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Diploma in Business
Unit Number and Title
Unit 1 Business Environment
This Unit 1 Primark Business Environment assignment distinction Copy has been prepared for Business Environment. In this assignment, organisation named Primark discussed. Nearly every organization has different purpose and objective which are based on its establishment. The purpose of the organization may be to earn huge profit or for the benefit of the society. Generally the organization has the motive to satisfy the need of its customer. All the organization is greatly affected by the environment in which it is running business. The environmental factors which generally affect the business are social, political and economical. The profitability of the business environment very much depends on how these factors affect the business. The globalization has provided the business all over the world a huge market to conduct their operations. The organization is free to operate their business all over the world without any restriction. This provides the business to manufacture the product at low cost and optimum quality by achieving economy of scale. Nearly all the country is interdependent on each other for the resources to manufacture a product or provide any service. This provides the organization low cost and good quality resources to manufacture product or service. It also benefits the customer with the availability of wide range of product with the best quality. The companies have ample of opportunity to grow while conducting its business globally.
Primark is a private company whose prime objective is to increase the return of its shareholder. The company is subsidiary of ABF (associated British food) group. The company has 238 branches across UK, Ireland and Europe. The company is owned by certain group of shareholder who manages the activity of the business. The main focus of the shareholder is to maximize their return on the capital invested by them. The government doesn’t exercise much control over the decision of the organization as they are not using the fund of the public for running their business. Primark generally focus on identifying the need of the customer and outsourced all of its manufacturing work to companies in Asia and Europe to achieve economy of scale. The company operates with a motive to increase the number of its branches from the current level and serve more number of people to earn high profit. Primark is engaged in garment business and generally focus on delivering the product to the customer on time and at the best cost. The company focus is on increasing its volume of sales and is achieved it through economy of scale and efficient distribution. The various types of organization to run business are private, public, Government, voluntary organization, charitable and cooperative etc ( Brennan, Binney, McCrohan, & Lancaster, 2011).
There are various stakeholders who have different interest with the company and the Primark is meeting the needs of the various stakeholders in different ways. The shareholder which have interest with the company are owner, customer, employees, supplier, finance group, government etc.
Every company has various responsibilities which the company is required to fulfill while conducting its operations. The Primark has various responsibilities as an organization and the strategy followed by the company to meet them are-
The economic system is the system of production, resource allocation, and distribution of goods and services within the society and given geographical location. Scarcity of the resources is the challenge which the individual or the nation faces. The economic system helps in effective use of the limited resources. The nation adopts the different ways to manage these resources often known as economic system. The various types of the economic system which can be followed by the nation are traditional economy, planned economy, market economies and mixed economy. (Newton, Etzion, Rasche, & Schuler, 2014).
Most of the developing countries follow mixed economy where the economic control is in the hand of both government and private individuals. The mixed economy incorporates feature of both capitalized as well as socialism to utilize the resources of economy in best possible way. The mixed economy facilitates simultaneous development of both private as well as public company. All the companies have freedom of choice of operation, although certain restriction is applied on certain sector to regulate price for the interest of the general public. This help in effective planning of economic activity and helps in economical development of the country. Under mixed economy both price mechanism and price regulation operates simultaneously. The economy generally follows price mechanism but in the situation of shortage the price regulation is bought into effect. They help the economy in attaining both private as well as social motive. The mixed economy helps in preventing the monopoly of various organizations in the market.
Cuba is generally following the planned economy where the government controls the economy. The state has the major decision over how to distribute resources. All the companies in Cuba are owned and operated by the government and the labor forces is employed by the state. The price in the market is governed by the government and the private individual doesn’t have much control over it. In some organization the government exercises few control on the other hand extensive control is exercise over some organization. This is generally a command economy where the resources are allocated as per the command of the government (Zsolnai, 2011)
The government uses both financial as well as monetary policy to control the plan the economy of the country. These policies facilitate the government to control inflation, stabilize economic growth, reduce unemployment and control balance of payment. The functioning and profitability of the business is very much affected by the financial and monetary policy followed by the government. This policy has very great impact on the economic activity of the nation.
