Global Factors on Business Environment Assignment
The Global Factors on Business Environment Assignment will show the glimpses of the business environment where the influences of the different aspects will be shown based on the organisation Morrison UK. As a consultant I will highlight several aspects of the business environments like the different types of organisations, stakeholder’s analysis, market structure, economic system like the mixed economy or command etc. Other than that this report will assist the organisation for framing their strategy based on the business environments. PESTEL analysis will be shown in order to understand the importance of the external factors. Analysis of the international trade and global factors will give assistance to frame the strategy.
1.1 As part of this support and development plan, you are required to research and review the local businesses and provide a report on a range of organisations currently operating in your area, including the identification of their purposes (AC 1.1). To cover different types of organisations, you should select at least four different ones such as private, public, voluntary, government and identify which sector these are in.
Organisation is the group where all the members used to share the common goal. But there are different types of organisations which are needed to be analysed at first. The different types of organisations are as follows:
- Private: Private organisations are highly structured and designed by considering the hierarchy which has top management, middle management and the frontline employees. The chairman is the head of the structure. There are also other stakeholders whose rights and the rules are mentioned in the Memorandum of Association. The company which has the LTD in the end of the name are the private organisations. For instance Beltway Group of UK who are the business organisations dealing with the cement and banking areas in UK.(Cole,2011).
- Public: Public organisations are the organisations whose shares can be offered to the public and traded in the stock exchange. The share capital that has to be maintained is 50, 000 pound. All the organisations which are public end with the initial PLC. For instance Morrison is one of the largest super market chains in UK having 515 superstores in the England, Wales as well as Scotland. The share price is around 185.80 pounds. The people prefer this organisation due to the enhanced value and services they are providing.
- Voluntary: Voluntary organisations are mainly funded by the Government and the purpose for the organisation is to enhance the welfare of the society. Charitable organisations are mainly come under this purview of the voluntary groups. For instance British Red Cross Society are providing First aid training to the people, child welfare, ambulance support etc.
- Governmental: Governmental bodies are the organisation which is directly run by the government and has the autonomy power. The Governmental bodies are found in order to take care of the different aspects of the business, society, international relations etc. For example the bodies like Department for Culture, media and Sport which are taking care of the social and cultural areas of UK in order to attract more tourists around the globe.
1.2 In addition, you are also required to discuss the variety of stakeholders those organisations have and to which extent they manage to meet the objectives of different stakeholders.
The stakeholders are the important part of the business who is involved in the business by their power and influence. The organisation is very much aware of their stakeholders and to address them several strategies they have formulated. The main objective is to deliver the satisfaction. For discussing the variety of stake holders “stakeholder mapping” can be applied in order to identify the stakeholders. The organisation is the public organisation that is Morrison a super market chain that is dominating the market of UK.
In stakeholders mapping there are four phases which is determined by power and interest level. For Morrison the stakeholder mapping can be done in the following way:
- Promoters: Promoters are having high power and high interest in the business of the organisation. For that Morrison has formed a committee under the chairman who are responsible to share all the business proceedings. General meeting, corporate Governance are highly structured at Morrison. The promoters are the investors who are investing in the business of Morrison UK for a return. On this perspective Morrison has created a committee only for them. (Hirota, 2015).
- Latent’s: Latent’s are the customers of Morrison who are having high power but they are having low interest in the business of Morrison. The customers want value in return of the price they have paid. In this case Morrison UK has a marketing oriented approach where they are in the central position. Morrison has opened an online platform to satisfy the customers in the terms of convenience.
- Monitor: Monitor is the people who are having low interest as well as low power. In this case Morrison has ignored in order to give focus on other important stakeholders.
- Defenders: Defenders are the people who are having high interest and low power. The employees of Morrison fall under this category. The objective of the employee is to deliver the performance in return of remuneration. Morrison UK has their effective human resource department who are managing the employees. The management always communicated with them in order to identify the issues they are facing or to gather important feedbacks from the customers.
