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Unit 1 Business Environment Primark Assignment Copy
Diploma in Business
Unit Number and Title
Unit 1 Business Environment Primark
In this unit 1 business environment primark assignment copy focused the role of the business environment for the organisations operating in UK will be highlighted. The first part will give the details of the general purposes of the different type of organisation relating it with the organisation Primark. Moreover the objectives of the different stakeholders towards the business and responsibilities of the organisation Primark will be focus. The second part of the report will state the different economic system by relating it with the nations UK, China and Cuba for understanding the output fixation and resource allocation. The economic policies of the Government specially the Fiscal policy and monetary policy along with the competition policy will be highlighted. The third part of the report will give the understanding of the different type of market structures and market forces in order to fix the pricing and output decisions. At last the formation of Brexit will be related with the context of the international trade and global factors towards the organisations.
An organisation is termed as a people working with leading group with a common intention to achieve the overall business goal. Organisation can be of many types which influence the basic purposes. The common objective is to achieve the goals with a combined effort of the members. Primark is an Irish based private company who is specialised in the fashion products. It is a subsidiary company of Associated British Foods. The main purpose of this company is to provide quality products to the people at a reasonable price in return of a profit (Buckett, 2012). They have given the licence to the Asian countries like India, Bangladesh and China due to reduce the cost of manufacturing and operations. Thus the motive is profit based as well as minimisation of cost in order to achieve more revenue. The basic objective is to serve the customers effectively with the superior fashion products in the countries like Austria, Germany, France, Belgium, Spain, UK etc. They do not offer any shares to the public and they have memorandum of Association where the rights and structure of the company is there. Basically this company has a specific hierarchy that clearly defines the responsibility and divisions of the organisations.
- Public sector is mainly the organisations which are managed and funded mainly by the concerned Government. For example, National Health Service (NHS) is a public sector organisation that is managed by the four Governments that are Scottish, Welsh, UK and Northern Ireland. 98% of the fund is come from the public taxation and a very small amount is from the patients. The basic purpose of NHS is to deliver emergency care service, GP service, dental service, pharmacy service, hospital services etc. in the form of information and help the organisations to maintain the standard in the health and social care sector. The motive is not profit based rather they are serious to provide quality service to the people at free of cost or sometimes they charge price which is very small amount.
- Charity is mainly formed to serve the communities, backward people and emergency service by considering the social welfare. The funds of the charities are managed by the members, volunteers, Governments and private companies etc. British Red Cross Society is the organisation under charity whose mission to provide emergency service, first aid service to the people. The main motive of this sector is to serve the people in order to meet the emergency needs (Red Cross, 2016).
- Cooperative is the voluntary association of the people to meet the aspirations based on the economic, cultural and social factors by controlling the business democratically. In this type of organisation, people used to become the member in order to achieve return out of their investments. One of the popular organisations in UK is Cooperatives UK (COOPS) have the basic purpose of promoting and developing the member based business including retail sector, agricultural sector and other business sector and nearly this sector is having the value that is nearly 34.1 billion pound towards the economy (Cooperatives UK, 2016).
Stakeholders are the part of the business that has a direct or indirect influence towards the successful business of the organisation. They can be the investors, employees, customers, suppliers etc. All the stakeholders have different objectives and influence towards the business of an organisation. Thus the management of the organisation must conduct a Stakeholder mapping in order to understand the power and interest level of the stakeholders towards their business in order to devise strategies for them (Noland and Phillips, 2014). The stakeholder mapping of Primark is shown below:
There are four dimensions in the stakeholder mapping which are as follows:
- Latents: As per the stakeholder mapping they used to share high power with low interest towards the business. Thus they will be the customers who are major drivers of the revenue for Primark. The basic objective of the customers will be to extract the best value from the organisation at a reasonable pricing. In this context, the organisation Primark gives their best offerings towards the customers by maintaining quality and design at a reasonable rate (Freeman, 2013).
- Promoters: It is clear from the stakeholder mapping, that promoters are the groups who are having high power with high interest towards the business. Thus they will be the investors of the Primark who used to lend their fund towards the business for a profitable return. The objective of the investors is to lend their money at a favourable Return on Investment (ROI). In this perspective, the top management of Primark used to conduct meetings and share regular updates to the investors in order to make them aware of the business situations.
