Introduction
The Business environment is ever changing however key aspects never change. The diagram below shows the business environment. Organizations have to be aware of their competitors, the industry as a whole and the wider environment. All of these factors affect the running of organizations and need to be studied as a result.
LO1: UNDERSTAND THE ORGANISATIONAL PURPOSES OF BUSINESSES
Guidelines: (Approx. 200 words) Recommended Interim Deadline: 27th January 2014
Your answer should include the following:-
· A description of an organization;
· Identification of four different types of organizations in the U.K. This could include defining their legal structure;
· Selection of two organizations from those identified and describe them, for example, in terms of their legal structure;
· Identification of the purpose of your selected organizations.
Question 1.1: - Identity the purposes of different types of organizations
Hint: - The report would discuss various aspects of the business environment in the context of British Airways (BA). It is one of the largest airlines of UK which is headquartered in Harmondsworth, London. BA is the largest airlines considering the fleet size in the UK. This organization was started after the merger of main four airline service providers of UK i.e. British European Airways, British Overseas Airways Corporation, Northeast airlines and Cambrian Airways. In order to discuss the aims of the different organizations, four organizations i.e. HSBS, BA, Marks and Spencer and Person Education are being identified. These organizations differ in their legal structures. HSBC was originated in Shanghai and Hong Kong while BA is an organization which is a merger of four previous airline services companies. Pearson education is a partnership firm while Marks and Spencer is a joint venture with the presence of almost 700 stores globally. The aims of HSBAC and British airways (BA) differ in many manners as they cater to different segments of the consumers. HSBC is a holding company of a group while BA is a conglomeration which is held by private entities. The main aim of the BA is to cater all the requirements related to the experience, no of flights etc. from the consumers. The purpose of the organization is to provide the best available service to all its passengers with the help of all possible technologies available in the market. These are the main aims of the organizations which operate in the civil aviation industry (Vignali, 1999).
Question 1.2: - Describe the extent to which an organization meets the objectives of different stakeholders
Hint: - This section would do the stakeholder analysis of BA in the brief. Stakeholders of any organization can consist of community, person or other institutions that can get affected by the operations and the other actions of the business from an organization. These stakeholders get affected in some manner by some or all activities of the organization. The main list of stakeholders of BA consists of its suppliers, customers, employees, shareholders, government and local community. Below mentioned list details about the objectives of all these stakeholders and what is the response of BA in order to meet these objectives of various stakeholders:
· Customers are the main stakeholders of the organization as the main source of the business for the organization are customers only. The objectives of the customers are to get the punctual and friendly mannered services from the organization.
· The main objectives of employees are to get a suitable environment to serve the customers in a best possible manner and get their salary and other rewards on the time.
· Main suppliers of BA are Boeing, Airbus and oil suppliers. The objectives of these suppliers to get the payment for the supplies on the defined time along with the regular business of the organization. Ore services from airlines service provider (Vignali, 1999).
Question: - 1.3 Explain the responsibilities of an organization and strategies employed to meet them
Hint: - All the objectives of stakeholders are being discussed in brief in the previous section. This section will talk about various responsibilities of BA towards all the stakeholders along with the strategies employed by the organization in order to fulfill those responsibilities. Following are the responsibilities of BA towards the stakeholders and the strategies followed by BA to fulfill the responsibilities:
· Providing customer friendly and best services to all the customers of BA should be the main responsibility of the organization. Organization uses customer centric policies in order to provide the best level of services to all its customers and aims at fulfilling all its responsibilities towards its customers.
· The responsibilities of the employees are being fulfilled by the organization with the help of the human resource department of the organization. The human resource department of BA ensures that the goals and objectives of individuals are also being taken care while planning strategies for goals and objectives of the organization.
· The responsibilities of the organization towards suppliers are the payment of the all the supplies at the correct time. The organization uses the strategies of re-buying for the suppliers and fulfills the responsibilities in an effective manner.
LO2: UNDERSTAND THE NATURE OF THE NATIONAL ENVIRONMENT IN WHICH BUSINESSES OPERATE
Question: - 2.1 explain how economic systems attempt to allocate resources effectively
Hint: - Economic systems of any economy play an important role in the resource allocation. The Economic system consists of all the processes that took part in the production, circulation and distribution of the semi-finished or finished goods and services which include human labor, products, tools, machines, raw materials, finished or semi-finished goods and services used in the process etc. In an easy language, it can be said that the economic system involves all the processes for the production and circulation of goods and services and allocates all the resources required as well. Various kinds of economic systems can be briefly discussed in below manner:
Planned Economy Traditional Economy Barter Economy Mixed Economy
Participatory Economy Market Economy
Planned Economy: Such an economic system is a regularized system where all the required resources are mostly owned by the state itself. Most of the rights are reserved for the state in order to allocate the resources for the benefits of the entire state. The United States of America is the main example of such an economic system. Such system has various advantages like the establishments of the targets according to the regional requirements, no duplication in the allocation of resources, no wastages of resources due to better planning and the equal distribution of all the resources according to the associated values. However, various disadvantages are also being associated with such an economic system like the involvement of most of the resources in the activities like planning, collection, and control.