1.3 As part of the report, you have been asked to provide an explanation of the responsibilities those organisations have and strategies they employ to meet those responsibilities
Based on that the certain responsibilities they have undertaken to fulfil the objective. For instance the public organisation Morrison UK has adopted certain responsibilities which are:
- Customers: Commitment to give enhanced value is the main objective of Morrison UK and for that they are strictly maintaining the customer’s protection policy for instance the labelling of the products which have the detailed contents like price, ingredients, net weight etc. The damaged goods are replaced immediately by the organisation and also maintain an equal pricing policy to all the stores. After sales service department of Morrison UK used to manage the issues faced by the customers at their stores.
- Government: Government is also the part of the stakeholders of Morrison UK where they need to follow the rules and regulations framed by them. For example, the organisation has to maintain Health and Safety Act 1974, where they need to assess the risk and undertake measures to reduce the risk level. Secondly, the organisation is maintaining the privacy of the customer’s information as per the data Protection Act. The organisation is also maintaining the ETI code of conduct for the dealing with the suppliers as there are specialised team who look after these issues.
- Investors: Investors are having high power and high influence in the business of Morrison UK. To make them satisfy with the business, Morrison UK has formed a committee under the leadership of the Chairman. The top management used to share different updates regarding the financial position of the business in order to keep them informed and motivated for continuing the investment. (Walker, 2012).
- Employees: Employees are the implementer of the strategy and the dependency of the organisation towards their employees are also there. The trainings, employees welfares, benefits are being provided to keep them motivated. The management is highly conscious about the importance of the employees and for that they have divided the work structure.
2.1 Explanation of how economic systems (command, free-market and mixed systems) attempt to allocate resources effectively.
As a consultant in Here’s Talking To You (HTTY) Associates I have given a responsibility for advising a new start up organization in the food and preserves. Economic systems are the mainly the structures which the concerned Government is used to follow. The explanation for the economic systems based on the allocation of resources is follows:
- Command Economic system: In this economic system Government is the central authority or their agencies who will direct the organizations and people in a country. It is kind of dictatorship of the Government in allocating the resources. Government decided the factor that is what to produce and how to produce and for whom to produce. The preferences of the Government are having high influence and if any one breaks the rule huge penalties are there. Government act as a coordinator between the citizen and organization by deciding the supply of the output of an organization based on the demand of the country. For example, in China, North Korea, Cuba used o have this type of economic structure. (Orr, 2011).
- Free market Economic system: It is the economic system where the producers and consumers used to determine the demand and supply. The interference of the central body or government is not there. It helps the organization to take decision based on their evaluation. Consumer’s preferences determine what to produce factors. The organization will take its own decision regarding the how to produce factors and lastly is for whom to produce it is the purchasing power and affordability of the customers. For example in USA free market economic systems used to follow for attracting more business organizations.
- Mixed Market Economic system: Mixed economy has both the central authority and also market demand. Both the public sector and private sectors are operating in this economic system. The resources like defence, fire, police and administration are controlled by the Government or Central authority. To protect the citizens there are laws framed by the Government like the Consumer protection, Food safety etc. The factor what to produce is mainly determined by the preferences of the consumers and also partially by the Government. It is the manufacturers or the business organisations who determines the how to produce factor in a cost reduction way and the Government has also the part on it. Lastly is for whom to produce factor where the affordability level of the consumers and partially by Government is used to decide. For instance the countries like UK, India is following this type of economic system in their country. (Samuelson and Nordhaus, 2015).
2.2 Assessment of the impact of fiscal and monetary policy on business organisations and their activities
Economic policies in a country are mainly determined by the Government with an objective to increase the growth rate. There are two policies mainly followed by the country which are fiscal policy and monetary policy. Fiscal policy is the strategy mainly adopted by the Government by considering the income and expenditure. On the other hand it is the monetary policy which is framed by the Central Bank of the country in order to keep the balance between the money supply in the country. (Friedman, and Woodford, 2010)
As per the fiscal policy, Government has make their spending around 748 billion pound at the end of the year 2015 and they have planned to maximise the spending around 760 billion pound. Apart from the spending Government has received 17.5 billion pound on the ground of taxes. With the increase in spending Government has taken several initiatives to make the youth of the country skilled and competent. UK Commission for Employment and Skills (UKCES) is a body which take care of the training issues. But for increasing the taxes on the ground of VAT that is up to 20% will increased the revenue to the Government but also affect the business of Morrison UK to operate as it will increase the operational cost. (Walker, 2012).