- Defenders: From the stakeholder mapping it is clear that defenders used to share less power but high interest. They are mainly the employees and suppliers of Primark. The basic objective of the employee is to give performances in return of remuneration. On the other hand suppliers will be producing the products for Primark in return of a profit (Freeman, 2013). The management of Primark used to give preference to the employees by providing sound remuneration, training, workplace rights, job security etc. Along with that the suppliers are given wide information about the standard and based in that profit margin is designed.
- Apathetics: They are mainly having less power with less interest as per the stakeholders mapping. They can be the charitable organisations who are being funded by the organisation Primark in order to support the social welfare. On this area, the management has secured some portion of the fund for the NGOs in order to serve the communities.
Carroll’s pyramid model shows four set of responsibilities that should be considered by the organisation in order to achieve the profit for a long term period. The four set of responsibilities which are important for Primark are shown in a picture form:
(Carroll’s pyramid model)
- Economic Responsibility: As per Carroll’s pyramid model economic responsibility is to be focused on the activities that should support the organisation to achieve profit for a long term period. Primark as an organisation supports the employment generation directly and indirectly. The suppliers from the Asian and European countries employ several people in order to support the manufacturing process and this way the employment is generated indirectly. Secondly the payment of the taxes, VAT and other duties are contributing the economy of the countries where the organisation Primark is operating their business(Capon, 2015).
- Legal responsibility: In this background obeying the laws, regulations and legislations by the organisation are generally considered. In the perspective of Primark they are maintaining and following the regulations of the Government by considering the health and Safety Act, Equality Act, Data protection Act in order to maintain their goodwill across the market.
- Ethical Responsibilities: These are the responsibilities which are related to the treatment with the employees or suppliers by the organisations. Primark is the organisations who are very much aware of the employee’s rights and safety in the workplace. Apart from that code of conduct is there which is mandatory for the suppliers to maintain in order to remain in the contract. These responsibilities will increase the goodwill of the organisation and able to attract potential employees and suppliers across the world (Harris & Mc Donald, 2014).
- Philanthropic Responsibilities: These are the responsibilities which influence the organisation to contribute in the society in order to maintain a sustainable future. In case of Primark donations to the charitable trust, working with NGOs are observed.
In order to meet the strategies the organisation Primark has undertaken certain responsibilities which are as follows:
- Paying the taxes, VAT and duties of the countries like Austria, Germany, France, Belgium, Spain and UK along with India, Bangladesh and China etc.
- All the employees are selected without any discrimination done based on the gender, religion, race etc. The rights are also protected for the employees in order to enhance their job security
- Sustainable business practices like opening the Green Stores in order to reduce the negative impact on the environment. Building Energy Management System is being adopted to reduced the consumption of the energy at the stores
- Forming the partnerships with the NGOs and training institute in order to safeguard the society as well as increasing the employment opportunities.
- Designing a code of conduct for the suppliers in order to treat the employees fairly under them in the form of working hours and wages.
a) In the context of Cuba, the economic system is system was controlled by the Socialist Government headed by the member of Castro family for along decades. The Government of Soviet Union was the main contributor of the economy of Cuba. At that time command economic system can be observed where the policies like free housing for the citizen, monitoring and controlling of the salary and daily wages by the Government, strict laws and regulations which are mandatory for the organisations while operating in Cuba etc. In this command economic system, the organisations that were operating in Cuba needs to follow the output benchmark of the Government. Any discrepancies in following the regulations are subject to the penalties (Ochoa and Pardo, 2012). The advantage of this economic system is the controlling power of the Government in order to maintain an equal economic status of the people and also to secure the living by giving guarantee to the job. All the officials under the Government of Cuba used to monitor the activities of the organisations and citizens. Thus all the three aspects like what to produce, how to produce and for whom to produce is on the hand of Government. This shows a strong interference of the Government in the decision making process of the organisations trading in Cuba. The disadvantage of this system is the restrictions in the operations of the business that are affecting the profitability and growth. Currently the collapse of the Soviet Union has brought planned economic system in Cuba where all the restrictions are abolished by enhancing the opportunities of the business organisations to manage their trade and affairs in Cuba.
