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Diploma in Business
Unit Number and Title
Unit 1 Business Environment
Business environment study is really a very important topic for the businesses in the market. The businesses can be successful only when they know that in which environment they are operating and what should be their best strategy in such a business environment. There are many kinds of businesses present in the market and these businesses formulate their strategies depending on the competitors, the business scenario, the rules and regulations, the policies which are set in the region in which they are operating. These businesses are highly affected by the policies which are set up by the regulatory firms and these policies mainly comprises of the fiscal policies, monetary policies, competition policies. These polices mainly determine the behaviour of the business in a particular environment. These days the businesses are also going global and these businesses have to operate in different countries in different environments. These environments can differ on the fronts of social, political, legal, etc. The businesses can have different setup in itself, it can differ on the number of owners and depending on that there are different strategies that the companies follow. The companies can be sole proprietorship, partnerships, corporations, etc. It is also really important for the businesses that their stakeholders are satisfied and they contribute towards the development of the business. The stakeholders are basically those people who are directly affected by the business activities like the customers, employees, shareholders, government, investors, etc. Different stakeholders have different motives and these motives and interests needs to be fulfilled by the business. For example the shareholders needs better dividends, the investors’ needs higher rate of return, the customers need better products at lower price and the employees need better compensations, etc. Apart from these, the businesses also have some responsibilities which they need to fulfil towards the society in which they are operating, towards the people, towards the environment and these responsibilities needs to be fulfilled properly by the businesses.
As we have already discussed that there is different type of businesses present in the world. These organizations depend on the fact that how many owners are there in the business. Depending on the type of the business these businesses have different purpose of doping business. There are many kinds of businesses but the most popular 4 types of businesses are Sole proprietorship, partnerships, corporations, and Limited Liability Companies (LLC). We can list down the common types of businesses as follows:
These different types of businesses have different purposes of doing business in England. There is a great benefit of actually doing business in England, this is because it is quite easy to set up and operate a business in the Europe as compared to other geographical locations. If we consider the words of the World Bank, then it takes an average of 13 days to set up a business in Europe, where the average is 15 days in OECD. It considers UK as the first option in Europe for doing business and fourth in the world. The corporate taxes are also low in Europe as compare to other places which is boon for the businesses sin Europe. The UK also tops in many of the industries like creating the wind energy, the in Europe is really good. So these are some of the benefits of doing business in Europe. The small and medium sized businesses are on a roll in Europe and these businesses are being set up with greater profits in Europe (Helpmanm, 1989). The government of Europe is focusing on creating encouraging business environment that will motivate a lot of a private-sector-led economic recovery. UK is considered to be at the 6th position in the world in terms of economy and one of the top regions in the world in the field of manufacturing. Most of the corporates have their headquarters in Europe because of the facilities provided by the European government. The different types of economy as discussed above have different purposes in Europe. For example the sole trader is one of the most common forms of business and in the UK almost 20 per cent of the businesses are sole traders. All profits are owned by the single owner and he or she also takes all the responsibilities of the activities done by the business. On the other hand in the partnership, all the responsibilities, ownership, risks as well as the profits are equally distributed by the partners.
There are many businesses present on the market and these businesses have to make sure that their stakeholders are happy and satisfied to sustain their business and profits. The stakeholders are the people who are directly affected by the business activities. These may include the employees of the business, customer, shareholders, investors, governments, etc. All these stakeholders have different objectives to be fulfilled. The employees want a better compensation from the business and better operating facilities. The shareholders want a better dividend on their shares, the investors require better returns on their investment and the customers need better products and services which are preferred by the customers at a lower price. All these are met by the businesses to make sure that all of them are satisfied and their businesses flourish and all these stakeholders support the business (Whitley, 1994). To study if the businesses are really meeting the needs of the stakeholder, we take example of two or more businesses in Europe. Let us take the example of Tesco and Sainsbury plc.
The Tesco plc is playing a very responsible role in meeting the objective of its stakeholders and this is the reason the company has immense support from its stakeholders which is helping the organization to reach the pinnacles of success. Tesco plc keep their employees motivated by providing them better opportunities to grow in the company and provide them better compensation and facilities. On the other hand Sainsbury also meet the expectation of their stakeholders by trying to provide better returns to their investors and keep their customers happy by providing the best services and products as compared to the industry standards (Spar, 2006).
As we have seen that the business is required to meet the expectation of the stakeholders, similarly the businesses also have to fulfil some responsibilities. These responsibilities are towards the society, environment, employees, etc. These responsibilities are the responsibilities of the business which they need to fulfil to make sure that he businesses are ethical and they are contributing their part towards the development of the society. There are many businesses which are fulfilling their responsibilities and making sure they are contributing towards the development of the society as well the protecting the environment in which they are operating. The organization should follow different strategies to fulfil these responsibilities. The can carry on the CSR activities which are very common these days in the businesses which is also known as the corporate social responsibility (Kollmann, 2002). They need to contribute their part towards the society by carrying out activities for the needy people of the society and donate toward their development. They can also support the conservation of the environment by employing strategies like avoiding the use of plastic, by carrying out plantation projects, by avoiding the release of harmful waste in the environment etc. They should be using more of the renewable source of energy and should also promote the use of easily disposable products. They should also promote the same and should also support one of the social causes and should work in that direction.
