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Unit 1 Business Environment Assignment copy – Primark
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.
1.1 Identify the purposes of different types of organisation.
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:
- Limited company: Limited companies are owned by shareholders. Private limited companies do not offer their shares to public while public limited company offer the share to the public also.
- Sole traders: Sole refers to single. This suggests that sole traders are the organisation run by single owner. These organisations function generally at small scale.
- Co-operatives: The people from the public associate and form the company for serving the public only. (Adekola and Sergi, 2007)
- Franchise: It is the type of organisation in which, owner company grant permission to the local company to run their business in that area.
- Partnership: It is the form of organisation where two or more than two people share the liability and profits of the organisation and act as partners.
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
- It is a people oriented organisation
- Focuses on maintaining the ethical work environment for the employees.
- They are not only responsible for their employees but focuses on educating the workers working with their manufacturers.
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.
1.2 Describe the extent to which Primark meets the objectives of its different stakeholders.
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:
- Shareholders:Shareholders are the stakeholders that are most closely associated with the organisation. Shareholders of Primark have some of the shares of the company with them. They are the internal stakeholders.
- Objectives:Shareholders are the one who invest capital in the organisation and the organisation needs to return appropriate amount to them.
- Employees:The people who work in different department of the organisation are known as employees. The company owners and Board of Directors recruit these employees. Every process of the organisation requires the man force to be conducted.
- Objectives:Employees work for the organisation and want job satisfaction in return. It is the responsibility of the Primark to provide proper working environment and job satisfaction to the employees.
- Suppliers:Primark is the organisation that depends on manufacturers for the products. They do not manufacture the products themselves. These manufacturers act as the suppliers for Primark.
- Objectives:Primark is responsible for making fair deals with the suppliers. The contract should be signed with the suppliers and the processes should be conducted accordingly.
- Customers:Primark is the retail organisation and focuses on customer’s satisfaction. Customers are the end users of the products sold by Primark. They are the one who drives the revenue of the organisation.
- Objectives:Customer needs satisfaction from the product. They expect from the organisation to provide them with the products that are worth for the amount they are paying. Primark have to satisfy the customers with their product specifications and the value. (Ditlev-Simonsen and Wenstop, 2013)
- Workers:Workers are the people who work with the manufacturing companies that supply the product s to Primark.
- Objectives: Primark is responsible for the safety of those workers.
1.3 Explain the responsibilities of Primark as an organisation and the strategies employed to meet them.
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:
- Towards stakeholders: All the stakeholders like shareholders, employees, customers, suppliers etc have different objectives to be associated with the organisation. Primark has the responsibility to fulfil those objectives in return.
- Legislations: Organisations in UK are bound to make the policies according to the legal legislations framed by the government. It is the responsibility of Primark to frame all the policies considering the legislations of the country.
- Towards society: Society is major part to be considered. All the organisations have the main responsibility towards the organisations. CSR is the most important practice that focuses on returning something to the society by the organisations. Primark engaged in many CSR activities to return to the society. (Hill, 2008)
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)
2.1 Different countries operate different economic systems to attempt to allocate resources effectively. Research and explain the type of system operated in the following countries and reasons why you think they follow these
- United Kingdom
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:
Cuba: Planned economic system
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:
United Kingdom: Mixed economy
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)
China: Free or transitional economic system
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.
2.2 In the UK the Chancellor of the Exchequer and the Bank of England plays a significant role in regulating the economy. The tools used by them are referred to as Fiscal and Monetary policies respectively.
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.
- Chancellor of the Exchequer: Chancellor of Exchequer is the head of the treasury in UK. He is responsible for all the financial and economic matters of the country.
- Bank of England: It is the central bank of UK that is responsible for maintaining the stability in economy of the country.
- Fiscal policy: Fiscal policy deals with the tax rates and the government spending of the country. It is the policy that provides tools to the government to make the balance between the spending and earning of the government in the country. The variation in the intake and expenses of the money by the government affects the functioning of the organisations in that particular country. (McSmith, 2016)
- Monetary policy: Monetary policy is the framework that determines the situation of flow of money in the country. It is related to the change in interest rates that affect the borrowing and lending of money. (Peng, 2009)
Impact of these policies on businesses:
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.
2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organization.
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:
- Privatisation: It refers to the policy related to transfer of ownership.
- Abuse of market monopoly power: This is the type of competition policy that focuses on reduction of the monopoly power from the country, restricting the merger and acquisition of the organisations. (Rosefielde, 2013)
- Regulation of anti-competitive behaviour: Anti-competitive behaviour refers to the activities of the organisation that limits the competition in the industry. These activities have been penalised by the government.