b) In case of United Kingdomthe economic system is planned and managed by both the Government and other business organisations considering the preferences of the customers. The mixed economic system can be observed at UK where the Government has set certain regulations in the favour of the citizens and also for the organisations. Maximum of the decisions in the nation UK are taken by the market in the form of taste and preference as well as demand. Fixing the output is based on the demand of the market in UK. For example, in case of business organisations fixes their output decision based on the market trends and demand. The target audience will be as per the decisions of the business organisations and the process to manufacture the output is depend on the management of the organisation. The role of Government is based on the areas of employee’s and citizen welfare which are needed to be followed by the organisations operating in UK. The advantage is the less interference of the Government over the business which creates more employment opportunities towards the people and the disadvantage is the certain modifications in the Government regulations increase the business cost. For example increase in the rate of the VAT up to 20% in UK will gear up the operating cost of the organisations (Thomas, Hills and Dimsdale, 2010).
c) For the country China,under the leadership of People Republic of China there is some transformation in the economic system which can be referred to the Socialist Market economy. This is an economic system that involves the state owned sector along with that open market economy is also observed. Under this economic system the private sector has a significant part which is increasing the scope of the employment throughout China. The differences that can be observed in China with the western countries are the dominance of the state owned sector in China that is regulating the business. There are some business sectors which are directly under the control of the Government that are power generation, petro chemicals, aviation, coal etc. The Business decision making produce the goods or allocating the output is totally under the control of the business organisations operating in China. The interference is only there in the form of taxes, duties and business regulations which are needed to be followed. Currently the Government has only started business friendly initiatives which are attracting the major brands to set up their business in China in order to take the benefits of the economic growth that is around 8% (Tan, 2015).
a) Fiscal policy is the Government’s plan on the public spending and taxation structure in order to boost the economic system of the country. There are certain measures which are taken by the Government of UK in the business sector that is farming. As per the regulation, the qualifies business professionals under the business of farming can do the average up to five years for the sake of income tax. Another option is also there, that is they can also consider two years for averaging their profit (Gov. UK, 2015). This will encourage the farming business with high level of productivity and the policy regarding the tax system will help the farmers with the fluctuating profits of the years. The negative impact can be the new policies which are needed to design due to the separation from EU. The grants like Basic Payment System (BPS) are allowed only to the member nation of EU as a result the farming business will be affected. On the other hand the monetary policy is the modifications done by the Central bank that is Bank of England in order to control the flow of the money. The positive impact will be the lower bank rate that will help the farming business to explore and invest in the important areas and the demand will also be high due to the reduction in the inflation rate from 0.5% to 0.2% (Debortoli and Nunes, 2015).
b) After the Brexit vote, the demand of the housing business will increase as per the reports of the market research. The stabilised condition of the housing sector will grow over coming years as a result the sales turnover and prices will be increase. Around 3.3% of the prices will be hiked for the housing. The favourable condition is for the decisions for the separation from EU and also the Bank of England who are successful to lower the inflation rate as well as loan interest rates (Paechey, 2016). The price will be hiked due to the increase in the rate of VAT up to 20% which has increase the cost of the production and as a result the customers have to pay more prices for purchasing the houses which is negative impact in the housing business.
The objective of the competition policy is to enhance the level of competition and explore the opportunities for the business in the single market of European Union. The five competition policies and other legislations are as follows:
- Cartel: It is a joint forum under the EU which brings uniformity in the pricing structure in order to reduce the immoral and unethical areas of the business and also safeguard the customers against exploitation. The organisation Primark needs to follow the agreement in order to operate their business in the regions under EU (Damro, 2010)
- Liberalisation: The monopolistic sectors like retail banking, transport, mobile communication are liberalised and ensure private sector to explore their business in this areas in order to bring competition in those areas and also to promote quality services to the people.
- Aid Control: The subsidies that are provided to the airline sector are subject to State-aid control in order to prevent the distortion in the single market of EU. This will bring uniformity in the approach and restrict the unethical competition among the organisations.
- Merger: All the integration in the business like the mergers, acquisitions is investigated properly by the authority in order to protect the competition level. This will protect the dominating group to control the market and brings sound competition among the organisations.
