UNIT-1 THE BUISNESS ENVIRONMENT

UNIT-1

THE BUISNESS ENVIRONMENT

Table of Contents

Introduction. 3

LO1 Understand the organizational purposes of businesses 4

LO2 Understand the nature of national environment in which business operates. 9

LO3 Understand the behavior of organizations in their market environment. 11

LO4. Be able to assess the significance of the global factors that shape national business activities. 12

Conclusion. 15

References. 15

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Introduction

Business organizations have different purposes and business structure with which they do market and business operations and fulfill the set of objectives by stakeholders in the business. Business organization must consider the significance and affects of national environment and market environment so that on the basis of the environment faced the organization can develop and plan suitable business strategies so as to attain the business goals (Heizer and Render, 2003). The aim of present task is to understand and highlight the purpose and responsibility of different organizations towards the business. In the present paper, the national environment of UK will be shown to find out how different national factors affect the activities of the business organizations. Also, the national factors and the global factors that affect the business strategies of the organizations will be analyzed. Below learning outcomes would be served to give learners the knowledge and understanding about the present study.

LO1 Understand the organizational purposes of businesses

LO2 Understand the nature of national environment in which business operates.

LO3 Understand the behavior of organizations in their market environment

LO4. Be able to assess the significance of the global factors that shape national business activities

These learning objectives would be obtained in the present research context so that successful analysis of business environment can be done in the different organizations.

 

 

 

 

 

LO1 Understand the organizational purposes of businesses

Under this Task the different type of business organizations, public, private or charity based would be analyzed for developing understanding about their different purposes. This task would explore the organization’s abilities to meet the objectives and expectation of the various stakeholders from the business. Along with it, the major responsibilities of the organizations would be studied including the strategies that would be needed to meet the defined responsibilities.  

Identify the purposes of different type of organizations.

Different types of business organizations have different business policies, strategies, structure and purposes. Irrespective of the business organizations, they are established for some specific purposes. In the context of UK, the business organizations can be divided into two sectors for the purpose of the present study. These two sectors can be private organization and public organization (Galloway, 2010). In a private organization, several other forms such as sole proprietorship, partnership, private ltd. companies, and franchises can be studied while public organizations can take form of public ltd. companies, owned by local government, or central government or non-profit organization run by the government for charity purpose etc. The organization type and their purpose can be described as under:
  • Virgin Group Ltd: Virgin group ltd. is aprivate ltd. company which was established in year 1970. The capital of the company was raised by issuing shares to 50 shareholders. The purpose of this company is to operate in such a manner that to not to allow any external person to take the ownership and also several restictions are posed over the shareholders to make sure that they do not trade or transfer their shares to the public.

  • Tesco Plc: It is a public ltd. company which was established by Jack Cohen in United Kingdom. In the begginning it was established as a sole proprietorship business but now, it is a public ltd company. The main purpose of a public ltd company is to raise capital from the capital market. In the present case, when the size of the organization became too high having a good growth rate then the organization was changed into a company so as to operate the business efefectively (Slack, 2010). Thus, public ltd. companies have the purpose of raising capital from the marketby distributing the ownership among the stockholders.

  • McDonald’s: McDonald’s is a frnachise type of buiness structure and is currently operating in mnay nations across the world with the recognized brand as a biggest food chain. The organization allows the other firms to take franchise by making agreement with the company as per the standrad termsand conditions of the company. The purpose behind developing a franchising structure is to reduce the risk and cost by getting globalized through franachising concept.

  • National health services: NHS is basically a non-profit organization which is funded thorugh public sources. It has been made for charity purpose for providing healths ervices to the UK citizens. This charity organization is not having the aim of making profits by its operations but rather it considers imparting and providing high level of helath care services to the citizens in United Kingdom as its main purpose.

  • A corner shop: Coener shops operates under the sole proprietorship concept and have small business operations. The main purpose of such type of sole proprietorship business is to have complete autonomy to operate through their business. Thus, by operating so and by deploying owner’s knowledge and funds in the business, risks and higher earnings can be faced by the sole owner in this business model.

Describe the extent to which an organization meets the objectives of different stakeholders.

