Unit : 1 Business Environment

Pearson BTEC Level HNC/D Diploma Business- Unit : 1 Business Environment

Unit Description

This is solution of London School Business Environment Assignment Help, it is part of HNC Business course. In This assignment, with business environment, market research and economic issues are also part of it.

The business environment

Introduction

The business environment is ever changing however key aspects never change. The diagram below shows the business environment. Organisations have to be aware of their competitors, the industry as a whole and the wider environment. All of these factors affect the running of organisations and need to be studied as a result.

business-environment

Lo1: Understand the organisational purposes of businesses

Q1.1 Identify at least four different types of organisations that exist in the U.K. Select two types of organisations from those identified and state their purposes.

Organization behavior refers to a social unit, working to achieve a common goal and as connection with the external environment.

The four organizational types in UK are

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Sole Traders – The owner in this kind of organization is one person. He/she owns the legal responsibilities for the losses, bills, and record-keeping of the business.

Private Limited Companies – The members of the limited companies are its shareholders. Their liability is limited to the extent of the value of shares which they own but have not been paid for.

Public Limited Companies – This is similar to the private limited company, with the difference that a public limited company trades shares publicly in the market, like, in London Stock Exchange.

Partnerships – All of the partners in this business form share the responsibility of the business personally. They all have legal responsibility for losses of business and bills related to business.

All these organizations are required to register with HM Revenue & Customs.

The purpose with which a sole trader organization is set is providing services and earning revenue by service charges put on the customers. The purpose of public limited company is providing services and augments the shareholders’ return.

From the several organizations, four renowned UK organizations include J. Sainsbury, Standard Life, Barclays, and BT Group.

From these, I would lie to discuss about Barclays and the BT Group. Barclays’ purpose is helping people realizing what they aim at and this is done in an adequate and ethical manner. (Barclays, 2014) BT group’s purpose is bringing the best technology together with the best networks and utilizing the proficiency and knowledge of people to the optimum level. (BTPLC, 2014)

Q1.2: Select an organization of your choice and describe the extent to which this organization meets the objectives of its stakeholders.

HSBC is a popular organization, which has its origin in UK. HSBS makes consistent efforts towards meeting the stakeholders’ expectations. Stakeholder can be any party that has direct or indirect interest in the company transactions because they get impacted by the company operations. (Investopedia, 2010)

HSBC’s stakeholders, their possible objectives, and the efforts of HSBC are:

Governments – The objective of government is betterment of community.

HSBC actively conducts sustainability programs so as to provide input, and guidance to UK’s community.

Customers – The objective of the customer is product satisfaction.

HSBS puts in a lot of time for understanding the client requirements for providing accurate investment solutions.

Employees – The objective of employees is job satisfaction

HSBC endeavours actual diversity. It tries to build an open, supportive, and inclusive working environment at different organisational levels.

Non-governmental organisations and Non – Profit Organisations – The objective is to improve the conditions of the community.

HSBC works with NGOs to understand the issues and share with them the sustainability risk management.

Suppliers – The objective of suppliers is continuous business

HSBC ensures that the suppliers abide by the Ethical Code of Conduct of HSBC. It checks this through regular audits for longer relationship.

Shareholders – The shareholders’ objective is to achieve maximum return

The company keeps in contact with the shareholders regularly through meetings. So as to answer their queries and update them on the company’s status (HSBC, 2014)

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Q1.3: Explain the responsibilities of the organization you selected in Q1.2. In addition, explain the strategies employed to meet these responsibilities.

HSBC’s responsibilities to the stakeholders are:There are several responsibilities that organisations have to the stakeholders. It is important that the organization maintains a balance between the business strategy and objectives and that of the other stakeholders. In an imbalanced situation, a risk may be losing the possibility of profit maximization. For instance, the customers would not prefer purchasing the product, or the employees would quit jobs or take leaves, which would impact the production and revenue of the business. Normally, the organisations is responsible towards the stakeholders for meeting their hopes as well as balancing the situation if a conflict takes place in needs of different groups of stakeholders.

Shareholders – Providing good return on shares

Employee – Fair pay as well as good environment to work

Suppliers – Prompt payment and customary business dealings

Customer – Providing the most suitable product within a fair price range and that satisfies the requirements.

Local Community – Not disrupting the community and providing them jobs.

Government – Providing the community with several jobs so as to augment level of employment.

HSBC makes sure that the shareholders’, employees’, as well as customers, and other stakeholders.

