Unit 1 Business Environment Assignment - GSK
Diploma in Business
Unit Number and Title
Unit 1 Business Environment
Different purposes of different types of organisations are identified. Different stakeholders and their objectives are assessed over the case study of GSK and AZ. The strategies to meet with the objectives are discussed. The responsibilities to different stakeholders of GSK and their strategies with marinating the responsibilities are discussed. The fiscal and monitory policies of EU and their impacts on GSK have been assessed. The competition policy and other regulatory policies are analysed. Different market structure, market forces, cultural environment forces etc and their influences are discussed.
1.1 Identify the purposes of GlaxoSmithKline(GSK) the National health service of UK(NHS), the Red cross and any cooperative society in UK that you are familiar with.
There are different types of organisations which are associated with the business event. These are:
- Sole traders
- Private limited Company
- Public Limited Company
- Joint venture (Teece, 2010)
The purpose of different organisations is different. These are:
- Purpose of Glaxo Smith Kline or GSK: there are mainly three priorities within the mission strategy of GSK. These are: to have balanced growth and increase the growth, reduction of risks and improvements of the long term financial issues. The main purpose of GSK is to grow a balanced business in global market and by simplifying the operating model deliver more products to the market. Return of the capital employed is also main purpose of GSK. (Teece, 2010)
- Purpose of NHS: The purpose of NHS is to deliver the care services for health and social care. Providing high standards services to the care users is the main priority for NHS. The NHS ensures the effective use of valuable resources in order to get profitable and best outcomes for the individuals, society and community in present and future perspectives. (Cantwell, Dunning, and Lundan, 2010)
- Purpose of Cooperative society: The cooperative has the purpose to make benefits for the individual who are attached to the cooperative. The profits are divided within the individuals.
- Purpose of Red Cross: The purpose of Red Cross is to prevent the sufferings of the human pain from the society and attached the volunteers and donators in this respect to the Red Cross. (Cantwell, Dunning, and Lundan, 2010)
1.2 Describe the extent to which GSK meets the objectives of its key stakeholders
The stakeholders are the groups or individuals who are associated with the business and the organisation. The stakeholders are of different types and their objectives are also of different types:
- External stakeholders: These are the important stakeholders who are impacting the business from the outside of the business premises. The customers and the government in the location where GSK has been operating the business are the external stakeholders.
- Internal stakeholders: The employees, staffs, board members and directives are the internal stakeholders. These stakeholders are related with the business operations and also the success of these operations. (Teece, 2010)
Different stakeholders of GSK can be approached through different techniques and planning for meeting their objectives:
- Customers: The customers are the prior stakeholders for a business to have success in the business. The customers chose the products of GSK for their high standard quality. The requirements of the customers should be met for achieving their objectives. GSK should consider health measures for the public while developing the products. The health requirements of the public can be achieved through making better approach in the health care services. (Cantwell, Dunning, and Lundan, 2010)
- Employees: The employees and their skills are the main aspects for the GSK in their survival. In order to meet with the objectives of the employees GSK should provide career growth in the organisation to the employees. HR planning should be made by include benefits of employees. The employees should be involved within the decision making processes. (Teece, 2010)
- Government and legal framework: Maintaining the legal policies of the government which are related to the pharmaceutical field should be followed by GSK along with the fiscal and monitory policy to meet the objectives of the government. (Laumer, Eckhardt, and Weitzel, 2010)
- Environment: Fair competitive measures, carbon footprint sustainability of the natural resource collection are the actions taken by GSK to meet the objectives of the environment associated groups. (Cantwell, Dunning, and Lundan, 2010)
1.3 Explain the responsibilities GSK has towards its key stakeholders and the strategies employed to meet them
The responsibilities of GSK are the most important factor in the business operations. The business of GSK should be run by maintaining the legal frameworks, social responsibilities, ethical responsibilities and employees towards the main stakeholders. (Xue, Shen, and Ren, 2010)
- Legislative framework: The legislative framework is the main responsibility for the GSK which should be followed within every business operations. The policies of the organisation should be developed on maintaining the government legislation and laws in different areas like production, management, employee relation, customer relationships etc.