As we already know that there are many different kinds of economy present in the market and these economic systems have different strategies to allocate the resources effectively. To understand this, let us first understand the different types of economy present on the market. The economic systems have been classified mainly into three types which are command, free market enterprise, mixed and transitional systems. These different economic systems attempt to allocate the resources affectively in their own way. The first is the free market economy which is that market where there is free entry and exit for the businesses from the market (Young, 1999). There is no intervention of the third party and the seller can produce anything according to the preference of the customers and can sell anything to the buyer at any price which they are comfortable at. There are no rules and regulations on them to control them. There is no regulatory firm to control their business activities. There is complete freedom to the sellers to produce as much as they want and to sell them at whatever price they want to. This type of structure enables the problems to be handles automatically by the system and the market is responsible for the allocation of resources. There is only 1 motive of doing business in this type of economy is to maximize the profits. Then there is the command economy where the business activities are being monitored by the government regulations. The governing bodies’ control the decisions like how much the businesses can produce, what the price range that the businesses are allowed to sell their products at and what polices they need to follow while doing their business. In this market, the controlling authorities are solely responsible for the effective allocation of resources. The government and the related organizations are considered as the controlling authorities over here. We also have an economy which is termed as the mixed economy and these economies are a mix of the free market and the command economy. Here the allocations of resources are combined held by the government as well as the sellers or traders.
The businesses largely are impacted by the policies and regulations set up by the governing bodies on the business and the economy. These policies which affect the business mainly comprises of the fiscal policies and the monetary policies. The fiscal policies are mainly dependent on the factors like taxes and spending. These policies help in the stimulation of the economy. It may include increased spending on goods and services which will indirectly increase their demand. It may indirectly increase the demand of the products and the services so the production will also increase and hence the businesses will be impacted accordingly (Cannon, 1978). If the government feels that the economy is growing too fast they can also decrease the spending in the good s and services which will indirectly decrease the demand in the economy and hence the production will also come down affecting the businesses negatively. So these fiscal policies are directly affecting the businesses and the businesses should be careful about these policies before formulating their strategies to operate. The fiscal policy can take the form of automatic or discretionary depending on the present conditions and the government preferences. In the UK it s not considered to be favourable for the company to expand in different geographies. The tax rate that is levied by the government makes it very difficult for the organization to enter different markets. The monetary policies also have a similar motive and are basically setup to control the money supply in the market. As the money supply is being controlled by the monetary policies hence it will indirectly affect the spending of the customers on the products and services which will affect the demand and correspondingly it will affect the production.
The economy of England is growing at a very fast rate and the businesses are flourishing in England. This rise in the economic development is because of the growth in the economic sector and the businesses in the economy. However the businesses are affected by many policies which are setup by the government. The businesses are also affected by the competitors and their products (Börzel, 2003). These are many strategies which are being adopted by the businesses to fight this competition and just to make sure that this should not affect the customers the government has setup several rules so that the businesses really work together and no businesses take any undue advantage of their businesses and ultimately this competition should be healthy and the customers should benefit from this. The competition law which is being setup in UK is a very flexible instrument. The competition law has been made with the prime motive of the public interest. There are basically few motives which are involved in this which are to encourage innovation, efficiency and increase in the choices for the customers as well as they are focussed on motivating customers to buy products at the best price available in the market. Suppose I have a production company in England, then the competition policy will affect the strategies that I will formulate for my business. This strategy will be based on providing the best quality product in the market at a competitive price. Whenever I have to take the decision that how much and at which price I need to set up for my products then these competition policy will come into picture which will affect the price which will the customers will be willing to pay. This will encourage us to makes sure that there is some competitive advantage which we should possess so that our products can be sold at a higher price as compared to other to make better profits.
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One of the important decisions which businesses need to take is to decide that how much they are going to produce and at what price they should sell their products or services to the customers. These decision depends on a lot of factors like the market size of the target market, how many competitors are already present in the market, how much requirement of the customers are already being satisfied by the existing competitors, so on and so forth. So in a nutshell these decisions are made depending on the different market structures (Holden, 1996). The market structures can be of different forms like the monopolistic economy or the oligopoly, duopoly, monopoly, perfect competition etc. These different economies can be explained individually. The monopolistic economy is the economy where there is imperfect competition and there are many sellers and the products sold are different from each other. This is the situation where the decision that how much should be produced and what price should be set is solely the decision of the company and is easy to set as the product is different from other. On the other hand in monopoly the decision is again very easy as there is no competition and there is no other player in the market and the player does not have to consider the competition. In the perfect competition this decision will be difficult as here there are a lot of competitors which are providing the similar products and the business need to consider a competitive price to sustain in the market as well they need to see that how much requirement of the market is still not fulfilled which will help in the decision that how much quantity needs to be produced.