Monetary Policy is the mechanism adopted by the Central bank that is the Bank of England in UK for controlling the national debt, credit restrictions and interest rates in order to control the supply of the money. Monetary policy Committee (MPC) has been formed by the bank that will look after the economic situation of the country. For instance currently the committee has suggested to minimize the bank rate that is around 0.5% which will motivate the people of the country to take loans for purchasing anything they like. For an organization like Morrison UK it will be helpful because the customers will purchase more and that will maximise the sales volume. (Bekaert, Cho, and Moreno, 2010).
Workforce of the organization or other unemployed candidates will be more competent due to the increase in Government spending on the ground of skill training and development. Training will make the employees industry oriented where they can give the exact performances that are required. But increase in the VAT will also increase the operational cost for the organization. For that they will offer high prices to the customers which are a negative impact for the business. But the lower rate of interest will motivate the customers to buy more which is the positive impact of the Morrison UK
2.3 Evaluation of the impact of competition policy and other regulatory mechanisms on the activities of an organisation of your choice.
Competition policy and other regulatory mechanisms are there to control the activities of the organisation on the ground of competition and other activities which will ensure the safeguard to the employees and consumers. Healthy competition and sound practices are the objectives of the regulatory mechanisms. For instance Competition Act 1998, Office of Fair Trading, Health and Safety Act 1974, Companies Act 2006 are there.
Under the Competition Act 1998 the organisation cannot charged the excessive price, cannot make a comparative advertisement by showing the rival company’s product, restrictions in holding the supply for creating demand etc. On this perspective Morrison UK is following all the rules framed by the Government like maintaining a healthy pricing, supplying the products to the customers etc. The positive impact is the universal approach of the organisations can able to measure the real competition level. The organisation can also identify their issues with the services if the market shares declines. Office of Fair Trading Act 1973 focuses on the areas like integration, strategic alliances etc. It also looks after the exploitations done by the organisations. Regulatory mechanism like Food Safety, Consumer’s Protection is there where Morrison UK has to follow the labelling of the foods by mentioning its details. For consumer protection food standard is being maintained for safeguarding the customers. For delivering the satisfaction the organisations will be more conscious with this regulatory framework. One of the major aspect is the Health and Safety Act 1974 where Morrison UK has maintained the policy where the risk are identified in their store and certain precautions like fire, electrical equipment are been taken which ensure safety in the work place. The motivation will be high if the organisation can provide security to the employees and in turn the productivity will be high. (Gov. UK, 2014)
So we can observe that the legal framework and competition policy ensures the ethics in the business strategy which will save the customer from exploitation and also establishes a positive working environment in the organisation which will help the organisation to reach the desired target.
2.4 Explanation of how market structures determine the pricing and output decisions of different businesses.
Market structures determine the level of competition in the country. For a new organisation it is needed to understand the present market structure for formulating the strategy. The sellers present in the market, knowledge of the buyer, nature of the goods are the ingredients in the market structure.
- Perfect Competition: Perfect competition is the market structure where the pricing is mainly determined by the interaction of the buyers and sellers in the market. There are no restrictions for the organisations to make an entry. The consumers in this market are very much aware of the price level of the market. In this structure the organisation wants to attract more customers by making the price reasonable which we know as Market Penetration pricing. For example the prices of the ice creams of the local shops are equal and that may differ due to the features added to the product. (Teece, 2010)
- Monopoly: It is the market structure where there is single seller for numerous buyers. Basically the organisations in the monopoly structure enjoy the high profit as they are only the sole organisation selling the goods which do not have any substitutes. The seller used to determine the price by confirming the level of supply in a demand curve. For example British telecom who has the majority in the telecom circle or else we can say the Microsoft who are dominating the market in operating system.
- Oligopoly: Oligopoly is the structure where the sellers are few and the products are differentiated to a small extent. The level of the competition is low. Certain changes in the price will influence the customers for taking their decisions of purchase. Morrison UK is the organisation operating in this market structure where there are few competitors like Sainsbury, Asda, Lidl etc. Some changes in the price that is lowering the price of Lidle have influenced their purchase by increasing the sales turnover. (Klapper and Love, 2010).
