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Diploma in Business
Unit Number and Title
Unit 1 Business Environment Primark Company
Primark is a private company which has different purposes towards the market. Business environment primark company also tries to fulfill the expectations of its stakeholders by adopting various strategies. The Government’s fiscal and monetary policies vary with different industries like farming and housing. Competition policies which are prevalent in the UK protect small companies and consumers from getting exploited. Companies are also getting benefitted from the international trade which is making people aware about different international brands, thus, helping the companies to earn higher revenues.
Primark is a retail company dealing in clothes and with its headquarters in Ireland. It is a subsidiary of the international group known as Associated British Foods or ABF Group. Primark supplies customers with fashionable clothes through its large number of stores of over 238 all across Europe and UK. It is a profit-making company and is a part of the private sector. This retail company is known worldwide and has a brand value globally. Different organizations have different objectives because they deal in a diverse range of products. One common purpose has been identified which is, the profit making motive of almost all the companies. The company not only provides men and women with fashionable clothes but also offer beauty products, home ware, confectionaries and other products. The main purposes of Primark are as follows:
Following are the examples and purposes of organizations which belong to the following categories:
A large number of people are associated with each and every organization and are known as stakeholders. Stakeholders can be grouped as internal and external stakeholders. Managers, employees, investors, etc. form a part of the internal stakeholders while the external stakeholders comprise of suppliers, consumers, government and so on. The stakeholders have various expectations from the functioning of a particular firm because of which the management develops policies in order to meet them which holds true for Primark as well:
Primark like other organizations hold certain responsibilities towards the government, stakeholders and the environment. It also develops several strategies in order to meet these responsibilities.
The responsibilities of Primark are as follows:
The strategies that are employed by Primark to meet the above responsibilities are as follows:
There are various types of economic systems which operate in different countries for effective allocation of resources. The following economic systems are found in most countries:
The impacts of both the fiscal and the monetary policy on farming and housing are as follows:
Competition policy includes the different opportunities that are given to the organizations for their economical stability. Regulatory mechanisms limit the activities that can be performed by a particular company while doing its business. This is mainly done to prevent monopoly in a market and to encourage free enterprise. A very well known pharmaceutical company in the UK is the GlaxoSmithKline (GSK). Like most other companies, the management of GSK aims to achieve higher profit by selling medicines. It does not have the power to perform monopoly in the market because of the presence of numerous competitors. Therefore, the competition policy encompasses market liberalization, regulation of merger powers, governmental regulations, and so on. The main competition policies are as follows:
Power of business is not restricted in a specific company’s hands. This is because of the competition and regulatory policies. The government’s regulatory policies do not allow any company to perform all kinds of activities. The main aim of these policies is to safeguard the consumers from getting exploited by the marketing practices of all the organizations. Products are cost-effective and customers have the privilege to choose the best quality among the various types of commodities that are available in the market. The consumers are business environment are protected due to the prevalence of these policies.
The prices and output decisions of any organization depend on the various types of market structures it is operating in like perfect competition, monopoly, duopoly, oligopoly, so on and so forth. These market structures vary from each other with respect to the number of buyers and sellers involved as well as the kind or commodities produced. In the UK, there are prominent companies which function in each of these market structures.
Demand is referred to the amount of a certain product that the consumers wish to purchase at a definite price. The demand for a product depends on its price but there are certainly a few exceptions. A demand curve can be drawn in order to explain this relationship between the quantity and price of that specific product or service (Hildenbrand, 2014).
On the other hand, supply can be defined as the amount of a commodity that the producers are willing to provide to the customers in a market at a certain price. The supply curve can also be drawn to explain the relationship between price and the quantity supplied.