- Competition Act 1988: This is an Act that brings restriction in the monopoly form in the business by allowing the private organisations to operate their business as a result the consumers will get more choices at a reasonable prices.
- Enterprise Act 2002: All the business strategies in the form of mergers and acquisitions are controlled with this Act. Competition Appeal Tribunal (CAT) is being formed in order to give fair decision to the company’s appeal against any wrong or unethical decision (Fernando, 2011)
The organisation can be the Primark who is operating their fashion business throughout Europe. The competition policy will create positive impact on the pricing which will provide advantage to the customers in the form of matching their choices at a reasonable price. The innovation in the technology, dynamic efficiency will be enhanced by the competition policy. The negative impact can be the uniformity in the approaches like pricing will hamper the business growth of the organisations. The interference in the integration of the business by controlling the merger will influence the business organisations to operate freely in the UK market.
Perfect competition is referring to a market condition where there is the existence of a large number of buyers as well as sellers that deal in homogenous products. In addition to that, in respect of perfect competition, there are no legal, social, or technological barriers regarding the entry or exit of companies. In perfect competition, sellers as well as buyers have complete awareness regarding the current market price regarding a product. (Palmer, 2011) As a result, none of them are selling or buying at an increased price. Hence, in respect of perfect competition, there is the prevailing of same price in the market. The buyers and sellers under perfect competition cannot do the influencing of the market price through the increase or decrease of their purchases or output. The industry does the determination of the market price of products in perfect competition implying that the determination of the market price of products in perfect competition occurs through the consideration of two market forces, viz. market demand as well as market supply. Market demand is explained as the summation of the quantity demanded by each individual company in the industry. Market supply is referring to the summation of the quantity supplied by each individual company in the industry. The price of a product is determined in perfect competition at a point where there occurs the intersection of the demand and supply curve with one another. This is considered as the point of equilibrium and the price is considered as equilibrium price. Moreover, the quantity demanded as well as supplied at this point is referred as equilibrium quantity. (McCalman, 2015)
Pricing and output decisions for perfect competition market structure
Regarding this structure of the market, no individual organization will be deciding on the market price and governments are not having any price regulations. In this market structure, determination of price occurs through the interaction of the market forces regarding supply as well as demand. Price is generally considered from the equilibrium regarding supply and demand.
Monopoly is referring to the structure of the market where there exists a single producer or seller having control over the total market. This single seller is dealing in the products that is having no close substitutes and is having a direct demand, supply as well as product prices. In monopoly, there exists a single producer regarding a product influencing the product price by making changes regarding supply. The producer under monopoly is known as monopolist. To increase the sell, the monopolist does the reduction of the product price whereas to decrease the sell, the monopolist increases the product price. Under monopoly, there occurs no distinction within organization as well as industry. (McDonald, 2012) The organizational demand curve is constituting the demand curve for the overall industry. The demand curve of the monopolist is considered to be Average Revenue (AR) that will be sloping downward.
Pricing and output decisions for monopoly market structure
The profitability gets increased through the production of the quantity where marginal cost is equal to marginal revenue. It is taking assistance from the demand curve for finding out the price that will be persuading the customers for buying the product quantity, charging a higher price level from the customers since they are not having any option. Also, does the utilization of average aggregate cost as well as average variable cost for finding out profits or losses.
Diversity regarding particular conditions of the market is working against the growth of a single, comprehensive definition of how oligopoly is determining the price as well as output. It comprises of the ‘tight’ oligopoly condition where two or three organization is dominating the overall market as well as the ‘loose’ oligopoly condition in which six or seven organization will be occupying the maximum market share. Other organizations are sharing the balance that takes into consideration differentiation as well as standardization. It includes the cases where organizations are acting in agreement and where they are functioning in an independent manner. (McDaniel, 2011) As a result, the presence of different types of oligopoly is preventing the growth of a basic theory regarding price as well as output. The component of mutual interdependence in oligopolistic market will be further complicating the aspect of determining the price as well as output.
Pricing and output decisions for oligopoly market structure
In this market structure, the ability for setting the price is with the sellers. The prices are set at an increased level and output at a decreased level helping in the achievement of economies of scale.
