Business environment

Business Environment
Unit 1

Table of Contents

The aim of present paper would be to explore the business environment pertaining to business organizations in UK. There would be mainly four tasks addressed in the present paper which would aim to provide the purpose of different business organizations, to assess the nature of national environment in UK, behavior of organization in market environment and assessing the global factors shaping the business activities in England.
Task-1 Business organizational purpose
1.1 Identify the purpose of different types of organizations in England
Business organizations in England are mainly divided in two sectors which are private sector and public sector. Private sector is formed by the organization types such as sole traders, companies, partnership forms and franchises while public sector organizations would include local government, central government and other businesses owned by government (Schrodt, 2002).
Sole traders are the organizations which are managed by an individual and form the popular form of businesses in small business segment for England. Sole traders are not limited liability means that in case business fails and debts are created then person running the organization would be personally liable to pay those debts. The purpose of creating sold trader organization would be to control the entire business as individual running organization would get 100% of the profit earned. Partnership firms are similar to sole traders but there is more than one owner in partnership firm and common examples of partnership firm in UK would be formed by accounts, dentist and lawyers.
Private limited companies are formed wherein shareholders would own the share of particular business and board of directors would be chosen along with CEO to make decisions. Public limited companies would be having little difference from private limited as in public limited companies shares would be traded on stock exchange and anyone can bought them unlike private limited companies wherein stocks would be held by relatives of business owner. Franchises are formed by taking permission from organization to sell goods in their brand name in particular area e.g. McDonalds. The major purpose of all the private organizations would be to make profit from the business activities. Subsidiary goals for these private organizations would include developing brand image, good customer base and offering high quality products (Schein, 1992).
In order to form the public limited companies directors should apply to stock exchange council. Nonprofit organizations which gets funding from the government are also part of the public sector organizations. State organizations are run from the state and decision making pertaining to the organization would be done at state level while for central organization decision making would be done at central level. The purpose of public sector organizations would not only to make profit but to continue community services.   
1.2 Describe the extent to which the organization will meet the objectives of different stakeholders
Stakeholder can be defined as a person or organization that has direct or indirect stake in the organization and can affect or get affected by the action, policy or objectives of the organization. Stakeholders can be of two type primary (who have direct interest in business organization) and secondary (who have indirect interest in business). Some of the important primary stakeholders in any business organization would include owners, employees, customers and suppliers. Owners want their business to be successful to gain profit and an organization would have moral & legal responsibility to give adequate return to owners. Employees are a vital part of the organization and an organization need to have efficient employee in order to become successful (Needle, 2004). Organization expects employees to work dedicatedly to attain organizational objectives while organization would meet the employees’ objectives by providing them good pay and growth opportunities. Customers are the stakeholders around which business would be oriented. Business organizations tend to fulfill customer needs by providing quality goods and reasonable prices. Secondary stakeholders of the organization are state & federal government, trade groups, competitors and financial institutions etc. These are indirect stakeholders and expect businesses to run according to general rules.    
1.3 Explain the responsibilities of the organization and strategies employed to meet them
Organizations are having ethical and moral responsibilities not only towards its stakeholders but also towards the wider community in which these are operating. Corporate social responsibility would be involves the creation of healthy society which modern businesses creates around them. Businesses are also bounded by the legal responsibilities pertaining to the area of consumer law, product law and employment law etc. These legal binding require organization to operate as per generally applicable rules. Corporate social responsibility defines the social responsibilities for the organization towards society (Cooke, 1987). There can be mainly eight strategies which can be adopted by an organization in order to serve their responsibilities:
§  Growth: Involves expansion of business e.g. product, size and markets
§  Stability: Consolidation for business organization
§  Profitability: Gaining profit especially in private sector
§  Efficiency: Using organizational resources in appropriate manner
§  Survival: Developing competitive advantage for long term sustainability
§  Globalization: Expanding in international markets
§  Merger and acquisition: Benefits from integration such as new customer base
§  Market leadership strategy: To evolve as the best in market
Task-2 Nature of the national environment
2.1 Explain generally how economic system attempt to allocate resources effectively
An economic system can be defined as the organized way developed by state or nation in order to allocate their resources. There are basically three ways in which resources are allocated in economic system which are given as under:
§  Mixed economy: In case of mixed economies state and private sector would direct the economy. Mixed economies can be defined with strong market regulations and would include the governmental provision of service goods and government run enterprise. Disadvantage of mixed economy is that the purpose of producing goods and service would be for benefiting society rather than economy (Montana and Charnov, 2008).