Fig 1: Demand curve and Supply curve
Any given company needs to maintain an equilibrium between the market forces, namely, demand and supply. This balance helps a company to function smoothly. Both the forces of demand and supply go hand in hand and depend on a large number of factors. For example, the supply of a certain medicine in the market is dependent on the demand of the product. Companies take advantage of such situations and limit the supply of such products and also increase the prices. A similar incident happened when the Ebola virus broke out and GSK limited the Ebola vaccines in the market (Hayden, 2016). It has been noticed that competitors of GSK take advantage of such a situation like the Red Cross and the NHS. They cut down the price of the vaccines which leads to a decrease in the number of customers of GSK. Therefore, the demand and supply of a product influence its price and vice versa.
If we look at the British company Tesco, we will notice that the company’s management revises the prices of different products because they are aware of the presence of substitute companies. The presence of competitors has an impact on the demand of the products of Tesco (Potter and Disney, 2010). The products which are of day to day use are cost effective in the stores of the company. Customers are also provided with club cards so that they can gain points while shopping the various products. At times, the company decides to lower the prices to a certain extent so that the demand for their products increases in the market leading to higher revenue generation. Recently, Tesco had to increase the price of its bread rolls which led to a decrease in the demand of the product. This was because the international production of both wheat and rice was less which increased the prices of these raw materials. Tesco imports these from Asian countries and the cost price of each of the rolls increased leading to an enhancement in the selling price. The demand decreased due to high prices and the supply was cut down substantially. Therefore, it can be understood that the prices of different products cannot be controlled by the company all the time. The price of a product or a service depends on various products which affects both the demand and the supply and vice versa.
Even McDonald’s, one of the biggest fast food chains, has noticed the demand for food products which are free from antibiotics. This is the reason why the company is trying to make food products which are free from genetically engineered meat (Frost, 2015).
Fig 2: McDonald’s Campaign of Antibiotics Free Food
Recently, the company along with Coca Cola noticed a decrease in their profits because consumers are shifting towards health eating habits. This has led to a decrease in the sales of the company. McDonald’s is trying to work on that by producing food items which are comparatively healthier that what it used to be previously.
Both cultural and business environment determine how a particular organization will behave. The cultural factors involve the changes that take place in the profit margins and changes in the sales rates. The behaviour of a particular organization also depends on its brand reputation like that in the case of GSK (GlaxoSmithKline). Employees who work in the company come from various regions of the world. The presence of different races, religions and languages affect the behaviour of GSK. Traditions, values and the different cultural practices all across the globe form an essential part of this type of environment. Even gender differences play an important role. The cultural differences often act harmful for the company as it hampers the revenue generation (Thomas and Peterson, 2014). Hence, when GSK decides to open a branch in some other country, it needs to keep in mind the culture of that particular place in order to avoid any kind of problems.
Economic environment and non-economic environment are the two types of business environment. The economic environment encompasses the various types of economic policies and economic systems. On the other hand, the political, technological and social factors form a part of the non-economic environment. The workplace environment of a particular organization like GSK is dependent on the working practices of that particular country where GSK has set up its branch. In China, the company got into trouble as the management was accused to bribing the doctors for prescribing its medicines. The country’s government penalized the company and closed down its office which was present in Shanghai ((Kessel, 2014). Thus, it can be concluded that both business and cultural environment determine the organization behaviour like GSK.
International trade provides companies a global platform for performing trade with other countries. All kinds of companies benefit from this trading system as it helps them to earn profit. The fact that these organizations get to earn foreign currency is beneficial for the overall revenue generation. Moreover, people of other countries are become aware of international firms which enhance the brand value of those particular companies. The significance of international trade to UK business organizations are as follows:
A diverse range of factors like political, legal, economical, social and ecological factors function at a global level affecting organizations of United Kingdom and other countries. These global factors can be advantageous for an organization but these have certain drawbacks as well. With globalization there has been a continuous increase in the rate of competition among companies. As brand new firms always try to enter the business, existing companies face the continuous threat of reduction in profit share. International trade further enhances this rate of competition among companies.