Fiscal policies- The fiscal policy is plan of the government to control the income and expenditure within the certain period of time. The government generally makes decision on taxes and spending to control the economic cycle of the country. The government can control the economic growth by increasing or decreasing the tax rate. If the government wants to increase the growth than it will reduce the tax rate on the other hand if the government wants to control the growth than the tax rate needs to be increased. If the government wants to increase the growth in the economy than it will start increasing its spending on goods and service which will speed up the economic growth of the country. On the other hand if government is finding that the economy is growing very much fast the government will reduce its spending to control the economic growth. The fiscal policy also affects the farming business in various ways. If the government in its budget employees more resources for the development of farming business than the business which are engaged in farming business have much growth. If there is reduction in the tax rate on the farming product than it will increase the demand of the farming business on the other hand if there is increase in tax rate of farming product than it will reduce the demand of the product.
Monetary policies- The monetary policy is used to control the flow of money within the economy by increasing or decreasing the interest rate. The government can also control the flow of money by conducting the open market operations. If there is a sudden price rise in the economy the government can control the flow by increasing the interest rate and sell the government securities and treasury bills in the market so that the public starts investing their money and the price of the goods are brought under control. On the other hand in the case of the recession the government needs to reduce the interest rate and start purchasing its security and Treasury bill so the public stop investing and starts using the fund. The monetary policy of the government greatly affects the farming business. If the government reduces the interest rate it becomes easy for this company to raise fund for conducting their operations. On the other hand if there is rise in interest rate it becomes difficult for this company to raise fund as it increases the cost of their operations.
Fair competition between the companies is necessary for the growth of the economy. So the government needs to build the policies and other regulation to control the competition within the economy. This prevents the certain industry to follow the unfair mean to get the competitive advantage. The purpose of these policies is to promote fair competition within the market and improve the efficiency of the market. Effective competition policies of the government facilitate technology innovation and controlling the price between various suppliers. The competition policies have a huge effect on the functioning of the business. The competition policies followed in UK and their effect on the business are as follows-
The office of fair trading (OFT) is an independent body whose main motive is to ensure that there is fair competition within the market. The main function of this unit is to prevent unfair and uncompetitive trading. The objective of OFT is to identify and put right trading practice which are against the consumer interest and to investigate anti- competitive practice such as forcing retailer to fix minimum price( Phillips, 2016)
The competition commission is formed to check the effect of merger over competition. The unit investigates the merger and grants permission or restricts it after investigating the issues.
The competition act 1998 prohibits the companies from formation and operations of cartels and controls the misuse of dominant position on a national and local basis. The act was formed to avoid conflict between the organizations and conduct its operations fairly.
The enterprise act 2002 was enacted to detect and punish abuse of market dominance and formation of cartels. The main provision of the act was the assessment of the merger to be less influenced and more independent. The act has the provision of disqualification of director for breach of competition rules. The act prevents merger and acquisition that creates a monopoly.
Enterprise and regulatory reform act 2013 was formed to promote technology innovation which promotes dynamic efficiency in different market and effective price competition between supplier. The policy promotes to safeguard and promote the interest of the consumer through increase choice and lower price levels.
The company needs to consider the market structure before deciding its output and pricing decision. The pricing or output decision of the business is generally depends on the current position of the company product in the market. The price and output decision of the organization generally depends upon the demand and supply of the product in the market. The demand of the product depends upon the ability of the company product to satisfy the need of the customer. Market structure of the company depends upon number of customer in the market , ability of the company to influence the demand of its product, number of industry in the market and there sizes, types of product and the opportunity of the competitor to enter the market. The following are the market structure in which company operates its business-
The market forces play a key role in determining the pricing and output decision of the company. The organization needs to predict and influence of demand and supply on the price and output decision of the product and services.
The company is required to simultaneously increase or decrease the price of its product on the basis of demand. If the demand increases the company is required to increase the price of the product to earn profit on the limited stock on the other hand if the demand of the product decreases the company needs to decrease its cost to earn to cover the cost.
The competition within the market also plays a key role in determining the price and output decision of the company. If there are limited seller in the market the company can increase the price of its product and will concentrate on increasing the output of the company on the other hand if the competition in the market is very high the company is required to concentrate on reducing the price of the product (Stenzel, 2013).
The supply of the product also plays a key role in determining the price of the product. If there is increase in the supply of the product the company needs to reduce its price to attain consumer equilibrium. On the other hand if there is decline in supply of the product the company is required to increase the price to cover the cost of the product or services.
The policies of the government also play a key role in determining the price and output decision of the business. The government for protecting the interest of the consumer creates certain policies to control demand and supply in the market.