§  Capitalism: In capitalism economic systems capital assets would be privately owned and would be brought to market so as to gain profits. In these economies parties carrying out transaction would determine the price. There would be assumption for existence of free market. The major issue with capitalism economic system would be inequality of income, unbalanced growth and class struggle. 
§  Socialism: Socialism in the economic system can be characterized by the social ownership taken for the means of production and economy would be managed by co-operative means. In socialism economy system of production and distribution for goods would be directly aiming at satisfying human needs. Advantage of socialism economic system would be to offer survival need for all, freedom for work and support for disable members. Disadvantage of socialism economy would be discouraging for working hard and no inherent advantage for participation.
2.2 Assess the impact of fiscal and monetary policy on business organization and activities with special reference to the national environment in England
Fiscal policy in national environment to England would include spending from government, borrowing in case of shortfall in income, repayment of debt and taxation. Fiscal policy defines the way through which government would adjust their spending so as to influence the economy. Major tools for fiscal policy would be government spending and taxation. Fiscal policy affects macroeconomic variables such as income distribution, aggregate demand and resource allocation pattern (Islam and Zyphur, 2009).
 Monetary policy affects economic environment by influencing exchange rate, interest rates, bank lending and money supply etc. The major influence of monetary policy can be observed in terms that changes in interest rate would reflect impact on long term interest rate such as mortgage rate. Low interest rate would mean lower business expense and higher profits. Lower rate can enhance higher home purchase giving higher business to construction industry. Higher interest rate cause higher exchange rate for Pound and leading to low import cost.
2.3 Evaluate the impact of competition policy and other regulatory mechanism on the activities you expect of your production company in England.
A production company needs to produce and deliver best possible goods with cost effectiveness otherwise competition would allow consumer to buy from anywhere else. In free market economies businesses are considered as a part of the competition game and consumers would get benefited through competition prevailing in marketplace. In order to develop free market concept and proper functioning for a production it is important that regulatory bodies should prevent anti-competitive behavior. Agreement between big productions companies forming cartel should be restricted, dominant position for big producers should be abused wherein a big market player would tend to outcompete their rivals and government bodies should tend to open market for perfect competition so that consumers can get benefits (Atkinson & Joel, 1978).
Task-3 Organization behavior in market environment
3.1 Explain generally how market structure determine the pricing and output decision of businesses
Market structure would be determined by the number of organizations producing homogenous product prevailing in the market. There are several market structures prevailing in economics such as monopolistic, oligopoly and duopoly etc. Monopolistic competition would be the structure wherein large number of firms are having small market share with differentiated product. In oligopoly small number of firms would be controlling major stake of the market while in duopoly two firms would be holding most of the market share e.g. Coca –cola and Pepsi in beverage market. Monopsony would be the condition when there is one buyer in market while Oligopsony would be the condition wherein several sellers would meet few buyers. In monopolistic market price and output decision would be decided by demand and supply of goods, in oligopoly market price and output decision would be decided by small number of firms with mutual understanding while in duopoly market price and output decision would be made based on competition and mutual understanding of the two suppliers. In case of Oligopsony and monopsony market price and output decision would be made by consumer demand (Schultz & Schultz, 2010).   
3.2 Illustrate the way in which market forces shape organizational responses using a range of examples, with special reference to market forces in England and how they may shape the responses of the planned production company in England.
There are several forces shaping the organizational response towards market and according to Porter’s five force model major forces shaping organizational response can be given as under:
§  Threat of new entrants: Any new organization entering in market with innovative idea can take away customer base of Sainsbury but there are low chances of new entry in the market due to several barriers.
§  Bargaining power of supplier: Due to high number of suppliers their collective bargaining power is low.
§  Bargaining power of buyers: With high number of retail stores in UK consumers have high bargaining power to purchase from any place. Sainsbury is facing challenge from Tesco, M & S and John Lewis in terms of pricing and quality (Steinmetz, 1983).
§  Threat of substitute products: Substitute products or products from other player would create the threat. For example in UK market Morrison and Asabi are facing high degree of threat from Tesco.
§  Competitive rivalry within the industry: With high number of supplier and mature industry Sainsbury have to compete with several players based on the quality and price aspect.