- Social responsibilities: Corporate social responsibilities are associated with the business of GSK as they are serving the public. They provide quality to make better human life and enable the public to feel better, do well and live longer. (Xue, Shen, and Ren, 2010) They provide financial performances through annual report to make transparency in the employee and public relation. The organisation makes their commitments through their values, development of innovative products for customers and by creating supporting and inspiring working environment to employees.
- Contractual: The contracts are created by GSK with following legal processes and are maintained through strategic planning and business activities.
Different strategies to meet the responsibilities towards stakeholders:
- Employee: The employees have the objectives of- job satisfaction belongingness within the organisation, safety in working environment, decent scale of salary etc. In order to meet these objectives GSK has the responsibilities to provide proper working environment with flexibility, provide modern IT facilities, open communications, etc. (Laumer, Eckhardt, and Weitzel, 2010)
- Customers: The objectives of the customers are associated with the customer requirements in the products, good value over the prices etc. The GSK must provide proper values in the product offerings, lowering prices over essential health products etc.
- Government: Focus of GSK should rely on the implementation of the regulation and rules in order to maintain the health aspects in the products. (Laumer, Eckhardt, and Weitzel, 2010)
- Local community: GSK should perform ethical and social responsibilities towards the local communities’ clean energy solutions, carbon footprint, health of the local communities and helping them to have better access to the health and social care through medication etc are the responsibilities of GSK.
2.2 Taking into consideration the recession that faced UK in 2009 assess the impact of the UK government’s fiscal and monetary policies on the activities of GSK and AZ.
There are different governmental policies and laws within the business environment of UK. In 2009 UK market economy has faced with great recession which has made the scarcity of the valuable assets in the economical market. With the fiscal and monitory policy the government has been stimulating the national economies and also reduces the risks in the financial system. These policies are impacting on the activities of the business organisations like GSK and AZ. (Klapper, and Love, 2010)
- Fiscal policy: Through this policy the opportunities in the growth of the business has been increased. The fiscal policy is also developed by government to improve the national economic situation. Through the fiscal policy the government bodies are constantly monitoring the business spending of GSK and AZ. (Klapper, and Love, 2010) Within the fiscal policy the government has included the taxation and the spending policies. In order to make legal approaches in their business GSK and AZ have been proper steps in the business environment the organisations are marinating the taxation policies through paying proper tax for their business operations. Through VAT the government has been imposing the spending of the business. The supply in the economic assets is maintained through this policy by the government.
- Monitory policy: The supply of money and the rate of the business are monitored through the monitory policies. The saving rates and the interest rates are changed through this policy the inflation rates are also controlled through the monitory policy. The prices of the products and the related services which are offered by GSK and AZ are set by following the monitory policy. (Laumer, Eckhardt, and Weitzel)
2.3 With reference to the Enterprise Act 2002 and article 101 and 102 of the EU legislation, evaluate how the UK/EU competition and regulatory policies can or have impacted on the activities of the GSK.
The enterprise act 2002 has been formed by the UK parliament in order to make changes in the competition Law in UK in respect with the mergers and insolvency. These are referred as the regulatory mechanisms which are used by the give4rnment to encourage business opportunities and maintaining the competitive environment in the business of UK. (Laumer, Eckhardt, and Weitzel, 2010)
- Competition policy: Competition policy is set of regulations and rules which are followed by the organisation in the competitive market. The essential measures which are needed to be follow while stepping within the competitive market by the organisation are defined within the competition policy. There are different factors which are needed to be followed by the organisation in their competitive strategies these are done by following the competitive policy. Through maintaining the policy the entrants within the business environment are encouraged by the government. GSK and AZ have to follow the rules of competition Commission. Enterprise Act 2002 has developed CAT or Commission Appeals Tribunal which has been appealing for the organisation against the decisions of Competition Commission. The Enterprise Act has been taking actions against the anti-competitive behaviour of the organisations and also encourages profitable mergers. (Laumer, Eckhardt, and Weitzel, 2010)
- Trade policy: The competition policy is also attached with the fair trading. Through the enterprise act the office of fair trading has been made to efficiently moniti9ring the trading rules of government and business trade activities. GSK and AZ have to make fair activities in the trade.