The market forces are responsible for shaping the organizational responses in the market. This can be studied by taking few examples. The market forces can include the elements such as the preferences of the customers, the number of competitors in the market, price elasticity, the relations with the suppliers, economic conditions, etc. These are the factors which determine how the organization should behave in the market. These are basically the forces which determine the demand and supply in the market. If there are too many competitors in the market then the suppliers needs to be very careful in deciding how much they need to produce and what shall be the price of the products offered. They have to behave very competent in the market and have to provide better services and good quality products to the market (Lane, 1992). In England the businesses are growing at a very faster rate and there is a good competition over there. There are a lot of opportunities for new business also to grow in England. This means that the businesses have to be competent in this region. Similarly the other market forces affect the businesses in the similar way and the bu8siness have to react in the same way. One of the issues which s prominent in England is higher tax rate, to suffice this business try to keep their costs as minimum and the prices are high to make sure that they get enough profit that even after proper payment of the taxes, the company gets enough profits.
As planned we will be having a production company in England and here we will assess how the business and cultural environments in England shapes up the behaviour of my firm. The business environment and the cultural environment are unique in England. There are some factors which are favourable for the businesses to grow here and some are against them. The norms and regulations for businesses over here are being set up by the European Union. The businesses to grow in Europe will be aided by the fact that the Europe creates an environment which will encourage the entrepreneurs to fund more businesses and the legislation set up by the governing bodies like the European Union should make sure that the policies help the businesses to grow. One demotivating factor for the production company I am planning to set up will be high tax rate. This will bring down the profit after tax and will be a disturbing element for anyone doing business over here. The economy of Europe is an emerging economy and has a lot of potential for the businesses to grow which is a plus [point for my production company.
The international trade has a lot of significance for a lot of businesses in UK as the companies are going global. The businesses have understood the fact that the doing businesses overseas and in other countries can be very beneficial and the expansion strategy can be very profitable for the companies and there are some of the factors which are very beneficial for the organization for doing businesses outside the borders, These advantages can be in terms of better technology, cheap human resources, advanced resources, lower taxes, etc. The UK business organizations are also expanding over the world for example Tesco plc, Sainsbury plc and many more. These companies have been established properly in the UK but they are expanding to other countries depending on the benefits from other countries (Scherer, 1990). In the process of expanding to other countries it is really very important for them to consider the international trade policies. There are some rules and regulations set up by the governing bodies which regulate the activities of a foreign business organization to do business in a particular country. These can be in the form of percentage of investment on business they can do in a particular country if they are not allowed to do business solely but with a local partner, the amount of taxes that has to be paid by the foreign companies, etc. These are some of the regulations which affect the international trade by the UK organizations.
There can be many factors which will affect the businesses in England. These factors can be local and global. The global factors can comprise of the national economy of the country, the tax rate implies on the businesses, the environmental factors of the region, the cultural aspects of the society, and the trade policies in the country. All these will definitely affect the businesses in England. The most important of all these are the international trade policies, economic condition of different countries, political condition of the countries, legal and regulatory framework for the businesses, etc. These factors are considered before planning the businesses strategy in different part of the world.
The policies which are set up by the European Union in UK definitely affect the business organizations. The European Union is the government body which is responsible for the formulating laws and policies for the businesses in UK. They are the major governing body in UK and all the businesses have to follow their policies and regulations. These control all the economic factors in the region like the inflation, economic growth, employment, tax rate, etc. All these are directly or indirectly are being controlled by the policies set up by the European Union and hence these affect the businesses in these regions. The businesses have to consider that if the policies set up by the European Union allows the businesses to do business properly and if the tax that needs to be paid is under reach (Kamien, 1982). The production company which we have planned have to consider if the policies set up the European Union will allow enough money supply in the market that the demand of our products does not come down. The economic condition of the people would be good enough that the demand increases and hence our production can also increase. Similarly there are many other factors which needs to be considered by our production company to make sure that the organization should sustain in the European market.
The businesses behave according to the economic system in which they are operating like the free market economy or the command economy, etc. These kinds of economy also really affect the business to a large extent. The organization mainly in UK is monitored by the European Union and the businesses have to follow the policies being set up by the European Union. Another important thing which the businesses have to consider before operating is how much they need to produce and what should be their price. This is really a very big question for the businesses and they have to making the decision based on the business environment around them and the customer preferences and the competition present in the market. The international trade is really a boom in the recent times and the policies related to the international trade have pick up too much popularity in the present. The political system of any region also plays a major role in promoting or creating problems for a particular business in that particular region.
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