This is a solution of UK College business environment Assignment
Over a period of time, the economy has become extremely globalised as well as volatile in nature. This has resulted in the fact that Business Environment Assignment, today have become extremely competitive. With increasing competition it has become important for companies to focus on their strength and remove their inefficiencies. Failure to do so translates into elimination from the market or replacement by some other competitor. Companies with illustrative history cannon rely on their past and have to adapt themselves accordingly as per the changing business environment. The purpose of all the task is to identify various aspects which are associated with business research to a level where each and every factor can be magnified and its importance can be understood.
LO1 Understand the organisational purposes of businesses
Organisations are units which are formed with a specific purpose. These units might have a profit or non-profit purpose. With an organisational structure, these organisations function to achieve their objectives. At times, there are organisations having certain talent management hierarchy, where people with different roles and responsibilities enable day to day functioning of the organisations (Trade Services, 2014).P1.1. Explain briefly the following types of organisations and their purposes
- a) Virgin Group LTD
Virgin Group LTD is a multinational company founded by Richard Branson. There are various sectors in which this company functions such as:
- Financial services
With more than 400 companies, Virgin group follows LIMITED type of organisation change model, such type of organisations are owned by shareholders, with limited liability. In the majority of the cases, Limited companies are run by directors.
The purpose of the Limited type of organisation is to earn maximum profit with a limited shareholding in the company that to through family, friends and relatives. Although Limited companies might issues stocks but their shares are not traded on public stock exchanges and in the majority of the cases they are issued through IPOs (Initial Public Offering). Class of Virgin group listed in 1989 is of a holding company. Limited companies at times have single ownership as well as a certain share of it owned by the public. For example, Virgin Group’s complete ownership is with Richard Branson, whereas in some of its subsidiaries he only has certain amount stakes (Virgin - About us. 2014).
b) Tesco PLC
After Walmart, Tesco PLC is the second largest retailer in the world on the basis of profits. Tesco PLC a market leader in the United Kingdom is a British multinational retailer which follows Public Limited Company (PLC) model. Such type of business organisations is the type of public company which are formed under United Kingdom company law. Liability in such managing people is limited in nature and shares in such business organisations are traded in public through stock exchanges (Tesco PLC - About us, 2014).
The purpose of the public limited company is to be able to sell its share in public through the stock exchange and raise certain the share of the fund through public shares. This type of model helps the PLCs to raise fund for their functioning and at times companies release shares to raise funds to boost their expansion plans. Currently, Tesco PLC is listed on LSE (London Stock Exchange) and is part of FTSE 100 index as well.
McDonalds is one of the leading global fast-food retailers with more than 35,000 local restaurants, which serves more than 70 million people across 100 countries. Although McDonalds corporation is a public company which is listed in New York Stock Exchange (NYSE) as MCD. However McDonalds Corporation operates its business by either a franchisee, an affiliate, or the corporation itself. But its major business revenue is generated from the franchise which accounts for 80% of McDonald’s business. Franchises can be defined an arrangement of licencing where an individual or group of individual obtain or buy rights by paying a certain franchise fee to the franchisor. This right is bought so that production or trading can be done under a well-known brand name such as McDonalds Corporation. That is why 80% of McDonald’s work on franchise model (Our Story- McDonalds.com, 2014).
The purpose of this model is to that it provides an easy opportunity for an entrepreneur to use a famous or well-recognized brand name and generate profit from it. By paying a licence fee to the franchisor, the franchisee can not only use the brand name, but it can also get benefit from in terms of innovation, backend support and expertise of the franchise. Hence, it also reduces the risk in the business.
- d) National Health services (NHS) UK
NHS can be defined as a public funded health care system in England. This system operates or functions through general taxation system of the country. This particular health system is responsible for providing health care system free of cost to every legal citizen of the UK, with most of its services free or subsidised in nature. NHS can be defined as an organisation following the public type of organisation. Such companies which come under this type are controlled by the government in terms of their day to day functioning. NHS functions through taxpayer’s money which is provided by UK government itself (NHS England-About us, 2014).
The purpose of such public sector organisation is to provide services and products to the general public at subsidised rates. Profit earning is not the core purpose of such companies. Although government tries to ensure that do not run in loss either.