- Reforms in insolvency: Through the purpose for implementing rescue culture for the organisations like AZ organisation the Enterprise Act has been changing the administrative processes. (Klapper, and Love, 2010)
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3.2.Using a range of examples, illustrate how the forces of demand and supply affects the pricing and sales decisions of GSK
Different market forces are there within the market to influence the organisation’s decision. Demand and supply are the two main factors within the market forces which affects the decisions of the organisations.
- Demand: the demand within the market refers to the customer demand for the product. Willingness of the customers to purchase the products of GSK is referred as the demand for the product of GSK. The amount of the product which has been placed by the customers of GSK is also an important factor in defining the demand of the products. By analysing the demand GSK can set their products’ prices. (Welford, 2013) GSK can set high prices for the products which are having higher demands among the customers.
- Supply: the supply of any product is also dependent on the demand of that particular product within the market. The supply is to make the availability of the products within the market in accordance with the demand. On having increasing demand of any product the organisation has to make increased supply. (Mithas, Tafti, and Mitchell, 2013)
With the increasing demand and unchanged supply of GSK products high quantity and higher equilibrium price can be seen by GSK. On the other hand with the increase of supply and unchanged demand lower quality as well as equilibrium price will be seen. The equilibrium of price is considered when the equality is maintained by supplying the quantity of demand wished by the customers and the quantity wished to be supplied by the organisation. On the reduction of the demand the price of GSK products can go up. With the increased demand the price of the products can be raised by GSK. (Welford, 2013)
(a) With the aid of the management tool called PEST/PESTEL judge how the business environment impacts /affect the behaviour of GSK
PEST analysis of GSK:
- Political environment: The political factors have significant impacts over the Pharmaceutical companies. Different government policies, politics of the nations and the political environment of the countries are associated with the political environment. As GSK has been making different approaches in the international market the organisation has to consider the political stability and policies of the government in different countries. (Mithas, Tafti, and Mitchell, 2013) In UK premises the supportive laws of government towards the pharmaceutical organisations have been providing opportunities of growth for GSK. Different laws like Tax laws, export import laws, environmental laws are the legal concern for GSK. Within the environmental approaches the carbon footprint, etc and related laws should be considered in the production by GSK to maintain the environmental impact. (Boons, and Lüdeke-Freund, 2013)
- Economical: Economical threats are associated in the business of the global companies. In the maintaining the business in global market GSK has to face different economic structure in different countries. Different interest rates, inflation rate, purchasing power of the buyers, GDP of different countries are also effective in case of GSK in this dimension.GSK is having advantages from the emerging markets.
- Socio- cultural factors: life style, culture, human behaviour, health factors in the society etc are the concerned factors within this dimension for GSK. As GSK has been making proper approaches in the social factors while approaching different countries, the organisation is having fewer threats from these factors.
- Technological factors: as GSK organisation has been using R&D in their business operations for better approaches the technological factors are effective in the research project. Availability of IT system in the research works are needed for GSK. (Duffy, and Jonassen, 2013)
(b) Judge how the cultural environment determines the behaviour of GSK
The cultural environment which determines behaviours of GSK consists with the internal environmental factors. Within the cultural environment of GSK there are different factors like the behaviours of the employees, employee relations, approaches of GSJK towards the employees, etc are associated with the behaviours of GSK.
- Culture and values: GSK has been motivating their employees through their values, integrity and transparency within the culture. (Davenport, and Beck, 2013) Strong leadership within the employee relations, individual development and reward system for the benefits of the employees will increase the GSK ethical behaviour.
