Unit 1 Business Environment Assignment Solution – GSK & AZ

Program	Diploma in Business
Unit Number and Title	Unit 1 Business Environment – GSK & AZ
QFC Level	Level 5

Introduction

This unit 1 business environment assignment solution GSK & AZ delves with business environment that states companies face tough competition and as a result there is the requirement for understanding the internal as well as external environment where they are functioning so that they can have improved strategies for competing. In this assignment we will discuss about the business environment in respect of two large pharmaceutical companies which are GlaxoSmithKline (GSK) and AstraZeneca (AZ).

Task 1

(AC 1.1)  Identify the purposes of GlaxoSmithKline (GSK), National Health Service of UK (NHS), the Red Cross and any cooperative society in UK that you are familiar with.

Purposes of GlaxoSmithKline (GSK): A public statement in respect of GSK Ltd  which sets out its mission in respect of the needs of the customers it is intending to provide satisfaction, the markets in which it will be meeting such requirements and the way by which it will be actualizing them. The purpose will be setting out the intentions of GSK in respect other stakeholders as well as other parties that are interested. The intention of the purpose for GSK is providing a meeting point in respect of every individual to function in the company, but the main responsibility to ensure that its main purpose gets actualised is the work of the senior management. (Berger, 2011). The purpose of GSK is to develop the quality of human life to enable individuals in doing more, feeling better as well as living longer. To invest in the people as well as communities are underpinning the lasting sustainability of the business for GSK. GSK’s practices for employment are designed for creating a cultural aspect where every staffs working for GSK will be feeling valued, respected, empowered as well as motivated for achieving their objectives. (Frydman, 2013). The business of GSK is concentrated around the delivery of three strategic priorities that are targeting the aspect of increasing growth, reducing risk as well as improving the company’s lasting financial performing ability. The priorities associate with these are growing a diversified international business, delivering more value based products as well as simplifying the functioning model.

Purposes of National Health Service of UK (NHS): The purposes of National Health Service of UK (NHS) is creating a cultural aspect as well as conditions in respect of health as well as care services and employees for delivering the highest level of care facility as well as ensuring that there is the utilisation of important public resources in an effective manner for getting the optimum result in respect of people, communities as well as societies in the present scenario as well as in respect of the next generation. (Iqbal, 2011)

Purposes of Red Cross: The UK Red Cross is preventing as well as alleviating the sufferings of individuals in emergency situations through the mobilization of volunteers’ power as well as the donors’ generosity. Also for fulfilling the requirements of the people in UK in having the most safe, most dependable as well as most cost efficient services with the help of voluntary donations.

Purposes of Heart of England Co-operative Society: Being a consumer co-operative, the purposes of Heart of England Co-operative Society is proving better value in respect of money with the help of a range of facilities associated with shopping as well as services. The co-operative society’s practices for trading depend on the association of effective co-operative business ethics as well as the requirement for trading in a profitable manner. (Lussier, 2011) The co-operative society will always be seeking ways for sharing their successes with their members as well as the domestic communities where they are trading.

(AC1.2)Describe the extent to which GSK meets the objectives of its key stakeholders.

In GSK, various stakeholders are having various goals as well as requirements. These objectives are mentioned as under,

• Investors – They are providing risk capital as well as their advisers is having the concern in respect of the risk innate in as well as return given by their investments. They require  information and knowledge  for assisting them in determining if they should be buying, holding or selling. Shareholders are also having the interest in information that is enabling them for assessing the capability of GSK for paying dividends.
• Employees – Staffs and their group of representatives are having an interest in getting information regarding the stable condition as well as profitable condition of the company’s employers. They are also interested in information that will enable them for assessing the ability of GSK for providing salary, retirement benefits as well as scopes for employment. (Iqbal, 2011)
• Lenders – Lenders are having the interest in getting information for enabling them in determining if their loans as well as the interest attached to them will be paid when outstanding.
• Suppliers as well as other trade creditors – Suppliers as well as other creditors are having the interest in information that will be enabling them in determining if the amounts that is owed in respect of them will be paid when outstanding. Trade creditors are likely to have the interest in GSK over a shorter time span in comparison to the lenders unless they are depending on the prolongation of GSK as an important customer.
• Customers – Customers are having an interest regarding information in respect of the prolongation of GSK particularly when they are having a lasting attachment with, or are depending on GSK. (Lussier, 2011)
• Governments and their agencies – Governments as well as their agencies are having the interest in allocating the resources and hence the activities for GSK. They also need information for regulating the activities for GSK, determining policies related to taxation as well as the foundation for national revenue as well as same kind of statistical data.
• Public – GSK influences the public members in different manners. For instance, GSK might be making significant contribution in respect of the domestic economy in different manners that include the number of individuals they are employing as well as their benefaction regarding domestic suppliers. Financial statements might support the public to provide information in respect of the trends as well as current developments in the growth of GSK as well as different activities.