- e) A corner shop near where you live.
Best-One is one popular corner shop near to place I live. It is a chain of a convenience store with more than 600 stores in England. The majority of these stores run on a franchise model, with parent company being Bestway. As discussed above, the purpose of franchise model is to gain from the parent brand name’s popularity and expertise in that specific field and it also reduces business risk to a significant level (News and Store Developments, 2014).
P 1.2. Considering Tesco PLC, describe the extent to which it meets the objectives of its different stakeholders.
Stakeholders provides ideology to makes out stand concept of any business organisations. They are individuals, a group of individuals or any other organisation having an interest in the performance of the company. They might or might not be affected directly by it, however, they do play a crucial role in the decision-making process of the company. In case of Tesco PLC, following are the stakeholders and the way Tesco is meeting their objectives:
Customers: Tesco PLC through various schemes and programmes such as special focus groups, hoe visits, surveys, on-going research trackers through loyalty programmes, customer services etc. has ensured that it is able to meet the main objective of the customer i.e. customer satisfaction.
Colleagues: Tesco PLC considers its employees as colleagues, and it order to ensure their interest remains intact with the company, Tesco from time to time conducts anonymous annual surveys, timely appraisals, career discussions through its intranet sites, social network site Yammer and various other initiatives.
Investor: Tesco has ensured that objectives of its investor are met through its dedicated socially responsible investment (SRI) community and a dedicated investor team. Thus from time to time Tesco organises specific consultations with these groups, so that Investors associated with Tesco are aware of Tesco’s growth and its future path.
Suppliers: For Tesco, suppliers are the backbone of their entire business. That is why Tesco has appointed dedicated commercial and technical managers under its knowledge hub who deal directly with the suppliers on behalf of Tesco. Tesco also has a Producer Network and an anonymous Supplier Viewpoint questionnaire.
Other groups: Tesco is involved in regular engagement and partnerships whenever required and appropriate is made with government agencies, industry bodies, NGOs etc. It has also established an expert advisory group responsible for advising the company on various strategies to meet objectives of its stakeholders (Kecskes et al, 2013).
P 1.3 Considering Tesco PLC, explain its various responsibilities as an organisation and the strategies it employs to meet them.
Tesco being the leader in the UK’s retail market has an important position in the society. It has various responsibilities such as:
Trading responsibly: With more than 75 million shopping trips a week which is sourced from 10000 suppliers, it becomes important that Tesco trades responsibly. It ensures to meet these responsibilities through ensuring safety and quality of its products, fair, accurate and honest pricing of its products and most importantly it has dedicated data protection policy to protect information related to its 40 million customers.
Reducing impact on the environment: the Tesco has set up a goal of becoming a zero-carbon organizational change by 2050. In order to achieve this objective and fulfil its responsibility towards environment Tesco has been focusing on reducing carbon emission and increase in resource efficiency. It has been taking initiatives in its packaging strategy as well to ensure minimum usage of resources.
Being a great employer: With more than 500,000 colleagues Tesco has huge responsibilities to fulfil expectations of its employees. That is why it has been working towards the creation of work which is inspiring as well as challenging for its employees. It also promotes the concept of inclusion in the teams so that no employee feels left out of the company culture.
Support to local communities: Since 2000, Tesco has raised more than 70 million GBP in charity. It has been focused on being a good corporate citizen supported by its strong governance framework. It has been working towards the creation of prosperous communities. That is why each year Tesco has set a goal of donating 1% of its pre-tax profit in charities.
LO2 Understand the nature of the national environment in which businesses operate
An economic system controls the entire ecosystem under which business organisations operate. It can be defined as a structured method through which governments and business organisations identify resources and allocate them for the purpose of production and distribution of goods and services to the general public of that region or country. Various types of economic systems and the way they allocate resources are defined in below tasks.
P 2.1 Giving relevant examples, briefly explain how different economic systems such as command, free enterprise, mixed and transitional systems attempt to allocate resources effectively.
Command Economy System: In a command or planned economy system resource allocation takes place through centralised planning system governed by the government. Planning authority which is appointed by the government takes critical decisions related production of goods and services, its quantity or amount and its intended customers. China and Cuba are two such countries which have command economy system, and the resource allocation is entirely decided by the central planning authority (McCallum, 2014).