HSBC’s strategy comprises of creating a network of business, which links the world and captures options arising from creation of wealth as well as social mobility. The investment by the company in the market of retail businesses is done only when they are convinced that profitable scale will be attained. (HSBC Group, 2014)

The strategy that is implemented by HSBC for meeting the duties towards shareholders’ group is “to lend and invest responsibly, avoiding projects where the potential for social and environmental damage outweighs the economic benefits.” (HSBC, 2014) Environmental responsibility is also shared by the company with people as well as governments for reducing the damaging effects of human activities – land, air, and water pollution as well as depletion of resources. It encourages employee involvement in the community as well as undertakes effective education investment and programs.

Lo2: Understand the nature of the national environment in which businesses operate

Q2.1: Using a country or countries of your choice, explain how two economic systems attempt to allocate resources effectively.

An economic system takes account of the organizational behavior, production, and flow of the outcomes resulting from workforce, a variety of goods and services – tools of machine, technology, as well as consumer goods put to use as key in for supplementary fabrication, and the incorporated infrastructure and by which production, circulation, as well as distribution occurs. These methods are over determined by means of political, cultural, and environmental conditions in which they subsist. (Wilson, 2010)

There are three kinds of economic systems:

Command economies
Free market economy
Mixed economies
The fundamental economic issue originates due to the fact that people have unlimited wants but; in its comparison the resources for meeting such wants are quite limited. This resource limitation is the resource scarcity and due to this scarcity; quite a lot of economic decisions are requisite to be made for efficient resource allocation. (Investopedia, 2010) Read about: Business Marketing Principles

United States of America is an example of free market economy. Roughly perfect competition exists in all of the markets in such economic system. Here, the allocation of resources is done by means of price mechanism. In this economy, pricing and profit signify an incentive for manufacturers to act in a required way to maximize their earnings, which eventually optimises allocation of resource in the whole economy. The role of government is negligible.

United Kingdom economy is an example of mixed economy. Such an economy observes that both the public and the private sector participate and demonstrate vital functions in allocation of resources in the economy. The allocation of resources by the private sector is done per the resources’ supply and demand, and this allocation in the public sector is done through implementation of centralized planning. (Watson, 2012)

Q2.2: Using the UK as an example, assess the impact of fiscal and monetary policy on at least two businesses and their activities.

The United Kingdom is a leading trading power and is the third biggest economy of Europe, and has active involvement in the EU (EUbusiness, 2014) The country’s total area is 244 820 km². Its annual growth rate is 2.70%, GDP is 2440 USD billion and the GNP is 405274.00 GBP million. (Trading Economics, 2013)

Fiscal policy involves methods of the government for acquiring proceeds as well as how this revenue is spent. It comprises of borrowing as well as taxation. Monetary policy is the action of government in place to regulate the supplied amount of currency for ensuring that an optimum amount of money is in circulation.

The monetary policy in UK has a lot of flexibility, where the rates might change every month. In addition to these, emergency changes in the rates might be done in the MPC meetings.

The UK’s fiscal policy has a gradual execution and the taxation modifications take much longer for being organized and being put into operation. This time lag exists because capital investment involves a lot of planning, and there exists lot of time in translating the interest rate reduction into increased spending in the investments.

For instance, Tesco bears the impact of the monetary and fiscal policy. The factors, such as, tax changes and the inflation affect the company. With a rise in the tax imposed, there would be a reduction in the personal disposable income and vice versa. If the people have low PDI, the sale of the companies like Tesco would also decrease and vice versa. Identically, indirect taxation, such as VAT influences the price of the product. Hence, in case there is a reduction in the rate of interest, there would be a reduction in the price of the product. With the inflation being low, the company would make better earnings since the products would have reasonable pricing and people will spend more.

UK’s largest serving airline is British airways. If the corporate tax’s main rate is decreased, the company will be able to make more money. There would be an increase in the BA’s revenue due to the rise in disposable income that would augment the number of travel trips made by people. Several leverages are permitted to the UK tourism supporting industries and BA is one of them. With the low rate of interest, there would be more borrowing, which would increase the expense on travelling.

Q2.3: Evaluate the impact of competition policy and two other regulatory mechanisms on the activities of a selected organisation.

A competition policy focuses on encouragement and enhancement of the process of competition, and to make sure that consumers attain advantages from these processes. These aims are achieved by competition law in UK.