- Reduction in import tariff: This practice results in reduction of the tariff on important that supports import of the product by the organisations at cheaper rates.
- Market liberalisation: Liberalisation in the market refers to the introduction of policies in the industry that are facing the monopolistic competition.
- Collusive behaviour: This occurs when firms mutually fix the prices of the products. This helps the companies to make higher profits by exploiting customers. This is illegal practice under law and needs to be checked by OFT.
Competition policy regulators in UK:
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:
- Office of fair-trading: OFT helps in investing the conditions of monopoly in the industries and take the corrective actions to them.
- Competition commission: This regulates all the policies of the competition in the country.
Other main regulators are:
- OFTEL for the telecommunications market, and especially BT
- OFGAS for the gas industry
- OFWAT for water
- OFFER for electricity.
- OFCOM for TV, radio and video
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.
3.1 Explain how pricing and output decisions of businesses is determined in the following market structures.
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.
3.2 Illustrate the way in which market forces (demand and supply) shape organisational responses using a range of examples.
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:
- Choice of the customer
- Change in the culture
- Technological change
- Change in the price
- Purchasing power of the customers
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)
1.3Judge how the business and cultural environments shape the behaviour of a selected organisation.
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:
- Political environment
- Technological environment
- Social environment
- Economical environment
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:
- Organisational structure
- Social behaviour
- Lifestyle of people
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.
4.1 Discuss the significance of international trade to UK business organizations.
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:
- Large audience to serve: International trade allow the companies of UK for larger exposure of the market of international countries. This enhances the business of the company as well as its revenue and image. (Hill, 2008)
- Reduction of production cost: Most of the UK companies try to import the raw materials from the countries where it is cheaply and easily available. This in turn helps the companies to decrease their production cost. McDonalds is the organisation that depends on US for its onions and on Turkey for the dill pickles they use in their hamburgers. They need to maintain the quality and standard of the product so; it is not possible for them to make any modifications in the import deals of the raw materials. (Mcdonaldsindia.com, 2016)
- World unity: International trade not only enhances the revenue of the businesses but also supports the countries to make good relations with each other. Building of relations results in unity of the world market. EU market is the single market that consists of 28 countries. UK is one of them. These countries are allowed to trade freely among themselves with standard policies framed by EU legislations.
4.2 Analyze the impact of global factors on UK business organisations
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.
- International trade and UK economy: UK economy is very much dependent on the companies that trade internationally. It is because UK has the mixed economic system. Therefore, the economy of the country gets affected according to the change in the environment of other countries that are involved in international trade with UK.
- Multiculturalism in workforce: Increase in international trade results in multicultural workforce in the UK organisations. This has its advantages as well as disadvantages to the country businesses. Multiculturalism supports diversity but somehow became the reason of conflicts as well. (Kwan, 2013)
- Global growth: There are many global factors that affect the business such as, competition, demand of product in other countries, imports and export duties etc. This develops the risk in international trading. Protectionism is the policy that supports the organisation who wants to do international trade by regulating the activities of fair trade and competition between the two companies based at different location. World Trade Organisation is the one that is responsible for ensuring that all the activities related to international trade are conducting fairly and smoothly.
- Climate change: Business of companies that produce seasonal products get affected by the change in climate of the place.
- Immigration: Immigration refers to the migration of people to live in foreign country. Immigration of people in UK affects the businesses there. It increases the range of customers for the companies as well as companies need to make innovation in the products and their strategies to serve the diverse population.
- Technology: Advancement in the technology affects the practices of the organisations. Organisations need to update their practices and strategies according to the new and latest technology available to target the customers as well as to compete in the market.
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)
4.3 Evaluate the impact of policies of the European Union on UK business organisations
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)
- The environmental policy: This policy suggests that there is similar trading environment for all the countries under EU. This result in presence of standard environment for the countries to trade with each other, this makes the competition fair.
- Free movement labour legislation:This is one of the biggest reasons that most of the people voted for BREXIT. According to this policy, UK government is not at all involved in the practice of migration of people in UK work.
- Child benefit for migrant workers:According to EU legislations, all the migrant workers have the right to claim for child benefits even they are not living in that country.
- EU liberalisation policies:This policy supported the UK businesses by import tariffs. According to the policy, there is no custom tariffs charge for the local producers on the imports that are coming from the countries of European Union. (Rosefielde, 2013) According to one of the policies of EU, the merger of the two companies can only be possible if the turnover remains below the certain amount.
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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