(AC1.3) Explain the responsibilities GSK has towards its key stakeholders and the strategies employed to meet them.

The responsibilities GSK is having in respect of its important stakeholders are mentioned as under,

• Customers – The responsibility of GSK goes beyond just providing satisfaction to the customers. The company has the belief that they are having a duty towards the society for offering products and services that can be used safely and are of better quality. Quality is a most important priority in the stages of development as well as production in the Chemical Division. There is also proper information provided to the customers regarding the way they require using the products in a safe manner. Also, GSK keeps gathering information regarding the products that are being used in the market for improving their quality. (Lussier, 2011)
• Employees – The management of GSK is focused on individuals with the mindset that individuals are the basis towards the competitiveness of the organisation. The responsibility of GSK towards the employees is that they provide opportunity as well as reward that are unbiased. Also, provide them with a place of work where every individual is having the capability to give their best. Also, GSK emphasises on a work-life balance in respect of the staffs. The company is having a range of systems for work that will be allowing the staffs in working flexible duties as well as schedules. The organisation did the establishment of a plan of action to assist staffs having children in continuing their duties at home or at work without much hassle. (Johnson, 2011)
• Business Partners – GSK is striving towards building a trustworthy relationship with its suppliers. For doing this, the company is having an open-door policy that depends on their Purchasing Policy where the potential business partners irrespective of their nationality can do the viewing of the company’s needs in respect of quality as well as cost prior to the submission of a bid. In respect of growing as well as evolving with the suppliers, the company assists the suppliers in building systems of management that offers better quality of product as well as safety, holding joint meetings with the suppliers where both the parties will have the ability in solving significant crisis situations as well as providing training in respect of staffs of distributors.
• Shareholders and investors – For offering shareholders as well as investors better prices for stock as well as stable dividends, GSK is striving to do the optimum utilization of capital for achieving the solid productivity as well as a strong financial foundation. GSK is also striving towards respecting the rights of the shareholders by making it easier for them in exercising their rights to vote. (Johnson, 2011)
• Communities – GSK is doing business internationally and striving to be locally entrenched organizations wherever it is functioning by safeguarding the environment, providing support towards education as well as living harmoniously with different communities as it is striving towards contributing in manners that create value towards the domestic society. 

(AC 2.2) Taking into consideration the recession that UK faced in 2009 assess the impact of the UK government’s fiscal and monetary policies on the activities of GSK and AZ.

Fiscal policy is associated with the process in which the economical development depends on tax collection. The issues that create the most impact in respect of fiscal policy are,

• Increase of Value Added Tax (VAT)
• Increase of Income Tax

In respect of the aforementioned factors, GSK is impacted by the UK government’s fiscal policies in a severe manner taking into consideration the recession that UK faced in 2009. When there is increase in VAT for the products, then GSK is required making new strategies for pricing for making the profit that was predestined. Whereas, when there is a rise in the income tax, then individuals will be trying to spend less money since they will be paying increased amount of taxes when compared with earlier period. They will be trying to restrict their budget with the daily requirements as well as discarding the costlier products. The rise of income tax in fiscal policy will be having limited impact on GSK. (Johnson, 2011). Monetary policy is the policy in which supply as well demand will be determining the proportional monetary distribution. By reducing the rate of interests, money supplies in the market have risen for ensuring the adequacy of money in the market. When individuals are having enough money, they will be buying more but will be saving less. (Johnson, 2011) Since, there is low rate of interest, individuals will be having the reluctance towards saving and as a result, the business of GSK will keep improving and there will be earning of higher profitability.