When an industry comprises of only two huge organizations, each selling similar products as well as constituting half of the entire market, there is every possibility of collusion amongst the two organizations. The organizations might be agreeing on a price, or do market division or assigning quota or merging themselves into a single unit and do the formation of a monopoly or try differentiating their products or accepting the price that the leader firm fixes and so on. Regarding the duopolistic situation, there will be the production of perfect alternatives engaging in competition regarding price, and the organization that has reduced expenses, improved goodwill as well as clientele will be driving the rival organization out of competition and will be establishing a monopoly. If there occurs differentiation of the duopolistic products, every organization will be closely monitoring the actions of the rival organizations. (McDaniel, 2011) The organizations that manufacture better quality goods with reduced expenses will be earning abnormal profits. Each organization will be fixing the commodity’s price as well as expanding the output in accord with the commodity’s demand in the market.
Pricing and output decisions for duopoly market structure
In this market structure, there exists price leadership by the large organization amongst two organizations in which the smaller organization will be following the price leader of the bigger organization.
Market forces influence organizational responses in different manners. Market forces comprise of things like supply, demand as well as marketing to consumers. Supply is considered to be the number of products or services having their availability in the market. Demand is considered to be number of products or services that are having the desirability in the market. For instance, there might occur the placement of a new soda in the market where the soda’s supply is more than its demand. Therefore, there is an inverse relationship between supply as well as demand. Firms want to reach a point known as equilibrium in which supply and demand is considered to be equal and is considered to be the perfect point in the market. (Lind, 2014) Price also measures supply as well as demand. Market is an activity that changes the point of equilibrium regarding supply as well as demand. Marketing increases the demand regarding a product or service that as a result shifts the equilibrium and is considered to be the point in which supply as well as demand is meeting the needs of the customers.
Another example is that when an ecommerce organization is shifting from web to the mobile platform completely, then it actually states that it is recognizing the manner by which individuals are showing their interest regarding mobile shopping. Finally, every firm is required responding to four basic demands of the market that might be taking different shapes as essential organizational success indicators viz., quality, cycle time, satisfaction of customers as well as profitability. There should occur the addressing of every market forces concurrently in accord to the standards that the market defines. While a business might be trading a response to a market force for another market force, like compromising quality for boosting profits, they might do it in a temporary manner. At certain point, the market will be punishing any entity that fails to completely respond in an effective manner to one or every market pressures. (Furnham, 2012). Marketing principles forces will always be creating pressures on the firms for performing. This will be leading towards excellent products such as iPhones as well as brilliant customer experiences like the one that occurred with Zappos. Also, for achieving success, companies needs to constantly look for methods towards efficiently managing as well as responding to the market forces. The firms that will be doing it effectively will be earning the right for continuous participation in the market while the others that are unable to do so will be losing their market share.
Businesses as well as cultural environments are having a massive impact over a business. This can be explained through the example of Nestle which is a Swiss organization having the involvement towards producing as well as manufacturing food and beverage globally. It is considered to be one of the biggest multinational organizations of the specific sector regarding food and beverage manufacturing. Some years back, allegations were made against Nestle for selling horse meat as beef. Because of this, in Europe a strong restriction was imposed on the meat products of Nestle. Nestle was also made to seek apology from the customers because of this wrongful act. This is reflecting the cultural aspect. Individuals from every country normally do not consume horse meat. (Freeman, 2010) If every individual would eat horse meat, then this scenario would not occur at all and this would have been taken very normally. Therefore, cultural environments are shaping the behavioral aspect regarding the business. There also exist different factors regarding the cultural environment such as language, religious beliefs, norms, values and may more. Each of these factors is playing a significant part regarding the behavioral aspects. For instance, by the term “yes”, the managers in the US are expressing that they have heard as well as agreed with the matter, whereas by the same word, “yes”, Japanese managers might be expressing that they just heard but might or might not give consent to the matter. (Freeman, 2010) One more example is that the alcohol manufacturers in UK will not be getting complete publicity in the Arabian countries since there is restriction regarding the consumption of alcohol in these countries.