Stakeholders can be best described as those individuals who have direct or indirect interest and impact from any of the actions of the organization. These stakeholders can include employees, customers, suppliers, shareholders, government and society. Each of the listed group has different objectives and expectations from the business. The stakeholders have certain expectations as per their priorities and interest and based on the level to which the business organization meets their expectations. The extent to which an organization meets the objectives of the various stakeholders is described below:
  • Customers: Customers are the people who buy and utilize the goods and services of the business. Thus being the end user in a retail industry, customers can be considered as the vital stakeholders as they expect high levels of customer service, quality products at fair prices, value for the money paid by them and proper after sale services from the business organization (Nordhaus, 2009). Due to their importance in the business, customers’ expectations are preferred by the business organizations over the expectations of other stakeholders. The reason behind giving priority to customer expectations would be that unsatisfied consumers may lead to failure of business.  

  • Shareholders: Shareholders are those stakeholders who invest their capital in the business for getting suitable profits from the business. They can be considered as the owners of the business and management works considering the interest of the shareholders in the company. Shareholders expect the business to make higher profits and to grow with a high rate for enhancing their wealth through dividend gained from the business. Shareholders would expect increase in share prices of the company along with a suitable and rational return on the investment they made in the business.

  • Employees: Employees mange the business operations and affairs by giving their time and efforts in the business and in return they also has some expectations from the business. They work efficiently and effectively in the organization for the attainment of the organizational goals. Since they work for the purpose of running the business their main objective is the high growth and status of the company they are working in as this would provide them with more growth opportunities and higher remuneration for fulfilling their needs (Broady-Preston & Steel, 2012). Employees expect a sense of job security from the business to work more efficiently. They become the part of the overall information flow in the business for assessing the prospect of the organization to consider the fulfillment of their expectations.

  • Government: As the whole economy is managed by the government, it has full autonomy to make changes in the tax regulations for the companies by monitoring the working of businesses in the country. Government set the rules and regulations accordingly for the businesses related to taxation, law, consumer welfare protection and business licensing etc. Government expects high employments creation from the businesses with proper follow up of all the laws and payment of the taxes. Thus, the business organizations have the liability to attain the business goals and objectives by abiding from the government rules and regulations.

  • Suppliers: Suppliers are responsible for supplying the raw material or the business items to the businesses. In return of their services they expect flexible credit terms and good payment system from the business organizations. The behavior of the organization toward them also affects their services for the business.

Explain the responsibilities of an organization and strategies employed to meet their stakeholder’s expectations.

As per the study regarding the different objectives and expectations of the different stakeholders from the business organizations, the business firms need to fulfill different set of responsibilities and objectives to meet the stakeholders’ expectations. For a business organization, every stakeholder must be given priority as per their position and expectation from the business. For meeting the responsibilities toward the stakeholder’s expectations, organization can deploy the below mentioned strategies in the business:
  • Responsibility towards the shareholders: For satisfying and fufliiling the expectations of the shareholders, organizations must provide them the key informations about the business so that they can estimate their worth and profitability aspects in the organization (Allen, 2011). Organizations have the responsibility that the financial statements to be reported to the shareholders must be reliable so that shareholders can make proper decsion from them. Organizations can display the bsuiness information on its website for ease and suitability of shareholders.

  • Responsibility towards customers: As customers expect quality services from the companies, the business organizations has the responsibility to deploy CRM processes within the organization, also it can create a customer relationship departmnet in the organization. This way the CRM processes would help in maintaining loyal csutomer base by enhancing the satifaction level of the csutomers for the business products and services.

  • Responsibility to employees: Organizations have the responsibility to deploy good human management practises in the business in order to meet the expectations of the employess of the organization. It is the responsibility of the organization to ensure the employees about their health and safety by providing a secure and healthy working environment. Organizations must offer ample grwoth offers and equal opportunities to their employees for retaining their confidence in the business.

  • Responsibility to society: Organizations must follow high level of corporate social responsibility for returning the favour and contribution of the society in the business. Oraganizations have the four major respnsibilities toward the society and which are economic responsibility of being a profitable business, legal responsibility of abiding the laws, ethical responsibility of doing harmless business by avoiding spread of pollution in the environment and lastly the discretionary responsibilty of making contribution to the community by employing larger mass in the organization (Gitman & McDaniel, 2009). On a ethical level, organizations must consider the issue of global warming in the environment for meeting the expectations of the society.


 

Figure 1: Showing the responisbilities of business organization towards society

M 1: In the study related to above task in order to find appropriate solutions for the expectations of the different stakeholders of a business organization, suitable strategies have been applied for evaluating the responsibilities of the business organizations. With the use of the findings, effective judgement for meeting the objectives has been done in the present context.

D 1: As the study shows that organizations need to fulfill many responsiblities fo maintaining cordial and healthy realtionship with the several stakeholders, it can be concluded for the organizations to implement the required changes and duties so as to face the business challenges together with the stakeholders.