- Monopolistic: Differentiated products are mainly sold by the organisations in this market structure where the marginal revenue and the average revenue will match. The sellers in this structure used to set their price as per their strategy thus there is a price differentiation in this structure. For example the mobile phone companies are differentiating their models with the price some is high some is re4asonable.
2.5 Illustration of the way in which market forces shape organisational responses using a range of examples.
Market forces are the influencing factor in a decision making process of an organisation. The market forces which are generally considered are as follows:
- Demand: It is mechanism that the consumers will pay a price of a good for a specific period of time. For example the pre-tax loss for Morrison UK was around 6.4 bn pound and the trend is showing that the demand is decreasing due to the lowest price supermarkets like the Aldi, Lidl. In these stores the customers are getting lowest prices than that of the other stores. There is a shift in the demand curve which is affecting the supermarket giants like Morrison UK. It is due to the change in the preferences of the consumers, influence of the substitution effect etc. (Mankiw, 2013)
- Supply: The law of supply states that when the price will high the supply will also high and it will be the ideal time for a producer to extract more revenue from the market. But it also can be happened keeping the price high will affect the demand and hence the supply will fall. The equilibrium position will be ideal point where the producer has to keep the trace in order to achieve the profitability. Based on the market demand Morison UK will fixed their supply. (Marshal, 2013)
- Labour Market: Labour market is depending on the opportunities provided by the organisation. More initiatives of the Government in the skill assessment will uplift the level of skill and also it will help the business to grow. The Current workforce in Morrison UK is skilled but they need to be more competent in order to beat the supermarket giants like Tesco, Sainsbury etc, and for those organisations have to enhance their training level to make them is competent. Apart from that certain flexibility will also increase the availability of labour
2.6 Judgement on how the business environment (political, economic, social, technical, legal and environmental factors) and cultural environments shape the behaviour of an organisation of your choice.
Business environment is considered to be the factors that used to influence the decision making process of an organisation. For example if we consider Morrison UK then we can analyse the external factors by conducting the PESTEL analysis in the following way:
- Political Environment: Government policies, political disturbances are the factors influencing the political environment. For instance the separation of UK from the EU will affect the business as they need to develop new policies for trading in the European countries. Too much political disturbances can affect the production process of the organisation and it can directly affect the business of Morrison UK
- Economical Environment: Economic factors govern the purchase decision of the customers. For example reducing the rate of interest in loan will encourage the people to buy more but increase in the tax that is VAT up to 20% will increase the operational cost of the organisation Morrison UK.
- Social Environment: Social factors involve the buying attitude of the customers, life styles they prefer etc. As per the convenience id concerned people are considering the purchase of items from the online and for that reason Morrison UK is offering online platform to the customers for considering the purchase. The demand for the convenience has increased due to the job schedules which are encouraging the customers towards online or packaged foods.
- Technological environment: Modern technology is also the deciding factor where Morrison UK has applied their CRM techniques via online in order to attract more customers by identifying their issues.
- Environmental: Environmental factors determine the sustainability of the business. Morrison UK has their recycling plant, follow the low carbon emission practices and also reduce the uses of paper in order to safeguard the environment.
- Legal: Based on the legal framework Morrison UK has the health and safety measures where the employees have been given training and certain precautions are also taken for safeguarding the employees and also the customers entering the stores.
- Cultural Environment: Culture is one of the important considerations where the organisation focuses deeply in order to attract more customers. Mainly the cultural environment is needed when the business houses are planned to move global. As the culture from one country to another is different that influences the organisation to study the culture. Multi-cultural parameters are followed in Morrison UK for attracting all the customers from the different cultural background. For instance in order to serve the Muslims halal meats is available.
This Global Factors Business Environment Assignment has clearly highlighted the effect of the business environment in a business. The different types of organisation that are mainly there are also shown with the example. The stakeholders are the important part of the business who is involved in the business by their power and influence. The organisation is very much aware of their stakeholders and to address them several strategies they have formulated. Market structures, level of competition can also be highlighted from this report. The significances of the international trade are also shown in this report.
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