International trade is having a major role towards the business organizations in the UK. Basically, there are various business organizations in the UK that are having the engagement in this kind of businesses like the Midlands World Trade Forum (MWTF), China-Britain Business Council (CBBC), East Midlands International Trade Association (EMITA) and so on. These are conducting businesses in China, India and also in the USA. These kinds of organizations are getting certain competitive advantages. For instance, there is the existence of cheap labor in China, India as well as Bangladesh. When a British organization will commence a manufacturing business in the UK, there will be higher cost of production since the cost of labor is higher there in comparison to China, India as well as Bangladesh, whereas if the same organization will be setting manufacturing plant in China, there will occur reduced cost of production. (Fernando, 2011) There are various other facilities that international trade is providing such as experiencing global exposure, opportunity of selling in high volume, skilled staffs and many more.
The impact of the global factors on UK business organizations are mentioned as under,
- Political factors – This is associated with the changing aspects regarding the government as well as policies of the government. The business operations are hugely influenced by the political factors. For instance, organizations that are functioning in the EU need to adopt directives as well as regulations that the European Union has created. The political arena is having a major influence on the business regulation as well as the customer’s spending power, therefore the business organizations are required considering the political stability of the government, policies of the government and so on.
- Economic factors – These factors does the involvement of the changing aspects in the international economy. An economy does the witnessing of the variations regarding economic activities. There should occur the development of the strategies of business taking into consideration these variations. (Dwyer, 2012) Other economic changes influencing businesses take into consideration changes in the rate o interest, rate of wages, as well as the inflation rate.
- Social factors – The social factors are providing insights into behavioral aspects, tastes as well as pattern of lifestyle regarding a population. The purchasing patterns hugely influence the structural changes regarding the population as well as regarding the lifestyle of the customers. In an international environment, there is the significance for the designing of the strategies of businesses taking into consideration the differences associated with social as well as cultural aspects that is varying from one country to the other country. (Dwyer, 2012)
- Technological factors – These factors assists the businesses in reducing the costs as well as developing the new products. With the arrival of modern technologies of communication, the technological factors achieved huge significance in the business world. Business organizations are required considering the recent pertinent technological improvements regarding their businesses for staying in the competition. Technology is considered to be an essential catalyst for globalization. To design the strategies of business, organizations are required considering whether using the technological aspects will be allowing the business organizations towards manufacturing products as well as services at reduced expenses. It has also become very easy in respect of the business organizations for communicating with their customers globally.
The impact of Brexit on the business organizations in the UK are mentioned as under,
- Lower Direct Tax – There will occur the reduction of corporation tax to less than 15% from the present rate of 20% for quelling the fear of the UK losing its reputation as a hub of business organizations.
- Higher Indirect Tax – After leaving the European Union, it will be providing Britain the opportunity for varying its VAT. Without making any considerable changes in the present system of VAT, the government is planning to do the addition of more products as well as services to the list that current list. This addition to the VAT will be increasing the burden of taxes on the UK business organizations that will be passed on to the customers.
- Murky labor laws – With the presence of Brexit, the free flow of laborers will cease to exist amongst the European Union countries. This might be triggering the homecoming of various UK expats, the business organizations in the UK might be losing out on the services of skilled staffs who came from a member state of the European Union. (Daft, 2015)
- Reduced funding – Since, London has been the epicenter regarding every financial activity in respect of the European Union and major American as well as European banks are having their subsidiaries in the UK, Brexit will compel Brussels for coming up with a new financial nerve- centre in respect of the European Union that will result in Britain losing a large portion of its trade with the European Union that will make it a less worthwhile destination in respect of foreign banks. (Fernando, 2011) Also, the mass departure of the banks will be moving out of the UK the jobs associated with financial services but will also be reducing the availability of the financial support regarding domestic businesses.
This case study delves with the aspect of business environment where it has been explained the ways buy which pricing and output decisions is determined in the market structures such as perfect competition, monopoly, oligopoly as well as duopoly. Also, the ways in which market forces are shaping the organizational responses have been illustrated, as well as the business as well as cultural environments shaping the behavioural aspect of an organization has been judged. Moreover, the significance of international trade to the business organizations in UK has been discussed, the influences of the international factors on UK business organizations have been analyzed and lastly the impacts of the policies of Brexit on business organizations in the UK have been evaluated.