LO2 Understand the nature of national environment in which business operates

This task would evaluate the different aspects of the nature of national environment which affect the business operations. In this context example of Sainsbury Plc would be taken in order to generate understanding regarding the national environmental issues pertaining to the business. Sainsbury Plc would be studied with regard to the impact of competition policy and other regulatory mechanisms on its business operations and business environment.

Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organization. 

There are several impacts of the ongoing competition policy in the marketplace on any business organization and such policies highly affect the business activities of the organizations. Considering Sainsbury Plc, the impact of competition policy and other regulatory mechanism in UK on its business can be discussed as under:
  • Competition policy

In the economy of UK, the retail sector is facing high competition due to the fact that the business model and resources deployed by most of the business organizations are similar. In UK retail domain market some of the major market players can be identified as Sainsbury Plc, Asda, Tesco, Morrison etc. As per the business policies in order to remain in the business, organizations have to alter and make adjustment in their business activities in accordance with the level of competition and the type of anti-competitive practices in the market. Hence, Sainsbury plc needs to stimulate proper action plan for adjusting the business structure and business operations as per the change in the competition policy from government or from competitors (Martins and Terblanche, 2013). In relation to the impact of competition policy, example of anti-trust suit against Microsoft Company can be discussed as:

In the case of Microsoft Company, in 1993 allegations by Novell (a competitor company) were made on it for blocking its competitors out of the market by anti- competitive practices. The complaint was registered and it centered the license requirements. Due to the complaint, Microsoft faced penalties of divulging server information and paid a huge fine amounting to € 497 million to the EU.     
  • Impact of other regulatory mechanisms

The UK government has developed various regulating mechanisms for the regulation of the business operations of the organizations operating in the market. The impact of these regulating mechanisms adopted by the government authorities can be both positive and negative in the context of Sainsbury Plc. For instance, if government imposes compulsion of standard product maintenance and operate quality check in the retail food domain then Sainsbury would have to incur huge costs in order to comply and manage in accordance with the guidelines issued by the government authorities. In such a situation Sainsbury can take remedial actions by generating higher efficiency in their business operations so that cost can be reduced to some extent or it can increase their product price for coping with the regulations (Scaner, 2009). Hence, the regulatory actions taken by government have a big impact on the business organizations but they can respond to such regulations by making proper strategies and by taking proper actions.  

LO3 Understand the behavior of organizations in their market environment.

Under this task, all the internal factors of a business organization like Sainsbury Plc would be examined to develop understanding their affects in shaping the business behavior. These business and cultural factors can include political factors, socio- cultural factors and educational factors which will be discussed in this task.

Judge how the business and cultural environments shape the behavior of a selected organization.

For a business organization like Sainsbury Plc the various cultural and business environmental factors must be well considered in advance for formulating suitable and appropriate business decisions in the business environment as these factors have a direct impact on the business activities. For this analysis, the factors as per the PEST analysis consisting of political, economical, social and technological issues would be discussed for understanding the business environment of Sainsbury Plc. The analysis of the PEST factors is discussed below:
  • Political factors: In United kingdom the political environment is quite stable and normal and for the purpose of encouragement of trade in the economy the government makes various supportive regulations for the welfare of the business organizations. The business policies of Sainsbury Plc would be developed considering the prevalent and upcoming government regulations (Kotler and Keller, 2010).

  • Economic factor: The major key economic factors that would impact the business environment of Sainsbury Plc in UK would be the interest rate prevalent in the economy, the existing inflation rate, exchange rates and GDP of the economy. In UK there are favorable economic conditions so the business operations of Sainsbury plc can be performed with ease.  

  • Social factors: Some of the major social factors impacting the business environment for Sainsbury Plc would include customer expectations, action and perceptions of the society regarding the services of Sainsbury Plc.

  • Technological factors: Due to emerging development in the field of technology, new technologies have been used in the business for bringing better work efficiency. In the context of Sainsbury Plc in order to remain in harmony with the changing technological environment, it should adjust its business processes accordingly as proper use of the new technology would help in achieving efficiency by increasing the product quality and reduction of cost in the business processes (Baron and Greenberg, 2008).

Apart from the above mentioned factors Sainsbury must also consider the impact of cultural factors on the business activities. A nation’s culture has a direct impact on the business behavior of an organization. The cultural factors such as social attitudes, belief systems, law, education, politics etc. have a direct bearing on the business prospects. Also, there are some more cultural factors like lifestyle choices of people, population growth rate, age profile, population employment pattern, social taboos, press attitudes, education and social mobility and other socio-cultural changes. These factors help in joining the business with its immediate environment. Due to impending affect of the socio-culture business organizations need to adapt itself as per the existing customs and traditions in the area of business operations. Hence, Sainsbury must develop its marketing policies and strategies by considering and including the cultural factors that are prevalent in UK.

