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Diploma in Business
Unit Number and Title
Unit 1 Business Environment Assignment – Primark
Business environment includes all the surrounding of the business that affect their functioning and behaviour. This unit focuses on the study of various factors of the business environment that leads to change in the behaviour of the business accordingly. This unit focuses on discussion of the type and purpose of the organisations in UK. Further, it discusses about various stakeholders that are associated with the organisations and the responsibilities of the organisations towards them. It also discusses about market forces like demand and supply and how they affect the decisions of the organisation. This unit also throws light on the perspective of change in demand and supply on pricing. Business environment of the organisation is formed by global factors that will be discussed in this unit briefly. The last part of this unit discusses about the impact of EU legislation on UK based businesses.
Not all the organisations in the country work similarly. They have the categories according to various factors. One of the factors is the ownership of the organisation. According to ownership, organisations have been divided into various categories. Some of them are discussed below:
This case is about a private limited company known as, Primark. Primark is a retailer company that serves its customers by acting as the mediator between the manufacturer and the customers.
Purpose: Primark is a retailer in fashion business that does not produces the products with themselves but depends on manufacturers for that. The core values of the company believe in ethical framework of the business. These core values are
These ethical practices by the company defines it pure objectives. Corporate Social Responsibility is the area of work that has also been focussed by the company. (Aras and Crowther, 2011)
Type of organisation
Public limited company
Marks and Spencer’s
The vision and mission of the company states the purpose of the same. The vision of M&S suggests that company wants be the standard for all other similar type of organisations. Mission of the company is to provide value products to the customers and introduction of “plan A” by the company is about commitment towards reduction of waste and creating sustainability.
The British Red Cross
This charity firm is purely into provision of health and support to the population of Britain. The company aims at providing help to the people in emergency. The values of the company suggest that they are courageous, dynamic and compassionate towards helping others.
Co-operative bank UK
These banks are specialised in helping the co-operative societies and firms to enhance their businesses.
Stakeholders: Stakeholders are the supporters who support the business to exist. They are associated with the organisation in one or the other form. The practices of the organisation affect its stakeholders and vice versa. This is the reason they are very important for the functioning and existence of the organisation.
Types of stakeholders:
As far as Primark is considered, this organisation has internal as well as external stakeholders. Internal stakeholders are the one who are closely associated with the organisation like shareholders and the employees. The external stakeholders are associated relatively less closely to the organisation. These consist of customers, suppliers and workers in the case of Primark. These stakeholders have the give and take relationship with the organisation. Stakeholders like shareholders provide funds to the organisation and organisation provides the profit in return. Therefore, both the parties remain in benefits. All the stakeholders have different needs and Primark has different responsibilities towards them. (Avadhani, 2010)
Stakeholder’s objectives that needs to be met:
Every organisation has some of the responsibilities associated with them. The organisation is a single entity that is made by efforts of so many people. These are known as stakeholders of the organisation. The organisation is not only responsible for those stakeholders but they need to consider some of the factors of society in their functioning. The major responsibilities of the organisation involve management of conflicts, stakeholder’s interest and satisfying the objectives of the stakeholders associated with the organisation.
