London School Unit1: Business Environment

This is solution of London School Business Environment Assignment, it is part of HND Business course. In This assignment, with business environment,  market research and economic issues are also part of it.

Introduction

The business environment is ever changing however key aspects never change. The diagram below shows the business environment. Organisations have to be aware of their competitors, the industry as a whole and the wider environment. All of these factors affect the running of organisations and need to be studied as a result.

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LO1: Understand the organisational purposes of businesses

Q1.1: Identify at least four different types of organisations that exist in the U.K. Select two types of organisations from those identified and state their purposes.

Answer: An organisation is a group of individuals or legal entities who are bonded by a common interest, and they work towards a particular purpose. The organisational unit is managed and structured in such a way that everyone who is involved within has clear understanding about his or her roles and responsibilities. Based on the structure and legal identity, the organisations are divided into various types.

Sole Traders: it is a simple form of organisational structure having a single owner, who runs the activities and is responsible for the entire operation.

Partnership: in this structure, more than one individual owners form partnership to own the business entity. The number of partners may be minimum of two and maximum of twenty.

PLC: Public limited companies are owned by public shareholders. The organisations may or may not be listed on stock exchanges, and the shares can be traded in the open market.

Limited: In this type of organisations, the owners have the liabilities which are limited to the extent of their ownership.

Two types of identified organisations are sole traders and partnership. Sole traders are legally defined as the single individual owned entities. The legal identities of owner and organisation are the same. Partnerships are legally identified as the cordial interactions between the owners, who share the responsibilities and liabilities (Lansley, Sadler, & Webb, 1974).

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Q1.2: Select an organization of your choice and describe the extent to which this organization meets the objectives of its stakeholders.

Answer: The organisation selected for the question is Tesco plc. Stakeholders in a company are the individuals or the group of individuals who are either directly or indirectly get affected by the actions taken by the organisation. There are primary stakeholders who get affected directly by the organisation actions, and there are also secondary stakeholders who get impacted indirectly by the actions of organisations. The stakeholders of the company are employees, customers, investors, suppliers, and lenders. The organisational think tank is always active in respecting its duties towards obliging the duties towards the stakeholders. Employees are the primary force of productivity for the organisation, which fuel the growth and reflect the organisational image in the market place. Organisation needs to pay them properly and develop their skills to oblige the responsibility. Customers hold the key to growth of any organisation that can modify the overall performance of the company; organisations need to offer superior products and service to meet the customer expectations. Investors provide the equity for organisation; which makes the responsibility of the organisation to oblige by giving proper rate of return on their investments. Suppliers are concerned with the performance of the business which would make sure that they are paid back in right time. Lenders provide the necessary money to carry on business; hence the organisation responsibility is to pay them back in due time (Dugdale, & Lyne, 2010).

Q1.3: Explain the responsibilities of the organization you selected in Q1.2.  In addition, explain the strategies employed to meet these responsibilities.

Answer: Tesco plc has to abide by a number of responsibilities which are necessary in order to survive in the business environment. Apart from its usual business activities, Tesco plc is also involves in fulfilling its responsibilities towards various stakeholders in the society. Main stakeholders of the company for which the organisational think tank is always active in formulating various strategies to make sure that the organisational responsibilities are met properly. The retailer fulfils its environmental responsibilities by carrying out various activities and initiatives towards complying by the various environment related responsibilities. The British retailer Tesco takes care to implement various environment related obligations across its outlets and supermarkets across the globe. It encourages its customers to use environment friendly baggage and non-harmful things to reduce environment affecting elements. The company also uses a number of socially oriented steps to make sure that the corporate social responsibilities are met. The society comprises various other individuals or the group of individuals who possess the power to impact the business operation in the overall market condition. Tesco understands the need of making the social stakeholders happy and hence carries out a number of activities make sure that the image of the company is kept intact. Tesco also identifies its responsibilities towards the government authorities; the company pays its tax obligations in time and makes sure that all the business related regulatory obligatory filings are filed in proper time. Another major responsibility of the company is to pay respect towards its duty for the employees; Tesco is concerned about making the lives of its employees better in order to facilitate the cordial relationship (Kennerley, & Neely, 2003).

