

Organizations behaviour changes to use different forms to meet these objectives, an organization can seek help from experts, employee’s surveys, customer surveys, and shareholders/supplier/distributors survey etc. to come out with plans and policies to meet the objects and responsibilities an organization has towards different classes. (BALIGH, Helmy H., 2006)

Tesco uses plans like reducing carbon emission so as to meet social responsibility, following a code of ethic set as to meet with the government or other regulations set by different bodies etc. Thus deciding what are the responsibilities an organization has and how one would meet them is a question each organization has to answer in its own way however long and sustained existence of any organizations depends on how an organization meets these responsibilities set.

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Task 2

How Does an Economic System Attempts To Allocate Resources Effectively

  • Market economy role in business environmentFree Market Economies: Resources are distributed by the influence of free market forces under one’s own control in a free market economy. In a free market economy, the consumers determine what to produce, the producers determine how to produce and the purchasing power of the consumers determines for whom to produce.(STANFORD, Naomi, 2010)
  • Command-economy
    • Command Economies: The method of allocation of scarce resources by the government is called central planning and the economies that use central planning are known as command economies. For example, how many roads or hospitals to be built are decided by the government?
     
mixed-economy
  • Mixed Economies: Mixed economy is that economy where both free market forces and central planning are present. Mixed economy may have a distinct private sector as well as public sector. All the economies in the world are mostly mixed economies. Some have more of government intervention while some are dominated by the free market.(STANFORD, Naomi, 2010)

Effective Resource Allocation in UK’s Free Market Economy

  • In UK there is a free market economy where most of the sectors are privately owned but all the important decisions are made with the involvement of the government.
  • The economy of UK is managed by the low taxation policy, low pricing policy and the market liberalizations with the dominance of the government. Inspire of having a free market economy, the private sector cannot control the settings of the price strategy without the permission of the government.
  • In UK, the interest rates are ruled by the Governor of the Bank of England for the achievement of the deadlines of inflation.
  • UK is very powerful in terms of competition, but all its competitions are managed and controlled by the Competition Commission for the improvement of its profile of constructive competition in reducing competition backtrack, like price wars.
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Effect of Fiscal and Monetary Policy on Business and Its Activities

Tesco can be influenced by the interest rates as if the rates of interest are up then Tesco will not be willing to take as much money for the purpose of development. And in case the consumers have loans they will not have much income for spending on the luxuries. If the minimum remuneration was lowered, it will bring more money for Tesco because in such case they will not have to pay to their workers as much money but the consequence of this will be low sales from the consumers as their remuneration could be lowered again and this may create a situation for them where they cannot spend much. And if the rate of unemployment does up or the expendable income rate comes down, it would be made obligatory for the customers to spend on the products that are not so costly and which they actually need. The business of UK is influenced by the economies all over the world; low – priced labour abroad also influences the competitiveness of the products of UK both nationally and globally. Tesco needs to be conscious of the economic conditions for making sure that they use plans and schemes to safeguard its business. With the change in society, behaviour of the people also change and therefore the organizations must be in a state to provide products and services according to the changing fashion and that which matches their lifestyles.

Impact of Competitive Policy of UK on Business

The competitive policy aims to improve market conditions, promote competition and do something good for improving the productivity in individual markets and improved competitiveness of the businesses in UK.

There are 3 key pillars of competition policy in the UK and in the European Union

  • Antitrust & cartels:This calls for getting rid of the agreements that attempts to limit competition, price - fixing and other bad effects by firms who dominate the market.
  • Market liberalization: Liberalization means bringing on a fresh competitionin the monopolistic sectors running from before, like mobile telecommunications, postal services, energy supply and air transport.
  • State aid control:Competition policy determines examples of state aid measures for ensuring that these actions do not deform competition in the Single Market.

Merger Policy in the UK and the European Union

Reorganizing the legal, operational, ownership or other structures of a Company is a reality of life. The markets naturally incline towards consolidating over take through a process of horizontal and vertical integration. The important matter for competition policy is whether a proposed merger or takeover between two businesses is believed to lead to a substantial lowering of competitive compulsion in the market and risks leading to a level of market concentration when collusive behaviour might turn into a reality.

Impact of Competitive Policy on Tesco

The Commission observed that maximum retailers such as Tesco PLC could prove to be a hurdle in the entry for new firms or current ones who desire to grow by making costs and risks on smaller retailers and organizations without prior grocery retail experience in the UK. The present grocery markets are highly intensive and exist in local areas, generally with a set customer foundation. Large retailers with price reductions and combined products will outplay those smaller corner grocery retailers which will result in the consumer over time having a few large key players rather than many competing local firms .The commission policy says that consumers are affected by local markets being highly intensive, usually showing less competition. As there is less competition in highly intensive markets the stores of Tesco can earn higher profit margins potentially. Hence this would prove to be harmful for the consumers.

Conclusion

Organization growth and development depends on a large amount on the regulatory and legal business environment of the place where it functions. Business environment is not considered to be important only for the existence of the business, however the business environment is also very important for the country or place where it is practiced as it is only if the business environment is conducive and favourable can the business grow and thus economy of a country can also grow with it, thereby providing prosperity and more income in the hands of the people of those areas. (SADLER, Philip, 2003)

References

BALIGH, Helmy H. 2006. Organizational Structure: Theory and Design, Analysis and Prescription. USA: Springer. CARSRUD, Alan L., Malin E. BRÄNNBACK, and Malin BRÄNNBA. 2007. Entrepreneurship. Westport: Greenwood Publishing Group. GROSS, Julian. 2009. Dimensions of Organisation Development. Western Australia: Wordclay. JEFFS, Chris. 2008. Strategic Management. London: SAGE. KOONTZL, Harold and Cyril O'DONNEL. 1964. Principles of Management: An Analysis of Managerial Functions. New Delhi: Tata McGraw-Hill Education. SADLER, Philip. 2003. Strategic Management. London: Kogan Page Publishers. STANFORD, Naomi. 2010. Guide to Organisation Design: Creating High Performance And Adaptable Enterprises. Great Britain: Profile Books. BTEC HND Assignment Experts

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