(AC 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.

• Enterprise Act 2002: In regard of the Enterprise Act 2002, it is considered to be a criminal offence for two or more organisations for engaging in Cartel agreements such as fixing of prices, market sharing as well as limitations of supply. The convicted offenders might be receiving a prison sentence of up to 5 years as well as an unlimited fine. (Jenkins, 2011)
• Article 101 and 102 of the EU legislation: Article 101 is associated with restrictive practices and Article 102 is associated with monopolies as well as mergers. The impact of the UK competition policy as well as regulatory policies on the activities of GSK are mentioned as under, Competition is required for market growth. As a result, the use of competition polices gets unavoidable in the market. Competition policy is ensuring that there occurs fair competition between the companies in the market. With the help of the UK competition policies GSK is doing competition with the other competitive brands. (Jenkins, 2011) GSK is creating certain unique products that will be dominating the markets in UK in the future. In addition to that with the support of the regulatory policies like wage for the workers, opportunities for employment, as well as to work for the improvement of the environment, each of these are given emphasis by GSK. With the help of these activities, GSK has the ability in creating a sustainable market image by satisfying the customers.

(AC 3.2).Using a range of examples, illustrate how the forces of demand and supply affects the pricing and sales decisions of GSK.

Market forces are taken into consideration because of their influence on the decision making process of GSK. There are various kinds of market forces which are,

• Demand of Supply
• Elasticity of Demand and Elasticity of Supply
• Economies of Scale
• Expectations of customers
• Short term and long term concept
• Technology with staff skills

1. Demand and Supply: Demand and supply is significant because of its impact on GSK. For instance, when GSK is planning to launch a new kind of product, then it will be analyzing the supply and demand in respect of that product.
2. Elasticity of Demand and Elasticity of Supply: Elasticity of Demand is considered to be a significant force because of its responsiveness with the quantity that is demanded as well as the prices that are provided. For instance, when GSK wants to do rapid selling of certain stocks at the end of the year, it must provide discounts in respect of the customers where prices will be lesser in comparison to the normal prices. (Iqbal, 2011)
3. Economies of Scale: This means the cost advantage, in which the output cost will be lesser when the output number rises regarding the products of GSK. For instance, when GSK is producing products in higher units, it will be reducing the making costs with the help of the Learning Curve theory.
4. Expectations of customers: It is considered to be another market force that will be shaping GSK. In respect of the production of products, the requirement as well as  customer satisfaction  expectations are given priority over other issues.
5. Short term and long term concept : The short term and long term concept in the economy are considered to be forces that are shaping the GSK. In respect of short term, there is always one fixed factor of production, whereas in long term concept, production issues are variable. (Iqbal, 2011)
6. Technology with staff skills: Development of technology in addition to the staff skills is considered to be a significant market forces for shaping GSK.

(AC 3.3) (a) With the aid of the management tool called PEST/PESTEL judge how the business environment impacts /affect the behaviour of GSK.

PESTEL for GSK

• Political factors (P) – It affects the marketing strategy for GSK that takes into consideration potential changes in international trade regulation as well as competitive regulation that likely to get introduced by the governments of different countries.
• Economic factors (E) – The factors take into consideration increased rate of economic development. In addition to that, present economic uncertainties in association with the European markets might be having an adverse impact on the strategy for marketing.
• Social factors (S) – These factors are associated with the changing aspects related with the lifestyle of the customers, shifts in the attitudes of the customers as well as views and many more. Growing level of resentment of the customers in respect of huge amounts of profits that the pharmaceutical organisations are making as well as sliding images of big pharmaceutical organisations are considered to be most essential social issue in the present scenario. (Boone, 2015)
• Technological factors (T) – These factors take into consideration breakthroughs in the pharmaceutical industry, factors related with licensing as well as patenting the technologies associated with the manufacturing of drugs and the growth level of industry technology.
• Environmental factors (E) – These factors take into consideration the crisis scenarios that are associated with global warming as well as influence to the environmental activities associated with the activities for GSK as well as the stakeholder’s reaction to this influence. (Boone, 2015)
• Legal factors (L) – These factors take into consideration the rules as well as regulations in a direct manner as well as indirect manner in association with the functions of GSK in domestic markets and European law as well as international trade rules and agreements.