LO2: Understand the nature of the national environment in which businesses operate

 Q2.1: Using a country or countries of your choice, explain how two economic systems attempt to allocate resources effectively.

Answer: Economic systems are the organised system of allocating goods and services in the society. There are four broad categories of economic systems: free market, socialist, planned and mixed economy. Free market is the mutually beneficial ecosystem of the producers and buyers which provide a better platform for interaction between the two parties. Socialist market system is characterised by the social ownership pattern of the assets and the production patterns. In a planned economic system, the factors are controlled by the government and its affiliated authorities who decide the resource allocation. Mixed economy is type of economy system where the patterns of planned and free market markets are visible.

We will examine two types of economic systems:

Free market economic system: In a free market system, producers and buyers act in such way that shapes the market behaviour. This type of economic system has almost no influence of the government authorities. The controlling authorities give ample amount of scope for the market forces to interact on their own for their own benefit.

Planned economy: In a planned economy, the economic system is controlled by the government and its controlling authorities who are responsible for the effective resource allocation. The authorities use various methods of regulation to have control over the various market forces.

Scarcity is the economic system related problem which is created when the resource availability is not matches with the demand in the market. Resources in the market are known as the driving factors that rule the market activities; the resource can be in form of material, labour or capital in the market.

Q2.2: Using the UK as an example, assess the impact of fiscal and monetary policy on at least two businesses and their activities.

Answer: The UK economy has been one of the major economies in the world. The country has been one of the pioneers of the industrial revolution in the modern economy. After the hitch in the longer period of time from 2007 until 2012, where all major global economies faced problems because of debt crisis followed by the European Union problem, the UK economy is recovering healthily towards a stronger future. The national Gross Domestic Production grew by about 1.9% in 2013, since the start of the global debt gloom in 2007-08. The present status of the economy is the sixth largest in terms of current prices GDP; and eighth largest in terms of purchasing power parity (PPP). The gross national production (GNP) of the United Kingdom economy is more than GBP1.16 Trillion. The country is also one of the largest importer (sixth largest in the world by 2012), and at the same time one of the largest exporter in the world. The government of United Kingdom follows fiscal policies and monetary policies as instruments to control the economy. The economy by its very nature is a mixed one. All market forces are allowed to interact freely with government acting as controlling agent (Truman, 2013).  The post debt crisis market scenario has impacted the balance sheet of the UK government. Hence the government has identified frugal manner of budgeting as a solution and has been taking steps towards making the austerity drives within the system. The austerity drive has been influential in affecting the style of expenditure among the consumers in the UK. Hence the business of Tesco has also been getting affected continuously. Because it is observed that the increase in government control will be resulting in decrease in the customer expenditure. Monetary policy is a controlling instrument of the UK government though which it formulates the money market mechanisms. The purpose of the monetary policies is to boost the economic activities in the market. The machinery used by the government are through adjustment of the key policy rates in the money market. If the key policy is high, then the interest rates in the capital market will be higher; which will decrease the economic activities. But the market policy rates at higher level will result in the decrease of inflation.

Q2.3: Evaluate the impact of competition policy and two other regulatory mechanisms on the activities of a selected organisation.

Answer: The selected organisation is Tesco plc. The company has been mainly impacted by the competitive policy of the UK government, which is in practise from 1948. The UK market has a number of other similar retailers, such as J Sainsbury plc, Asda Stores Ltd, and Morrison Supermarkets plc, who give strong competition to Tesco plc. Hence the importance of competition law for Tesco is significant. Apart from the bigger players, the company also faces competition from smaller retailers. The competition policy of the UK government is to ensure that a competitive market atmosphere is fostered by the players present in the market. The retailers like Tesco plc are supposed to encourage unbiased market competition. Being part of the European Union, the United Kingdom market also has to obey a number of EU norms. The main objective of the competitive laws is to make sure that the fair pricing is practised in the market and the customers are provided with a range of choices to choose from.