- Integrity: The performances of the GSK have been committed towards the integrity. Integrity in action has been the enforced within every level of the cultural environment within the business of GSK. GSK has been following the legal and fair approaches in their employee and customers relations. (Becker, Kugeler, and Rosemann, 2013)
- Transparency: In order to maintain their global business approach transparency has been made integral within the cultural environment of the GSK. Fair and honest approaches within the internal environment are also representation of the challenges in maintaining the organisational behaviours. (Becker, Kugeler, and Rosemann, 2013)
4.1 Discuss the significance of international trade to GSK and AZ
Within the term international trade different export and import activities are associated along with approaching to different markets. GSK and AZ have been operating in the global market through international trade. With the international trade the organisations are extending the customer base. Expansion of the business is also done through the international trade. With the international trade the organisations behaviour are having better opportunities in the market. By offering better products and making innovation in the products in accordance with different requirements of different countries and regions GSK and AZ are making their international trade. After Johnson and Johnson and Pfizer GSK has placed itself in the third place within global market as the third largest Pharmaceutical Company. (Davenport, and Beck, 2013)
GSK and AZ have made a wide range of products in associated with different disease in different areas. The product development model of GSK and AZ is based on the major disease areas and the current conditions of the health of these societies. (Becker, Kugeler, and Rosemann, 2013)
By offering large number of products in oral health care, nutrients drinks, other medicines like Gaviscon, horlicks, Sensodyne the organisation has been approaching large consumer base indifferent regions. These products are developed on common diseases. AZ and GSK are currently making medicines for the broad range of world’s most common diseases such as respiratory, oncology, infectious diseases etc. to approach other countries. Through international trade the organisation can have better access to the other resources which would be needed for production. The availability of different resources also can be extent through the international trade. (Davenport, and Beck, 2013)
4.2 GSK and AZ are multinational companies operating in many parts of the world. Analyze how global factors can affect their activities (Consider, political, economic, social, technological, ecological and legal factors in the global context but not local)
There are different global factors which are associated with the operations of the multinational business.
- Political factors: Different laws in the global market and the current stages of political dimension has been affecting the multinational companies like GSK and AZ. In order to do trade activities the GSK and AZ has to face different laws in different countries while doing import and export of the business. Different political situation such instability in different countries will make impact over the business of GSK and AZ. (Davenport, and Beck, 2013)
- Economic: Stability in the economy within the global market is required. Unstable economic conditions in the global market impact on the economic market assets of individual countries. Stable economic conditions within the global market are necessary for providing mutual beneficial approach to the customers.
- Social: Social trends in the global situation has been important to be analysed by GSK and AZ. Current food habits, life styles etc which are enforcing obesity, chronic diseases worldwide must be researched by these organisations. In many parts of the world the society has been suffering with the obesity and also with HIV. (Davenport, and Beck, 2013)Considering these, GSK and AZ should develop their medicine. (Hill, Cronk, and Wickramasekera, 2013)
- Technological: Current globalisation trends within the worldwide market influencing the business operations. The communicational aspects should be improved by GSK and AZ. With technological adaptation within the communicational system the organisations can approach different customers in worldwide basis.
- Legal factors: legal factors are greatly associated with the international trade. With different legal system and policies GSK can face threats in the international trade.
- Ecological: Currently global warming, break out of harmful diseases, scarcity in the natural products for medicines are imposing threats in the business of GSK. (Becker, Kugeler, and Rosemann, 2013)
4.3 Evaluate how the policies of the European Union, including the ones mentioned below, can or have impacted on the activities of GSK and AZ
Different EU policies are impactful in the business of GSK and AZ. With the changes in the policies EU impact over the business activities of multinational companies.