(AC 3.3) (b) Judge how the cultural environment determines the behaviour of GSK.

For the successful functioning of GSK, it is essential in understanding the business environment in a proper manner. The business environment comprises of two factors viz. external as well as internal factors. The cultural environment is considered to be the environment that the business cannot control. The cultural environment explains about the production, pricing, placing as well as promotional aspect of a business such as GSK. The beliefs of the customers, attitudes as well as values are considered to be the external factors in respect of the cultural environment for GSK that is impacting the business and choice of production for GSK. (Furnham, 2012). Whereas, the organisational staffs as well as their cultural demands as well as traits does the formation of the internal factors for the cultural environment in respect of GSK. When the staffs abide by the strong values as well as ethical awareness, then it will be ensuring the company’s ethical awareness in entirety. Also, from another perspective, when there is moral weakness amongst the staffs, then there will occur miss-utilization of resources in GSK. Therefore, it can be concluded by saying that cultural environment is shaping the behavioural aspect of GSK.

(AC 4.1)Discuss the significance of international trade to GSK and AZ.

With the help of international trade, GSK as well as AZ did the attainment of the beneficial aspects associated with minimum communication cost and also transportation cost. In addition to that, international business as well as opportunities for trade assists in making the business of GSK and AZ more innovative as well as technologically very effective. International trade assists GSK and AZ in building strong networks throughout the world in connection to suppliers, customers, shareholders as well as staffs. (Frydman, 2013). In addition to that, international trade assists in bringing the scope to transfer capital with minimum costs, which will be leading to the sustainable business growth in the longer period. International trade provides increased scope of employment in relation with GSK and AZ in UK where there occurs the integration of various cultural values to improve the services as well as satisfaction of the customers. The scope of investment increases because of the influence of international trade that is important for the sustainability of GSK and AZ. In addition to that, GSK and AZ’s brand image does the attainment of its optimum level simply due to international trade.

(AC 4.2.) GSK and AZ are multinational companies operating in many parts of the world. Analyze how  global business  factors can affect their activities (Consider, political, economic, social, technological, ecological and legal factors in the global context but not local)

PESTEL for GSK

• Political factors (P) – It affects the marketing strategy for GSK and AZ that takes into consideration potential changes in international trade regulation as well as competitive regulation that likely to get introduced by the governments of different countries.
• Economic factors (E) – The factors take into consideration increased rate of economic development. In addition to that, present economic uncertainties in association with the European markets might be having an adverse impact on the strategy for marketing.
• Social factors (S) – These factors are associated with the changing aspects related with the lifestyle of the customers, shifts in the attitudes of the customers as well as views and many more. Growing level of resentment of the customers in respect of huge amounts of profits that the pharmaceutical organisations are making as well as sliding images of big pharmaceutical organisations are considered to be most essential social issue in the present scenario. (Boone, 2015)
• Technological factors (T) – These factors take into consideration breakthroughs in the pharmaceutical industry, factors related with licensing as well as patenting the technologies associated with the manufacturing of drugs and the growth level of industry technology.
• Environmental factors (E) – These factors take into consideration the crisis scenarios that are associated with global warming as well as influence to the environmental activities associated with the activities for GSK and AZ as well as the stakeholder’s reaction to this influence. (Boone, 2015)
• Legal factors (L) – These factors take into consideration the rules as well as regulations in a direct manner as well as indirect manner in association with the functions of GSK and AZ in  global business  and international trade rules and agreements. 

(AC 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.

The harmonization or approximation of technical and safety standards on large number of products

The European Union is having its influence in respect of the businesses in UK regarding GSK and AZ. The businesses of these two organisations are impacted by the European Union policies to a certain level. The Climatic Change Act of European Union did the targeting of the quantity of maximum carbon emission, where companies having reduced carbon emissions will get the benefit. For complying with this Act, and for establishing the image as a concerned entity in respect of the environment, GSK and AZ have tried limiting the degree of carbon emission. When GSK as well as AZ will fail in complying with this Act then it will be unfavourable in respect of the organisational business. This adverse scenario in a negative manner influences the brand image for GSK and AZ. Regional policies of the European Union will be assisting GSK as well as AZ in the enlargement of the business by increasing the production as well as sale. (Barden, 2015)