3.3 Judge how the businesses and culture environments in England shape the behavior of your planned production company.
Example of Avon Rubber which is dealing in UK can be considered in order to understand the impact of business and culture environment of the organizations in England. There is stiff competition in the market due to which Avon is looking for expansion in overseas markets so as to extend their customer base and profitability. Further Avon involves in consumer research pertaining to the industry so as to understand the consumer requirement so that they can produce relevant products and delivered to their consumers. 
Task-4 Assessment of global factors shaping business activity in England
4.1 Discuss the significance of international trade to UK business organizations
International trade in UK would cover trade between England and rest of the world. Without having sufficient international trade there would be lack of resources in UK which may hamper the overall progress for the nation. In order to shape the international trade there are two vital factors which are trade relations between different countries and cost effective labor in developing countries. Invention for new technology and access for the cheap labor resources would shape the international trade activities for England in context to international trade (Rogoff, 2011).
4.2 Analyze the impact of current global factors on UK business organizations
Some of the key impacts of global factors on UK business organizations can be given as under:
§  Social: Requirement from consumers would change from time to time and organizations need to understand and respond according to changing consumer pattern in order to deal with the situation faced.
§  Technological: Development of new technology would create new opportunities and challenges for the organization. Sensing the change and coping with the change are two important activities which organization needs to do so as to manage technological changes.
§  Political: Political changes happening around the world would shape the business environment and nations with instable political situations would be left out. UK is among the countries having strong political stability and this would helps other countries to build good trade relations with UK (Wilfred, 2009).
§  Environmental: Businesses in UK which are not environment friendly would not be promoted either by government bodies and other business stakeholders.
§  Economical: Changes in economic situation around the world impact on business organizations in UK as international relations would be developed based on the economic situation in the foreign country.
4.3 Evaluate the impact of policies of the European Union of UK business organizations with special reference to your planned production company in England
European Union has gained high amount of power for guiding policy in UK business organizations with high focus towards the automobile industry. For organizations such as Avon Rubber dealing in automobile industry there are increasing concern for the environment. EU has developed strict policies in order to strengthen the environmental protection and explore eco friendly ways for moving in right direction. Consumer policies developed by EU would enable the consumers for health and safety aspects and help them to improve their life (Maynard, 2004).
Present paper has helped in order to assess the business environment pertaining to organizations dealing in UK. Purpose and type of organizations have been understood in context to UK and there are mainly two sectors found for type of organizations which are public and private. Second objective i.e. nature of environment, deals with economic system prevailing in UK and impact which it has on the business organizations dealing in UK. Organization behavior for UK businesses in market environment was evaluated and finally global factors such as PESTEL have been evaluated to understand their impact on business organizations in UK.
Schrodt, P. (2002). The relationship between organizational identification and organizational culture: Employee perceptions of culture and identification in a retail sales organization. Communication Studies, 53, 189-202.
Schein, E (1992). Organizational Culture and Leadership: A Dynamic View. San Francisco, CA: Jossey-Bass. p. 9
Needle, D (2004). Business in Context: An Introduction to Business and Its Environment.ISBN 978-1861529923.
Cooke, R. (1987). The Organizational Culture Inventory. Plymouth, MI: Human Synergistics, Inc.
Montana, P., and Charnov, B. (2008) Management (4th ed.), Barrons Educational Series, Hauppauge:NY
Islam, G and Zyphur, M (2009). Rituals in organizatinios: A review and expansion of current theory. Group Organization Management. (34), 1140139.
Atkinson, J; Joel O. (1978). Personality, Motivation and Achievement. Hemisphere Pub. Corp. ISBN 0-470-99336-7.
Schultz & Schultz, D (2010). Psychology and work today. New York: Prentice Hall. pp. 121–122. ISBN 978-81-317-3370-7.
Steinmetz, L. (1983) Nice Guys Finish Last: Management Myths and Reality. Boulder, Colorado: Horizon Publications Inc.
Rogoff, B (2011). Developing Destinies: A Mayan Midwife and Town. Cambridge: Oxford University Press.
Wilfred P (2009). Childhood in an Indian Village. Institute for Indian Studies. Neewin Publishing, Toronto etc.
Maynard, A. E. (2004). Cultures of teaching in childhood: formal schooling and Maya sibling teaching at home. Cognitive Development, 19(4), 517-535