Free Enterprise: Resources allocation in a free enterprise is purely driven by demand and supply forces. Demand is the main factor which influences the entire resource allocation aspect. That is why consumer’s demand and producer’s supply determines the resource allocation.
Examples of such economy system are countries such as the United States and Japan. Here entire resource allocation is driven by the market forces of demand and supply and private sector based on demand-supply channelize and allocate their resources.
Mixed Economy: In the mixed economy system there is the presence of both private sector as well as public sector. Hence, resource allocation is driven by both central planning authority as well as demand-supply factor in the private sector. Countries such as India, United Kingdom are examples of a mixed economy. Here both government, as well as private sector, takes decision-related to resource allocation.
Transitional system: In a transitional system the economy transitioning from state ownership to private ownership or vice-versa, resource allocation is driven by the price system. Depending on the pricing factor of the region and the products being produced resource allocation takes place. Countries such as Poland, Romania and Georgia etc. can be picked up as countries having a transitional economy system (Kirby et al, 2014).
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P 2.2 Considering Tesco’s PLC UK, assess the impact of fiscal and monetary policy on their activities.
Tesco PLC since its inception has seen the impact on its business due to various UK government and monetary policies. Monetary policies can be defined as those policies which attempt to control various macroeconomic variables in the economy system. Whereas Fiscal policies can be defined as those policies which are formulated in order to influence the economic activity taking place in a specific region or country. In the case of Tesco, it got affected by policies such as an increase in Value Added Tax to 2.5 % resulted in price changes of its products across its stores in the United Kingdom. Since VAT increased impacted on its inventory modification, and ultimately impacting the retail price of the product. Such policies at times result in additional operational cost on the organisation.
P 2.3 Explain the impact of competition policy and another regulatory mechanism on the activities of Tesco’s PLC UK.
Competition Commission in the United Kingdom recommended Competition Test in 2007-2008, which was focused towards imposing hurdles in the way of restricting supermarkets to open new stores. This policy was formulated with a purpose of prevention market monopoly by bigger retailers such as Tesco Plc. Opposition to this policy resulted in spending of approximately 1.4 million GBP in legal battles. Eventually, Tesco failed to overturn this decision. This has impacted on Tesco’s expansion plans as Tesco has been planning to expand rapidly in various locations of United Kingdom. Competition policy is an important instrument through government ensure that market remains competitive and every market player gets a level playing field for running its business. In the UK, there are various regulatory mechanisms under competition policy such as Fair Trading Act of 1973, Competition Act of 1998, Restrictive Trade Practices Act of 1976 and Resale Prices Act 1976 (Sufrin & Jones, 2014).
LO3 Understand the behaviour of organisations in their market environment
There are several interconnected charters tips which define a market structure such as a number of firms, nature of cost, the extent of product differentiation, ease of entry and exit from the market. These interconnected characteristics have a significant impact on the competition and pricing in the market.
P 3.1 Explain how market structures determine the pricing and output decisions of Tesco PLC UK.
Majorly there are four types of market structure, with each of them having an influence on price and output in their own way. Pure or Perfect Competition type of market structure has several sellers or competitors in the market who deal with a homogenous line of business and also the entry of new competitor is allowed, this type of market structure is practically impossible. In Oligopoly type of market structure, where there are only a few dominant sellers existing in the market, who ensure that barrier to the market entry remains high. In monopoly type of market structure, there is only a single dominant seller who completely dominates the market and has considerable control over supply and demand of the market. Another type of market structure is Monopsony, in this type of market structure, there is single buyer which is having control over the demand and the price factor in the market (Myers & Tauber, 2011).
In the case of Tesco PLC, the company operates in within an oligopoly market structure which is dominated by very few market players. UK supermarket sector being extremely competitive, with only a few major dominant players such as Asda, Sainsbury’s etc. the entire market structure is driven by these few sellers. Tesco PLC in such market structure has a leadership position, that does not mean that it has monopolistic control over the market since competition among these few dominant players is stiff as well. Due to such market structure, Tesco always focuses on its competitive pricing strategy. Its pricing and output decision is purely driven by the market forces of demand and supply. That is why based on demand Tesco ensures that its product pricing remains in sync with the demand.