The UK’s competition law comprises of sequence of legislation. The four main parliament acts are at its core, including:Fair Trading Act 1973, dealing with abuses that may arise out of a monopoly and mergers.Competition Act 1980, dealing with anti- competition practices by particular organizations.Restrictive Trade Practices Act 1976 dealing with the contracts that put a restriction on people or companies from observing free competition.Resale Prices Act 1976, dealing with endeavours and attempts of imposition of minimum prices for goods resale.

The expansion of Tesco in towns has been put on restriction, subsequent to its demonstration of share in the UK grocery sales up to 26%. There is an impact posed on the company through the Sales and Goods Act, 1994. This act mentions that in case there is no agreement on the price, the customer would be required to make payment of a reasonable price that might be agreed by Tesco. There is an impact posed by the minimum wage act 1998 on the company since the company is not allowed to keep the employees at a lower wage than the amount mentioned for such organizations.

Lo3: Understand the behavior of organizations in their market environment

Q3.1: Explain how market structures determine pricing and output decisions of two UK businesses.

Market structure refers to the level of competition that an industry r a business experiences. The chief market structures are:

Monopoly – Monopoly is a condition when the entire market is controlled by a single supplier of a particular service or product. An example on monopoly in UK is British Railways.

Oligopoly – Oligopoly is a condition where some of the large organizations are involved in the industry’s business. Identical items of goods are provided by them and the firms compete aggressively to attain dominant power in the market. Tesco executes in an oligopoly market structure.(Wizznotes, 2011)

These structures of market establish decision related to the output and pricing of Tesco and British Airways. There is interdependence between output and pricing decisions. In monopolistic condition, like in British railways, the changes can be made by the organization in relation to the prices since it is the only service provider in the industry of railways. Whatever be the price, people will use the services since they cannot manage without railways. Nevertheless, in case things are not urgent, people might stay away from travelling by train or travelling at all. And hence demand may be adversely impacted. It is vital that such repercussions are kept in mind before such changes are made.

In an oligopolistic condition, like in case of Tesco, few large organizations conduct operation in the market and mostly the rivals are noted and the businesses take actions accordingly by operation management . This affects the output and pricing. “‘Strategic interaction’ is a term that describes how each firm’s business strategy depends upon its rivals’ business behaviour.” (Price Determination under Oligopoly, 2010)

The organizational responses are shaped by the market forces in several manners. The market forces comprise of demand, supply, substitutes, competition, and product marketing.

The response of Tesco on the market forces is mentioned below:

Supply – The supply might affect the product price in an oligopolistic market. There will be a reduction in price, if there is an increase in supply.

Demand – In case demand increases, the supply can be increased by the company for bringing equilibrium price.

Competition – Because of various competitors, it is significant that the company maintains and balances its products price.

Alternate products – Many substitutes are available and therefore the product pricing might not go higher or the organization might lose customers.

Marketing – Marketing influences the product’s demand and therefore the level of equilibrium is shifted.

The British Railways’ response is stated as below:

Supply – With supply increase, the prices would decrease and vice versa

Demand – Because of the low elasticity of supply, a rise in demand leads to rise in the prices and the service may be denied if demand is higher than availability.

Competition –British Railways has no competitors.

Alternate products – The alternate transport modes are quite costly or time consuming therefore, there would be no fear that the organization has in relation to loss of customer.

Marketing – Marketing is not required and thus demand is not impacted by marketing.

Q3.2: In the last 100 years, the UK has drastically changed. Consequently, businesses operating in the UK have had to adapt their marketing mix offerings to capitalise on these demographic and cultural changes.

Title – Changing Tesco with Modifying UK.Assuming you work as a Business Executive for a supermarket chain operating in the UK, write a report to the Directors, explaining how the business and cultural environment in the UK can shape the behaviour of this organisation.

Tesco

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Impact of Culture Change

The trend of citizens of UK shows that they give preference to going to the stores that serves a one stop shop. Various alterations have taken place in the UK demographics. Increase in population, ageing people, rise in females working and reduction in home food preparation.

UK has diverse population with people from diverse cultural conditions. With changing demographics, there is need that the design of the store is changed together with advertising and marketing campaigns to attract the target groups. (KPMG, 2014)

Impact of Business Environment

Political Factors – Large influence is placed by these factors on Tesco’s performance. A condition of conducting hiring for filling positions in the company has been placed by the legislations. These people could be disabled, students, or senior citizens. Due to competition, the local business suffers and poses job cuts. Because of this Tesco is required to create position and accommodate these people.

Economic Factors – Demand of the product and its pricing are impacted by economic factors. With low personal disposable income, demand would be reduced, which would adversely impacted the revenues.