Two other significant regulations under the UK government’s control are the Employment Rights Act 1996 (to ensure that employees are treated fairly in terms of their employment choices), the National Minimum Wage Act 1998 (to ensure that the workers are getting paid by the minimum industry standard) (Scherer, & Palazzo, 2011).

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LO3: Understand the behaviour of organisations in their market environment

 Q3.1: Explain how market structures determine pricing and output decisions of two UK businesses.

Answer: The market structure is very crucial in deciding the interaction between the market forces. The output, pricing, demand, supply and competition type are decided by the inherent market structure. We will examine the two organisations in the UK market context: Tesco plc and Associated British Foods plc. The two organisations are involved in the supermarket retailing and food manufacturing industries respectively. Despite the companies are present in two different sectors, the market structure of the economy is very crucial in affecting the business of the two firms. The market structure is the deciding factor which forces the two companies to adjust their pricing strategies and output decisions. The first decision of pricing comes from the inherent demand and supply trend in the market. The demand comes from the customers and buyers and the supply is showcased by the sellers. Hence the pricing decisions cannot be determined independently by the two companies. The competitor’s action is also important in impacting the decision-making process related to the market pricing. In monopoly market, the single player can decide the pricing and output decisions on its own. However in a perfectly competitive market, the number of buyers and producers are larger enough to make sure that the companies are following the market pricing (Buchholz, 1995; Prasad, 2010).

The main market forces are demand, supply, seller, buyer, and price. The interaction between the market forces decides the entire picture of the market, and the economy at large. The two companies selected for the examination of the market force impact on the function of market are:   Tesco plc and Associated British Foods plc. One company is into services sector and the other is into manufacturing arena. The organisational decisions of the two companies are decided by the inherent market force interaction in the economy. The demand from consumers makes the two companies decide upon their raw material requirement and the amount to offer in the market. Supply is decided by the demand level and the viability of the material availability. Sellers are the two companies, who hold a significant position in the market because they provide the goods and services. Buyers are the common buyers in the market, who are impacted by the level of disposable income and the economic health. The pricing decisions is to be taken by the food manufacture based on the supply and demand interaction, which implies the need of either increasing the pricing to take advantage or to decrease the price so that the products are not left unsold (Aguilar, 1967).

Q3.3: In the last 100 years, the UK has drastically changed. Consequently, businesses operating in the UK have had to adapt their marketing  principles mix offerings to capitalise on these demographic and cultural changes. Assuming you work as a Business Environment  for a supermarket chain operating in the UK, write a report to the Directors, explaining how the business and cultural environment in the UK can shape the behaviour of this organisation.

Answer: Tesco plc is a retailer involved in food and non-food retailing business in the UK and outside UK.  Various inherent elements present in the society which reflects the cultural behaviour of the buyers are their viewpoint, personal values, and way of thinking, cultural customs, and religion. These are the factors which can affect the decisions of the retailer. Because it has business activities spread across various geographical areas, the importance of cultural values of the buyer decide the way Tesco should go about marketing its business in various markets.

Apart from cultural factors, the business environment factors are also vital such as: political, economic, social, technological, legal and environmental factors. The British retailer has to examine its market in terms of the above mentioned criteria so that the future business endeavor is easier.

Political factors are critical because they decide the market survival. The government structure and stability ultimately affect the survival of the business.

Economic factors decide the demand and supply in the market. Major benchmarks such as interest rates and tax rates, are the building blocks of an economy. The inflation level, economy growth rate, customer’s expenditure style and future growth potential are the economic factors that affect the business.

Social factors decide the way Tesco should go about doing business in various markets.

Technological factors imply the need of advancement in the business strategy . Any advancement in the technology will force the British retailer to think about its strategies, and to reshape its attitude towards adopting various technological advancements.

Environment factors are responsible for making the organisation more aware about the environment related necessary regulations.

Legal factors bring the need of certain legal and regulatory compulsions in to picture.

(Wetherly, & Otter, 2014).