P 3.2 Illustrate how market forces shape Tesco PLC UK responses using a range of examples.
Market forces can be defined as those factors which have a significant impact on the price, demand and availability of the product. The industry has widely accepted the use of Porter’s five force analysis as a framework for industry analysis and business development process (Porter, 2011). These five forces can be identified as:
- Threats of new entrants
- Bargaining power of customers
- Threat of Substitute products
- Bargaining power of suppliers
- Competitive rivalry within an industry
As discussed in above section, that UK supermarket industry is an extremely competitive one. Although it follows an oligopoly market structure, but there is still the significant threat of new entrants. Off the late with UK government’s specific focus on liberalisation and the opening of the market has resulted into various new retailers in the market. Thus such retailers pose a significant threat to dominant players such as Tesco, Sainsbury’s etc.
The similar threat of supplier is another market force. Tesco today has more than 700 supplier members who are like a backbone to its business. However at times due to better pricing from a competitor a critical supplier might shift away. This might lead to disruption of business for a specific product. That is why the threat of such market force is high for Tesco. In order to ensure that suppliers remain satisfied with Tesco’s strategies, Tesco has been working on strengthening its supplier relationship through innovative mediums such as developing a dedicated system for enabling suppliers to interact directly with the critical stakeholders of the company.
Hence, it can be said that market force do have a significant impact on the overall policy and strategies of the company, especially for a company like Tesco which operates into a highly competitive market of United Kingdom.
P 3.3 Explain how the business and cultural environments shape the behaviour of Tesco PLC UK.
Grocery and general merchandise have always been two key categories where the market hardly sees any slowdown. People can avoid spending money on luxury items but reducing spending on grocery and general merchandise is almost next to impossible, especially since both these categories consists of items which help in day to day functioning of a human behind. With rapidly changing time there has been a significant impact on the way people purchase these items. Today going for shopping of grocery or general merchandise is an experience itself. Tesco has capitalised on this experience enhancement since its inception and got a major boost with retail revolution sweeping not only the UK but the entire world. The rise of Tesco PLC in UK market can be attributed to subtle shift and in cultural as well as the behavioural aspect of people towards grocery and merchandise shopping. Unlike the past, when people had ample time to indulge in purchasing of items, today life has become extremely hectic. This has directly impacted on their shopping behaviour. People prefer going to a store which can be their one-stop for purchasing all of their grocery and general merchandise related items. Also, emphasis on touching, feeling and then making a buying decision has also influenced by Tesco’s growth. People prefer feeling the product and analysing with other options before purchasing it. Companies like Tesco PLC provide such kind of environment though their retail stores spread across the globe. Apart the from these cultural changes, Tesco also got affected by the change in business environment. With opening up of the retail sector in several countries, Tesco has been able to scale up its operation in various countries. Due to the expansion of the Tesco in various countries, Tesco has been able to negate the economy slowdown in the United Kingdom. Also with increasing competition in the retail sector, Tesco has been working hard towards maintaining its leadership position in the United Kingdom.
Hence such type of business and cultural environment change has also impacted Tesco’s growth along with its strategies and approach towards the market.
LO4 Be able to assess the significance of the global factors that shape national business activities.
In a globalised world, no country can ignore the importance of international trade. International trade can be defined as an activity where goods, services, capitals are traded between two or more than two countries under an agreement of trade agreed upon between the parties. International trade today has a significant impact on Gross Domestic Product of any country. Depending completely on domestic trade cannot help a country to grow. That is why countries these days are specifically focusing on strengthening their export sector as it gives a significant boost to their economy.
P 4.1 Discuss the significance of international trade to Tesco PLC UK.
Tesco currently operates in 12 countries on three continents. With approximately 75 million shopping trips every week. Today it can be said that its international operations are responsible for driving Tesco’s top line. For example in 2010/2011, growth in Tesco’s international revenue was approximately 13.8% which was three times faster than 4.3 % growth of Tesco UK. This clearly underlines the fact that Tesco for its growth is not restricted to its performance in the United Kingdom alone. Today Tesco is giving equal importance to its international operation when compared to its domestic operation. This can be understood by the fact that, the rate of opening stores outside the UK was faster than the rate of the opening store in the UK itself (In 2011). This translates into the fact that today Tesco is operating more stores outside the UK than within its home market. Out of total retail space occupied by Tesco more than two-third is located outside the UK itself.