There major types of responsibilities are:
Some of the legal factors are also associated with the responsibilities of the organisation. Organisations need to make the policies considering all the legislations that include discriminatory Act, environmental Act etc. Ethical considerations are also important for the organisations to perform their responsibility tasks. (Friedman and Miles, 2006)
Responsibilities of Primark:
Strategies of Primark:
Primark is the company that sticks to its values and beliefs in order to be responsible. The first strategy of Primark to be responsible towards its employees is determined by its values. The value of the company suggests providing fair and equal treatment to all the employees. Another strategy of the company is to be ethical in practices and behaviour. The company is engaged with many CSR activities in order to fulfil their responsibilities towards the society. The HER project of the company focuses on educating the women workers of the company about the important of maintenance of health and hygiene. This education can be transferred to the families of these workers and in turn benefits the society. (Businesscasestudies.co.uk, 2016)
Every country adopts a pattern of economic system in order to allocate the resources. Economic system of the country is the framework that determines the pattern of the resource allocation and many of the business decision makingprocess of the organisations. There are majorly there types of economic system that have been discussed below by the reference of different countries:
Planned economic system is also known as command economic system as it based on the command of the central power of the country. All the decisions regarding the production of an organisation is taken by the government agency. Cuba is the country with this type of economic system because the central union of the country controls most of the organisations in Cuba (Rosefielde, 2013). It is the country with communist society. 71% of the business of the country is owned by the public sector and private sector contributes much less in the business economy. There are several advantages and disadvantages of this economic system:
It is the economic system that deals with involvement of business strategy as well as the government. The system is partially commanded by the government with limited interference. M&S is the company that is partially affected by the government in framing the general policies of the industry while the organisation like NHS are government owned organisations but coordinate with many private companies to achieve the objectives. The advantages and disadvantages associated with the system have been discussed below: (Kwan, 2013)
Free market is the economic system that supports the deals between the customers and the producer without any interference of the government. The factor that only affects the deals would be demand and supply of the product. In this case, all the resources are controlled by the private organisations. It has been identified that 70% of the GDP of China is due to the contribution of the private owned companies. (Liu, 2009) The market of China is not very free but it is moving towards it and that is why it is said to be under transitional economic system that is moving from command to free economy.
You are required to assess the impact of fiscal and monetary policy on the following type of businesses
Political environment and change in UK government policies have their impact on the businesses in UK. Different policies affect the business in different ways.
Farming is the business of agricultural products. Most of the farming business takes place on rural areas of the country. In UK, 69% of the total land of the country is used for agriculture purposes and engage 1.5% of the country’s workforce.
Impact of monetary and fiscal policy on farming:
Expansion of the fiscal policy means fewer intakes of the taxes by the government than the spending by the same. This affects the businesses like farming in positive way. as the government spending increases, it leads to reduction of tax rates and higher income of the people. It also helps in increasing the profit after tax of farming business.
As far as the monetary policy is concerned, relaxation in the policy reduces the interest rates and increases the liquidity of the money in market. Low interest rates results in easier credit facilities to the farmers as most of the corporate banks also reduces their interest rates. Easy availability of loans facilitates the farmers to invest more in business. (Morgan, 2005)
Contraction in the fiscal policy by the government results in increase tax rates and low government spending. This somehow affect the housing purchasing power of the people and affect the housing industry in negative way. Increase in interest rates results in tightening of monetary policy in the country. This leads to decrease in money flow in the market and makes it difficult for the people to take mortgage loans. Since, the housing industry depends on mortgage loans, as buyers cannot afford to pay such big amount without taking loans. Increase in interest rates indirectly reduces the housing business.
Every organisation needs a motivation to innovate and perform better. Competition is one of the factors that force the organisations to compete with each other. Competition allows the companies to come up with improved products. Competition in any industry raises the attractiveness of the industry. Competition policies in UK stimulate the organisations to conduct fair practices in the business with improvement in the products simultaneously. The main aim of this policy is UK is to create health competition environment among the organisations. Some of the competition polices have been discussed below:
The competitive policies need to be regulated by some of the regulatory authorities in UK. These authorities have the responsibility to investigate about any of the illegal practices related to competition. Some of the regulatory authorities have been discussed below:
Other main regulators are:
The industry that is facing monopoly in UK is the industry of supermarket. It has been observed that few of the firms like Tesco, ASDA and Sainsbury were dominating the industry. This monopoly was restricted by OFT decision of stopping Tesco from purchasing Safeway. This practice supported so many small retailers like Aldi and Lidl to raise their businesses in the industry.