The year 2015 witnessed the excessive revenue generation of GSK by selling huge amounts of the HIV drugs in different countries. During the outbreak of the Ebola virus, the company also sold Ebola vaccines in a large number. This enabled GSK to enhance its profit share much more than what was expected by the company’s management (Ficenec, 2015). However, the excessive production of any product like a medicinal drug can harm the ecological balance and different conditions of the environment all over the world. AZ or AstraZeneca has introduced ‘ecopharmavigilance’ which is a new tracking system. The company will be able to keep a track of any new data that enters the environment due to its production processes, through this tracking system. The company’s brand reputation has enhanced due to this new method that the organization has adopted (Owens, 2015). However, the bribery scandal that emerged in China hampered the reputation of GSK internationally. GSK was penalized and the company also decided to close the company’s office which was present in Shanghai. The year 2014 also saw a fall in AZ’s Nexium that led to the cancellation of the company’s US license. So, the UK companies need to study all these factors before performing any particular function.
An issue was raised against McDonald’s when the company as willing to offer breakfast meals all day long when the country faced the shortage of eggs. This happened right after the spread of the flu and many people of the business world were of the opinion that such a move from the side of McDonald’s might increase the shortage of eggs. Even in the 1990s, Russia came up with a request when they asked the company to change the look of the outlets keeping the Russian culture in mind. The same thing happened in china when they asked the management to make the outlets more oriental in its design. One of the main reasons behind the success of McDonald’s is the technological aspect. The company with its advanced technology has been able to produce higher amounts of food products in foreign countries and has been able to spread its business all across the globe. A social factor also played an important role when the company decided to do business in India. McDonald’s is famous for its beef burger but it had to make chicken and vegetable food items in India because of the religious reasons that are prevalent in the country (Kannan, 2014).
The countries which are a part of the European Union (EU) operate according to the rules that are laid down by the body. The various policies that the European Union has come up with have different impacts on the companies which belong to a diverse range of industries (Beetham and Lord, 2014). The companies belonging to the pharmaceutical industry are not exceptions to this entire thing. The two major pharmaceutical companies that have been affected by the policies of the European Unions are GSK and AZ.
The EU has put forward a number of policies which have been helpful in removing the legal barriers when it comes to doing business in more than one country. This increases the number of consumers who are associated with each organization. Both GSK and AZ are provided with the facility of performing international trade practices. When the companies involve in trade practices, they follow the taxation policies, employment policies, cultural policies, regional and international policies. The companies need to be registered before initiating the processes of trading with other countries as well as for doing business in their own countries. When the UK pharmaceutical industry underwent price reductions, GSK was subjected to lesser profits as it had to work in accordance with the policy that had been introduced by the UK Government (Kollewe, 2012).
The European Union also ensures that the products which are sold by different countries meet the safety standards that are laid down by the association. Products which are safe to use as well as safe to manufacture are allowed to be sold by the EU. When AZ came up with Zurampic, a medicine for the people suffering from gout, an extensive check was done on its safety standards before giving the permission of selling it in the market (AstraZeneca, 2016).
All the policies are applicable for companies which are associated with the food industry as well. In a case of McDonald’s, a particular group of Italian Franchisees complained that McDonald’s put forward unjust policies for its franchisees. This complaint was submitted to the European Union so that they could take proper actions against it. It was reported that the company uses its superior brand name in order to charge its franchisees an amount which is almost ten times if compared to the other brands (Fairless, 2016). The policies of the company are such that franchisees are not allowed to switch to any other brand if they wish to. Such actions are against the policies that are laid down by the European Union and the association is trying to sort this problem. Companies which have a high position in the market are asked not to disrupt the business practices of the smaller companies. Hence, it becomes clear that the policies of European unions have various impacts on the organizations belonging to different industries.
It can be concluded that various types of economic systems operate in the market along with different market structures. The characteristics of them vary from each other. Even economic systems of countries like Cuba, China and UK are extremely different from each other. Private companies like Primark have certain purposes which are discussed at length. The European Union also functions in order to improve the business operations in the UK. The countries which are a part of the EU are expected to follow the rules in order to prevent any sort of exploitation of the owners as well as the consumers.
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