Based on above facts, it can be easily analysed that how international trade has become an important part of Tesco’s growth strategy. This not only helps Tesco but international trade also brings critical foreign revenue back to the home country, ultimately strengthening the economy. That is why companies these days are aggressive when it comes to their international trade related strategy (Johnson, 2013).
P 4.2 Analyse the impact of global factors on Tesco PLC UK.
There are various factors which drive the international trade and overall phenomenon of globalisation. However, the impact of global factors can be analysed through PEST framework.
Political Factor: Tesco PLC operates in 12 countries spanning across three continents. That means that every country has its own political situation. Thus, at times, there are countries where due to political unrest there is the impact on Tesco’s operation hence impacting its business.
Economy Factor: In a globalised environment, the economy of every country has more or less became independent on each other. That is why recession hitting shores of United States has an impact on Asian countries such as China and India. Point is that today in a volatile economic environment having a steady state of business has become very tough. That is why at times Tesco has to struggle hard in order to maintain a healthy margin of its profit.
Social Factor: Societies across the globe has been lapping up the concept of the retail market. This has helped Tesco significantly in expanding its business across the globe. Today people are interested in visiting a retail store rather than visiting a conventional grocery store. Such cultural shift has ensured that companies like Tesco can expand in growing economies.
Technology Factor: Technology has proven to be a single largest factor which has helped Tesco to reap the benefit of international trade and globalisation. With its dedicated supplier network on the internet, it can easily manage its suppliers. Similar it has intranet for its employees enabling them to interact and provide crucial feedback to the company. Such technological advances have enabled Tesco to cut its operational cost and inefficiency (Hopkins, 2011).
P 4.3 Evaluate the impact of policies of the European Union on Tesco PLC UK.
The European Union was established with a purpose to promote progress in terms of social and economic context. With the establishment of EU, there has been significant an impact on UK businesses as well. There are several policies which either have a direct or indirect impact on businesses. For example European Union’s common trade policy initially hindered the growth of Tesco PLC outside the UK. As this policy restricts member states to negotiate its exclusive trade agreement with countries outside EU. Such policy has been a roadblock in the rapid expansion of the company. With its operation in 12 countries and 3 continents, there is still ample of scope for Tesco to grow rapidly. However, policies such as common trade policy result into slow growth the of the company. If there are the certain negative impact of policies then policies such as free trade and open border policy have provided the vast market with a for companies like Tesco. For example, today, Tesco sells, Polish food in more stores in the United Kingdom than Poland itself. This indicates that how easy it has become for companies to trade goods and products across member states of the European Union. Such policies promote the expansion of the company (Jura, 2012).
To conclude it can be said that business environment is an important aspect of any economy. It defines and drive the entire economy through its various aspect. Whether it is the type of business organisation, or it is trade policies or it is anything related to globalisation. All these factors have ensured that today’s market structure and the overall business environment remains competitive as well as dynamic in nature. Companies such as Tesco PLC illustrate the fact that how international trade can be used for boosting the growth of the company. Hence with properly identified strategy a company can not only boost its growth but can also improve its revenue by leaps and bounds.
Hopkins, A. G. (2011). Globalisation in world history. Random House.
Johnson, H. G. (2013). International trade and economic growth. Routledge.
Jones, A., & Sufrin, B. (2014). EU Competition Law: Text, Cases and Materials. Oxford University Press.
Jura, C. (2012). EUROPEAN UNION TRADE POLICY. Quality-Access to Success, 13.
Kecskes, A., Mansi, S., & Nguyen, P. A. 2013. Can Firms Do Well for Shareholders by Doing Good for Stakeholders? The Importance of Long-Term Investors. The Importance of Long-Term Investors (April 29, 2013).
Kirby, S., Meaning, J., & Warren, J. (2014). Prospects for the UK Economy. National Institute Economic Review, 227(1), F43-F64.