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Market structure is the term that determines the structure of the market according to the level of competition existing. This structure has a great impact on the pricing and output decisions of the organisation. The structure of the market differs from difference in the industry because it is not necessary that all the industries in a country have equal level of competition in them. The level of competition can be identified by the number of existing firms and the barriers to the entry of the new firms in the industry. (Adekola and Sergi, 2007) These are the factors that determines the attractiveness of the industries and hence the level of competition in them. Some of the market structures have been discussed below with the examples of various industries from UK:
Example of industry
Impact on pricing and output
It is the situation, where many number of buyers and sellers deal with each other in the market. In this situation, products are homogenous in nature and are not much differentiated. This is the reason why one of the sellers cannot dominate over others for long period. The entry and exit of the new firms is also not much difficult and thus this industry has a fierce competition among the organisations.
In UK, the major industry that falls under this category is agricultural industry. This is because the industry has homogenous products. The brand value and the image of the organisation have no great effects on the choice of the buyer.
Firms are price takers in this case because they do not have any control over the price. Due to homogeneity in the product, buyers do not have preferences for the firms.
Example of industry
Impact on pricing and output
It is the situation where a single firm rules over the whole industry. The competition is nil under this condition. As far as the entry and exit barriers are concerned, they are very tight in this case.
Network Rail is the only one that is responsible for upgrading and maintenance of UK rail network.
In this situation, almost all of the products supplied in the industry are formed and produced by one or two of the big companies. They act as the price makers as they can control the supply in the market. The product formed by them is so much differentiated that other products cannot be the substitutes for them.
Example of industry
Impact on pricing and output
It is the situation where small number of large firms dominates the market. The firms that are leading in the industry generally produce either similar or identical products. There are significant barriers in the industry.
In UK, the industry, which is largely affected by this situation, is supermarket. The firms like Tesco, ASDA and Sainsbury are leading the industry with the variety of products. There are lot of other small retailers that contributes in the industry but some of the big firms dominate the industry.
Price of the products remains stable. Some of the price making power remains in the hand of the leading firms. Attaining competitive advantage by brand loyalty is very essential to compete with the competitors.
Example of industry
Impact on pricing and output
Duopoly is the condition where exactly two firms lead the market. Even when all the small businesses are present but both the leading business fights amongst themselves.
Airline industry in UK is facing the same challenge. Airbus and Boeing are two of the aircrafts that are competing with each other.
The businesses that are dominating the market act as the price makers and control the supply as well.
Market forces are those factors of the market that affect the organisation’s decision of output and pricing. Demand and supply are the two main forces that affect the organisational decisions. Study of both these factors let the organisation know about the situation and positioning of the product in the market. (Aras and Crowther, 2011)
Supply: Supply is the amount of product or services that a producer is willing to sell in the market. It is related to the willingness, and ability of the producer as well as some of the other factors like production rate, logistics etc. As far as the law of supply is concerned, it argues about the relationship between supply and demand as well as about the relationship between supply and price.
Supply curve:It is the curve that identifies the change in supply with the change in price and quantity of the product.
The above curve suggests that as the price and quantity of the product is increasing, there is a simultaneous increase in the supply. There is a direct relationship between the price and supply of the product. As the price of the product increases, producers start supplying more of the product in the market to generate more revenues. They decrease the supply of the products with declining prices to increase the availability of the high price products in the market. (Avadhani, 2010)
Supply demand curve:
Schedule states the price, demand and supply of coca cola.
The above diagram has been made following the schedule. It states that as the price of coca cola rises, it leads to decrease in the demand of the product. It has been observed that price and supply have similar increase.
This curve suggests the relationship between the supply and the demand of the product. It is identified that both are in inverse relationship with each other. The equilibrium is the state where company earns the maximum profits as the demand and supply complements each other at this point. (Cherunilam, 2010)
Demand:Demand is the willingness of the people to buy the product. It is the amount of product that is required by the buyers in the market. Demand of the product can be varied by many factors. Some of the factors are:
The law of demand suggests that as the price of the product increase. The demand of the product decreases. This results in decline in the purchase of the product.