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LO4: Be able to assess the significance of the global factors that shape national business activities 

Q4.1: You have been selected by the trustees of your local youth group to make a presentation to young entrepreneurs in the area on the importance of international trade to the local economy. Key to this is a discussion on the significance of international trade to UK business organisations.

Prepare this presentation using a format of your choice (if you use power point slides, take a screen shot of them and paste into your answer)

Answer: Global trade has taken the front seat in the emerging way of doing business across the globe. The market is no more confined to a particular geographical boundary. The need of resources and new customer bases are driving the business houses to go beyond their home nations and expand the market boundary to an extension.

Positive Side of Global Trade:

It is important to explore the global market which brings in a number of positives to the business. Firstly, the global companies will be able to have an access to wider alternatives of resources, which can be in the form of human resource or the raw materials. Secondly, the companies based in the United Kingdom can consider the markets in European countries, Asian developing markets, and American developed markets as their target markets. The customer base will resultant be much wider which gives a wide scope of better revenue generation for the companies. The access to technology in some market is much better than the UK market. Hence a global trade will help the UK organisations to learn application of new and innovative technologies

Negative Side of Global Trade:

The local trade is also absolutely unproductive. The local customers in the UK market always prefer the local business houses. Most of the UK based businesses are thriving in the local market because of the inherent market support. Moreover, the UK business houses can only understand the UK buyer behavior very clearly. The requirement of foreign regulations is also not required when the business is carried out in the local UK market (Johnson, & Turner, 2010; Hellman, 2000).

 Q4.2: Analyse the impact of global factors on UK business organisations.

Answer: Globalization is the integration of not only economies present across various countries, but also the amalgamation of political thought processes, cultural practice and legal regulations. Globalization is not an entirely new concept to the international market. The concept has been present even before the formal regulatory allowance of trade practices beyond boundaries in a number of countries. However the globalization trend has been on the rise especially after the second half of the 1990s. After some drastic steps taken by a number of global economies, the trend of going global has been taking place at an unprecedented rate in the last few decades. Companies like Coca Cola, MacDonald’s, Toyota, etc have made the concept of globalization wide spread and practiced.

There are two major drivers of globalization: mobility and free market. The mobility is present in various fronts of doing business at global level. Human resources, technology, facilities and information can be mobilized easily in the global market. However various factors related to the cultural inherent practices and the behavior of people are the few things which cannot be mobilized. Political situation if not favorable for the foreign organisations, then also the global trade is difficult. But it is subjective depending upon the type of company and the type of market. Free market structure allows the free trade between the various organisations. The free flow of capital and trade makes the globalization more attractive and profitable (Mol, 2003; Davis, & Blomstrom, 1966).

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Q4.3: For an organisation or organisation behavior , evaluate at least two European Union policies and explain the impact of these polices on your chosen organisation(s).

Answer:European Union was formed in 1993 as a result of the Maastricht Treaty in order to foster the economic and political union between the participating nations. The role of European Union is to provide a common platform for mutually beneficially trade practices between the 28 member countries. It issues directives which are followed by the UK government, because it is one of the major member nations. The UK government has specified a number of times about the economic integration and the benefit it gets by being a member of the EU. Among a number of unfavorable EU mandates, the Common Fisheries Policy is probably the most talked about and controversial regulations which EU has imposed on the UK fishery industry. Don Fishing Company, which is a leading fish seller based in Scotland, get affected directly because of the common fishing water access. Another EU policy is the Common Agricultural Policy which mainly affects the consumer prices of agricultural products. The objective of the regulation is however to ensure a common market for agricultural goods. But various agricultural companies in the UK face problems in terms of human resource, cost benefit and environmental practices (Hix, & Høyland, 1999).

References

Dugdale, D., & Lyne, S. 2010. Budgeting practice and organisational structure. Amsterdam: Elsevier. Kennerley, M., & Neely, A. 2003. Measuring performance in a changing business environment. International Journal of Operations & Production Management23(2), 213-229. Lansley, P., Sadler, P., & Webb, T. 1974. Organisation structure, management style and company performance. Omega2(4), 467-485.

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