The reductions in the obstacles of cross border trade and agreement:-Closer approximation of excise duties and other fiscal barriers e.g. vat. The removal of legal obstacles to trade (discrimination and purchasing policies)

In respect of the aforementioned factors such as the reductions in the obstacles of cross border trade and agreement, closer approximation of excise duties and other fiscal barriers as well as the removal of legal obstacles to trade, GSK and AZ are impacted by the policies of the European Union in a significant manner. (Berger, 2011) When there is increase in VAT for the products, then GSK and AZ are required making new strategies for pricing in respect of making the profit that was predestined.

Task 2

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 economic system: The free market economic system is considered to be the most suitable economy in which the market values of products and services are decided with the help of intersection of supply and demand curve. There is the avoidance of the intervention of the government, where it is assured that in the absence of government legislation, the economy can be fair to everyone.
• Command market economic system: Command economy is where the Government is the deciding factor. The government makes the decision regarding the supply of the products as well as services in addition with the pricing. The Government takes the sole decision in respect of production or  marketing principles.  (Baines, 2012)
• Mixed market economic system: The mixed economy is the economy in which both the Government as well as the market are the decision makers in respect of appropriate allocation of resources. Mixed economic system is the association of free market economy as well as command economy.

Free market economic system allocates resources more effectively than others as because pricing is important here for determining the items for production as well as quantity for production. For an organisation, pricing of products is determined with the customer demand with intersection of the choice of suppliers. (Baker, 2010) As a result, the determination of equilibrium pricing takes place where there occurs satisfaction for the customers as well as suppliers with the organisational products. The motive to seek profit is impacting the organisations’ price mechanism for allocating the resources in a proper manner.

Task 3

Explain how prices and output decisions are determined in a perfect competitive market, Monopoly, monopolistic competition and Oligopoly. (AC 3.1) 

• Perfect competitive market: Perfect competition is a scenario that prevails in a market where buyers as well as sellers are so huge as well as well informed that every element of monopoly is not present as well as a commodity’s market price is further than the control of individual buyers as well as sellers.
• Monopolistic competition: It is the kind of market structure where a huge number of independent companies supply products that are to some extent distinguished from the buyer’s viewpoint. There are a large number of independent buyers and sellers.
• Monopoly: There is the existence of monopoly when one organisation is the sole producer or seller of a good that is having no close alternatives. There exists only a single producer or seller of product. In this respect there exists only a single firm that does the production or selling of a specific commodity or service. (Armstrong, 2014)
• Oligopoly: In Oligopoly, there exists less number of firms so that sellers are aware of their interdependence. The competition is not perfect, even though the competition between the firms is soaring. Therefore, there exist different oligopolistic behavioural models, each depending on varied patterns of reactions from the competitors.

Conclusion

In this assignment, business environment is considered to be the various forces that are shaping the segment of business and the product line. In this respect, the business environment for GSK as well as AZ are assessed in relation to certain factors like the structure of market, key responsibilities of GSK and AZ and many more. The influences of the fiscal and monetary policy on the business of GSK and AZ have provided emphasis in association with the influence of cultural environment.

Reference

Baines, P (2012) ‘Essentials of Marketing’. Oxford University Press
Baker, R (2010) Implementing Value Pricing. John Wiley & Sons.
Barden, M (2015) A Beautiful Constraints. John Wiley & Sons.
Berger., A. (2011). Operations Management. GRIN Verlag
Boone, L (2015). Contemporary Marketing. Cengage Learning
Frydman, R (2013). Rethinking Expectations: The Way forward for Macroeconomics. Princeton University Press.
Furnham, A (2012). The Psychology of Behaviour at Work: The Individual in the Organization. Psychology Press
Iqbal, T (2011). The Impact of Leadership Styles on Organizational Effectiveness. GRIN Verlag.
Jenkins, D (2011). Managing Empowerment. Random House.
Johnson, G (2011) Exploring Strategy, London, FT: Prentice Hall
Lussier, R (2011). Management Fundamentals: Concepts, Applications, Skill Development. CENGAGE Learning