Demand curve:It is the curve that shoes the relationship between the demand and the price of the product.
This suggests that it is very necessary for the organisations to research out the effect of demand and supply of the products. The study of demand and supply affect the pricing of the products. Organisations like McDonalds earn profits because of the market research they do. They are one of the businesses that supply the products according to the demand to restrict overstocking and its cost. (Mcdonaldsindia.com, 2016)
Culture in an organisation:Culture of the organisation involves the beliefs and values of the organisation as well as the changes made according to the external cultural environment of the business.
Any organisation or business changes its behaviour according to the circumstances. This is because the behaviour of the business organisation is majorly affected by the change in the internal and external environment. Organisations need to behave accordingly to compete with the competitors in the market. Restriction to change in the organisation can affect the business in negative way.
Business environment of the organisation consists of many factors.
These factors include:
This can be explained by studying the effect of the environment on the organisation like Marks and Spencer’s. The company is chosen because it serves the customers in UK as well as in whole of the world. It is a retailer organisation that has its businesses in food and clothing. As far as the political condition of UK is considered, it is very stable and hence supports the businesses like M&S to grow. EU legislations also have some of the effects as UK falls under European Union. It facilitates the company to trade freely between the countries that are the part of EU. Economical condition of the country is also stable and people have very high purchasing power. This also affects the company in positive way. M&S is the company that generally absorbs the new technologies. As the competitors like Tesco and ASDA came up with the online business, M&S also started the business online. This suggests that technological advancement in the environment affect the company business and behaviour pattern. (Corporate.marksandspencer.com, 2016)
Cultural factors or environment also plays a very important role in affecting the behaviour of the business. Cultural factors involve:
M&S is the company that have changed its collection of clothing from formal to designer just for the sake of the cultural changes among the customers. As there was a change in the need of the customer, company behaves accordingly.
International trade refers to the business across the borders. It is the factor that supports the organisation to provide a broader platform for the business. International trade is important in order to import and export the products. This contributes a lot in the country’s economy. More of the exports from the country increase the revenue of the country. Every organisation want to reduce the production cost of their product and thus this is important for them to extract the raw materials from the cheapest possible place. This requires the organisations to do international trade and building relations with the foreign countries. Some of the significance of international trade for UK companies has been discussed below:
The global factors are those factors that are related to the changes in the world environment that affects the business. Many UK based companies are functioning outside the country and have international trade relations with foreign countries. Any change in the policies business and business environment of the countries has great impact on the functioning of many of the multinational firms of UK.
It has been observed that large number of imports and less number of exports in UK affects the businesses and the economy of the country in negative way. This issue is because of the competitive advantage of China and India having low labour cost. The import from these two countries suppressing the international trade benefits of UK businesses. (Morgan, 2005)
European unions involve 28 countries in the union along with UK. It is the union having legislations that is same for all the countries that are the part of this union. This facilitates these countries to trade freely among themselves. The policies of this legislation have great impact on UK businesses either in negative or positive way. They need to transect the currency in Euro by contacting European money union before trading with any other country of EU. There are no trade barriers between these 28 countries. Various policies affect the UK business and somehow lead to BREXIT. (Peng, 2009)
Some of the policies of EU legislations supported the UK businesses while some were restricting their growth. This is the reason most of the people have voted for BREXIT. BREXIT is the term made from two words. These words are Britain and Exit. It refers to the withdrawal of UK from the European Union.
Business environment is very important subject to be understood in order to adapt the changes and taking many business decisions. It is not the national but international environment of business also affect the functioning and behaviour of the companies in UK. International trade is a very important factor to enhance the businesses of the UK organisations. This is because most of the multinational companies depend on import and export relationships. Many global factors also affect the functioning of the businesses. UK is the part of EU, thus all the policies of EU should be followed by the UK businesses. Some of the EU policies affect the UK businesses in positive way while other became the reason for BREXIT.
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