LO4. Be able to assess the significance of the global factors that shape national business activities.

This task would evaluate the importance of the global parameters that affect and help in shaping the business activities on a national level. For the purpose of globalization of business structure, the global factors are needed to be considered first. In this task, impact of EU policies in UK on the business organizations would also be studied. 

Analyze the impact of global factors on UK business organizations.

For a business organization global factors hold crucial significance for operating the business on a global level. The key global factors which affect the overall business activities of the UK business organizations can be discussed as under:
  • International competitiveness: In the retail domain several big international players are creating huge competition in the international market. Some of the major players include Sainsbury Plc, Wal-Mart and Tesco. The competition generated by such international players’ affect the company’s operating globally as well as operating in domestic market (Daniels et al, 2007).

  • International business environment: For a business organization international business environment would include the external factors such as political factors, economic, social and technological factors. In order to develop better business strategies, organizations need to consider the impact of these factors over their business and the strategies are designed in such a manner to minimize the adverse effect of the external business environment on business activities. When the organization is operating globally then these factors have a direct bearing on the business and should be considered for avoiding negative impacts.

  • Exchange rates: Due to change in the currency rates of a country with other nations, it impact the overall revenue gained by the organizations. In UK any significant change in the exchange rates of pounds would create threats regarding loss of revenue for the business organizations operating globally. Fluctuations in the currency prices also affect the margin value for the business organizations and any unfavorable downfall or change in the rates of currencies may result in heavy losses for the business organizations. Hence, the business organizations must consider all the facts regarding the change in exchange rates and their impact on the overall business activities.

  • Tariff and tax: The tariff and tax structure of global market need to be analyzed in order to plan for expanding the business as a global model. A strict and rigid tax structure would not allow the business organizations to compete with the other market players on international level and as such the business organizations could not even offer the customers lower price for gaining high market share (Hofstede et al, 2010).

These factors revealed that proper consideration is required by the business organizations in case if they are thinking to expand their business on global level or if they want to compete with the global market competitors as these factors have a direct bearing on the business activities of the organizations and non-consideration may lead to downfall or heavy losses for the business organizations.

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Evaluate the impact of policies of the European Union on UK business organizations. 

In UK the European Union has laid various business policies and regulations which are abided by the business organizations operating there. The major key elements of the policies developed by EU would be discussed as:
  • Employment policies

  • International trade policy

  • Training and development policy

  • Rules of game policy

  • Regional policy

  • Taxation Policies

  • Inflation Policy

These policies are established by the European Union and the business organizations of UK need to understand the impact of each of these policies on their business depending upon the significance and impact of these policies on the business activities. The organizations have to consider the EU policies before setting the business policy and must ensure that they are abiding these laws stated by EU (Joshi, 2009). The business organizations operating in UK are highly under the influence of European Union and thus it would be very necessary on their part to abide by the EU’s laws so that they don’t violate any law and face consequences of violation which will have a negative impact on the business operations of the company. Proper follow up of these rules by the business organizations of UK would avoid any adverse legal implications for violating rules on the business. These laws are of high importance for the companies which are functioning globally as several countries are member of European Union and these member countries would definitely support the business operations of the business organizations if they abide the rules of European Union of United Kingdom.

M 2 The policies mentioned in the above analysis which are framed by the European Union are derived from the general reports of EU’s notifications and official gazettes. These policies are analyzed suitably for developing understanding about their impact on the business organizations of United Kingdom.

M3 The study in the present report has been formulated after using suitable approach to collect the information. Appropriate measures have been used to analyze the different scenarios of all the issues related to the present study. All the information shared above is reliable and appropriately analyzed for deriving conclusions. 

Conclusion

In the present paper, the study shows that the business organizations operating in UK must consider various internal and external factors that have a direct or indirect impact on their business operations. The study regarding the stakeholder’s viewpoint for the business organizations showed that organizations need to fulfill their responsibilities for satisfying their stakeholder’s needs. For judging the impact of competition policy, example of Sainsbury Plc was taken for better understanding. The overall analysis revealed that business organizations need to adjust its business priorities and business policies considering the impact of global, political, social and internal factors. The business organizations in UK must follow the rules laid by European Union for avoiding any harmful legal effects on their business operations. All these factors are to be followed properly for gaining competitive advantage in the market.

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