Tesco’s Adaptation –

The company is required to make increased sales. Because of the people being health conscious, they need ready to eat but healthy food. This is important that Tesco works towards adoption of a product mix for meeting the demand of organic products. The company should ensure maintenance of variety and diversity in the supplied products.

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Lo4: Be able to assess the significance of the global factors that shape national business activities

Q4.1: You have been selected by the trustees of your local youth group to make a presentation to young entrepreneurs in the area on the importance of international trade to the local economy. Key to this is a discussion on the significance of international trade to UK business organisations.

Prepare this presentation using a format of your choice (if you use power point slides, take a screen shot of them and paste into your answer)

Introduction

International Trade means exchanging the goods and services across countries’ borders. A world economy is built in which the prices, supply, and demand of a service of a product influences and is influenced by the events taking place globally. For example, Asia’s political changes may cause a rise in the cost of labour. Therefore, cost of manufacturing sneakers for an American company in Malaysia, would increase. Thus, the sneaker price would increase.

Advantages of International Trade in Tesco’s context

Sales augmentation – There is increase in the number of customers because of span of sales increasing. This way, Tesco can make higher sales in other countries and make more earning.
More markets – International trade has helped Tesco to increase the market and the company is not only dependent on the market in UK, but has access to markets worldwide.
Better domestic competitiveness – With good performance by Tesco in the international market, better reputation has been earned by Tesco in the domestic market.
Disadvantages of International Trade in Tesco’s Context

Supply Chain Disruption – There might be a delay or breakdown in the Tesco’s supply chain because of conflicts or natural disasters.
Enlarged Competition –Tesco has to deal with domestic as well as international competition. (Maketiwa, 2011)
Conclusion

International trade has its own pros and cons; nevertheless, its introduction has brought about a variety of opportunities for new as well as existing businesses.

Q4.2: Analyse the impact of global factors on UK business organisations.

Globalisation is the movement of investment funds as well as businesses to international markets worldwide, away from the domestic markets. Globalisation increases several interconnectedness of the market. Globalisation has brought about improved changes in cultural exchange along with the domain of trade

The two chief globalisation drivers are:

Low cost of transport – With globalization the ocean shipping cost has been reduced, which has helped in bringing a match in the export price to local sales.

Improvement in Digital Communication – The cost of communication is decreased with the amplified use of Internet.

The possibility of expanding to new territories is now comparatively easy because of a reduction in the international trade barriers. Also, international trade is promoted by the government because it raises revenue options for the economy. (MSU, 2010)

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The UK businesses might be impacted by several global factors. Two of such factors include:

Cultural and Social Environment – These factors are the changes that takes place in the social structure globally and includes patterns of lifestyle, behavior, or international population’s preferences and tastes . The UK businesses need and would continue to require in upcoming times about molding themselves for catering to the expectations and requirements of the intercontinental customers.

Legal Elements – The organizations, which perform businesses external to United Kingdom should adhere to all the terms and conditions, as well as rules, laws, procedures, and regulations of the country in which it is doing business and therefore, might be required to effect alterations for making sure that he entire criteria is met effectively. This is important aspect because in case of a legal problem, there may be a need to shutting business by the organization.

Q4.3: For an organisation or organisations of your choice, evaluate at least two European Union policies and explain the impact of these polices on your chosen organisation(s).

The European Union is economic and political partnership that exists between 28 countries of Europe. The EU’s purpose is promoting economic and social progress, high level of employment, and sustainable growth of the states of the member countries, as well as the continent as a whole. The objective of EU is the preservation and growth of the Union with justice, freedom, and security, where there is free people movement in consensus with adequate measures with regard to controls of external border, asylum, immigration, and preventing the crime. (Heron, 2013)

Many policies have been drafted which must be followed by the countries, which are its member. The European Union’s External trade policy is the chief source that offered capital access in various markets. There is an increased access to products and services by means of expansion in the world trade and turning the international rules to become well-built and sturdy that assures a field of trade to all EU members worldwide beyond EU. With this policy, the market of Tesco has taken expansion to various other countries and has been able to create an edge on competitive and reputational level. (Euromove, 2010)

Kyoto Protocol has impacted Tesco. It is a climate change agreement, hereby, it is required that the businesses correct their carbon footprint, which would ultimately help them in becoming friendly to the environment. Each year Tesco used nearly 4 million carbon and they are executing changes required to lower the emission of greenhouse emission that eventually placed the company among the list of an environment friendly organizations.

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