The environment of the organization plays a key role in profitability and growth of any business. The factors of the environment which generally affects the business are social, economical, political, global etc. Different government follows different policies to control the economy so certain situation may be favorable in one economy or may have the adverse effect in the other economy. The various political parties also affect the functioning of the business. The social factor is also one of the biggest factors which affect the business in many ways. The preferences of the customers changes with the change in the market. A product may have huge demand in one market and may face difficulty in the other market. The social issues with the company may also lead to the failure of the some business. In UK certain business faces problem due the issue with the public which caused the huge loss to the company. The company before entering the market should determine the effect of various factors which are going to affect the business. The organization should choose the product after considering the preferences of the customer within particular region (Svensson, & Wagner, 2015).
Nearly all the companies over the world are interdependent on each other for resources to run the economy. Through globalization the company is free to conduct the business in any part of the world. It helps in proving the huge market and opportunity for the company to grow their business. This help in development of innovation technique and improving the quality of the product and services. It is hard for the country to survive within the scare resources. The company needs to dependent on other country for certain resources which are not available at the particular location. The international trade is also helping the customer by providing product and services which are not available in the local market. The current negotiation of EU with US to create the world biggest free trade area will provide the further opportunity of the business organization in UK to grow their business. This will help the companies in UK to diversify their international link. On the other hand most of the Britain exports goes to other EU countries and will be counterproductive if the barrier is put on trade ( Brewster, 2011).
The Free trade policy of the EU is helping growth of business of the member countries. It helps in availability of the resources which are not available in the local market at best price and best quality. The cost incurred on manufacturing certain product may be high in certain location so the company can import those goods from the other country to reduce the cost of the product. The policy will also help the company in UK to provide global competitive advantage and strengthening the economy of the country. The international trade also helping the organization in UK to attract latest technology to conduct their operation which helps in improving the quality of the outcome of the product and service. It also helps in growth of economy by attracting huge amount of foreign capital and attracting latest technology from all around the world. The international trade is proving the huge market to the business of UK to expend their business. This also helps in improving the standards of the public of UK by proving optimum quality product and services (Delcour, 2016).
The change in global factors affects the business all over the world. Economy of all the countries is interlinked with each other. Change in certain factors affects the business all over the world. The negotiation of EU with the US to create world biggest free trade will affect the organizations all over the world. It will affect the business of the countries which are linked with it. These factors are generally under the control of the organization. The global factors which are affecting the business in UK are as follows-
The policies of EU have a great impact on the functioning of the organization in UK. The EU doesn’t impose any tariffs on the import and export between the member states. This helps the organization in UK to easily acquire the resources which are required for effectively conduct the business. It helps the customer with the availability of the wide range of product which is not available in the local market. The EU is the largest market in the world which facilitates free trade between the members state. The membership of EU has increased the opportunity and scope of business for the Organization in UK. This has helped business to conduct their business with the other member of EU without any restriction. The organization in EU is free from abolition of selling tax and other restriction imposed on them. Due to this the organization has freedom to conduct their business and enjoy higher profit and operates more freely without the involvement of the government. The business in UK is not bound by any restriction on imports and exports of the goods on the other hand other countries have to meet all the regulation while conducting their business. The EU has facilitated free trade between the member states.
The Competition policy of EU ensures that there fair trade between the member’s state and the product is available at best price and optimum quality to the customer. The policy helps in protecting the organization to use unfair means to get competitive advantage. It also helps in controlling the price of the product in the market for the benefit of the customer. This has increased the opportunity for the small business to conduct their business ( Eroglu, 2015).
The employment policies of the EU help in protecting the interest of the employees from getting exploited. The policies help in improving the standard of the living of the employees of the member’s country. The policies also help the employees with the equal opportunity to grow.
The policies of EU which affect the UK business are as follows-
So it can be conclude that the environment of the business plays a key role in the functioning of the business. The organization needs to consider the effect of the entire factor while running their business. The rise in international trade has provided ample of opportunity for the organizations to grow their business. Nearly all the countries are interdependent on each other as all the resources are not available at the particular location. The economic structure of the company also affects the business in many ways. The company needs to consider the market structure before making price and outcome decision of the product and services. The price and output decision of the company depends upon the demand and supply of the product. The company also needs to consider the effect of financial and monetary policy of the government on the current activity of the business. So the company must understand the market structure for growth and profitability of the business.
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