Border trade is the flow of services and products which are exported and imported across the international borders. Crossing the broader would be positive in expanding the business activities. Excise tax and Vat are associated with the boarder trade. In the reduction approaches of the barriers in cross boarder business activities, the lower excise tax over the pharmaceutical products would be efficient for doing business by GSK in profitable aspects. With low VAT such as in Spanish boarder the import and export cost can be reduced by GSK and AZ. (Hill, Cronk, and Wickramasekera, 2013)
The trade barriers are associated with every product which is traded. Non discrimination and reduction of the trade policies would impact on the market access and on the national welfare. The removal of the discrimination would impacts on the equilibrium of the prices in long run measures of GSK. The removal of the policies can negatively impact on the organisation as string competition policy can foster free entry resource allocation etc. (Becker, Kugeler, and Rosemann, 2013)
Technical trade barriers are associated with the EU policies and impact on the freedom of the movement of the products. The policies of health, safety and environment are harmonised which are impacting on the products of GSK. In March 1968 EU had taken certain steps in harmonising the regulations which areconce4rning pharmaceutical products. With the changes in the approximation of the technical and safety standards consumer protection measures would be imposed in the business activities and products of GSK. (Davenport, and Beck, 2013
Explain the three economic systems (Free market, command and mixed) and discuss why you think one of them allocates resources more effectively than the others (AC 2.1)
- Free market: Free market has been developed over the power of the demand and supply of products. Within this economic system there is no government intervention.
- Command economy: Within the command economy the government has total control over the pricing of the products and services as well as on the production. The types of goods and services which would be produced are decided by the government. The distribution channels which are associated with the business are also decided by the government in this economic system. (Hill, Cronk, and Wickramasekera, 2013)
- Mixed economy: Within this economic system there are both the features of command economy and free market. This economy is partially controlled by the government and the other parts are based on the ratio of demand and supply. Within this economy public and private sectors are involved. (Becker, Kugeler, and Rosemann, 2013)
With the free market the resource allocation has been dependent over the customers. Depending over their demand the supply of the products is done. Through centralised planning the resources are allocated by the government in the command economy as they decided what to produce and through which components. In the mixed structure the resources are allocated in accordance with the demand and supply. (Duffy, and Jonassen, 2013) The private sector allocates the resources through analysed demand and supply graph and public sector allocates resources through marketing planning. Within these economic structures the mixed economy has been efficient for the resource allocation as there is resource allocation is dependent over customers’ power of buying and the customer welfare as well as business environment factors are maintained through the command of government. (Hill, Cronk, and Wickramasekera, 2013)
Explain how prices and output decisions are determined in a perfect competitive market, Monopoly, monopolistic competition and Oligopoly. (3.1)
- Perfect competitive market: In this market there is large number of small buyers and sellers. The entry and exit in this market is comparatively easy. There is no market power in this market. The firms are offering similar products. Demands of the products are impacting the output decisions the purchasing amount of the customers is the key indicator of the pricing decisions. (Boons, and Lüdeke-Freund, 2013)
- Monopoly: Within this market structure there is one market firm. There is no close substitutes or close competitors within this market and there is no price competition. The market power is absolute and the government regulation is existed. As there is only one organisation the pricing decision has been obtained by the organisation. As there is only one organisation or producer the demand of the products are always higher in this market. This high demand leads to the output decisions. (Becker, Kugeler, and Rosemann, 2013)
- Monopolistic competition: There are different small organisations. The production is dependent on the differentiation of the products. Non-pricing competition is significant in this market.
- Oligopoly: The small and large firms are mutually dependent on this market. There are different brand which offer similar products. The demands of the market placed by the buyers are influencing the output decisions. The price decisions are influenced by the buyers. (Becker, Kugeler, and Rosemann, 2013)
Every organisation has been operating within business environment. Through analysing the current situation within the market the business can operate in successful way. There are different purposes of every organisation. Different types of organisations made different purpose within their products. Through meeting the objectives of the customers and other stakeholders the business can be run with enhancements approaches. Meeting the objectives of the stakeholders and also maintaining responsible approaches within the business operations is essential. EU develops different policies over the trade and the business activities within the trade such as reduction of the trade barriers and policies can influence international business.
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