Mixed Economy: A mixed economy has the combined features of the free and planned economy. However, most of the resource allocation are done by the state only while such economy also allows the development of free enterprises due to the difficult resource allocation in such enterprises. India can be considered as an example of a mixed economy. Such an economy has the advantages like the promotion of both public and private sectors, correction of market failures by the government. Various disadvantages of a mixed economy are a misuse of the loopholes prevalent in the regulations and policies of government (Bhar, 2011).
Question: - 2.2 assess the impact of fiscal and monetary policy on business organizations and their activities
Hint: - There are some policies which define and help in the economic health of any economy. Such policies are fiscal and monetary policies. These policies define the tax rates, interest rates, and exchange rates etc. which have a direct impact on the gross domestic product (GDP) of an economy. These policies have a direct influence on the economic development of the economy. UK stands at sixth position in the GDP list of countries all over the world while it finds the eighth position in the list of countries according to their PPP (purchasing power parity). UK registered a GDP of $2.44 trillion in the year 2012 will grow at the rate of 3% per year. Currently, UK has defined its monetary and fiscal policies according to the various guidelines defined by IMF for the better growth. The monetary policies of any country define economic policies while monetary policies define the policy for the better growth of the country. The expansionary policies defined by the UK government have impacted the businesses of the organization in a positive manner as such a policy aims at lowering down of tax rates along with the increment in the government spending. Lower interest rates and quantitative easing are the monetary policies of UK. However, the government is aiming at the betterment of the economic scenario. Monetary and fiscal policies of UK impacts BA in a manner as the spending by the customers highly depends on the purchasing power of the consumers. HSBC gets impacted by the policies in a manner that different interest rates and tax rates play a decisive role in the savings and banking business of the customers (Richter, 2001).
Question: 2.3: - Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organization
Hint: - Competition in the market play an important role in the businesses of the organization as the tough competition sometimes results in the loss for the organizations and consumers both. So, it becomes important for the governments to define some policies related to the competition in the economy for different sectors in order to benefit the complete market from the existence of the competition in the market. Governments define some regulatory policies for the business in different sectors in order to help in the proper business and sustainable environment. These policies impact the activities of BA in a manner as BA operates according to these policies only. Competition policies have impacted the business of BA earlier during its joint venture with the American airlines and some changes in the policies were made in order to meet the complaints registered by the competitor of BA i.e. Virgin Atlantic. These competition policies help in bringing the economic environment in the situation of perfect competition to help the businesses operating in an economy. Various regulatory policies like Fair Trading Act defined in 1973 by “Office of Fair Trading”, enterprise act introduced in 2002 and Competition Act defined in 1998 have a direct impact on the business of BA in direct or indirect manner. Fair trading policies ensure the consumer rights and protection from unfair actions. Cartels, scams and some other unacceptable activates are avoided by the help of such acts (Falconi, 2004).
LO3: UNDERSTAND THE ORGANISATIONS BEHAVIOUR IN THEIR MARKET ENVIRONMENT
Question 3.1 Explain how market structures determine the pricing and output decisions of businesses
Hint: - Various sectors have different market structures which define the output of the products from such sectors along with the pricing decisions. These market structures play such an important role for the consumers and companies both that the success of the organization is dependent on the market structures and the benefits associated with the products and services for the consumers. Various kinds of market structures and their role in the pricing and output decisions are as follows:
1. Perfect competitive market
2. Oligopoly
3. Monopoly
4. Monopolistic competition
Perfect Competitive Market
A market where there is not entry or exit barrier for the business is considered as a perfectly competitive market. The output and pricing decisions are not affected by the supply and demand for the goods and services in the market. Unlimited supply and elastic demands are the characteristics of such a market. Since demand and supply do not affect the market decisions so free trade exists among producers and consumers. However, such a market does not exist in the UK. So, it can be easily said that such a market structure has no impact on the business of BA and Marks & Spencer.
Monopoly
In such a market, there is only one producer/supplier for a particular product or services. In such a market, consumers are highly dependent on the pricing and output decisions of firm only. So, the consumers are not benefitted as firms define the cost and output for their best possible benefit. For the kind of business decision making , there is no monopoly on all kinds of products and services are available in the market in plenty of markets. The business of BA is not dependent on only one or two firms. No monopoly can be employed by the organization in the market structures like the UK (Willis, 2005).
Question3.2: - Illustrate the way in which market forces shape organizational responses using a range of examples.
Hint: - Various market forces exist in the marketing environment where organizations operate. These market forces impact the businesses of the organizations. Marketing Guru Porter has defined main market forces which are considered to have an influence on the business of the organization. Following are these main market forces which impact the business of BA and Marks & Spencer in some manner:
· Bargaining power of suppliers: Suppliers help the businesses in their businesses as they provide raw material to the manufacturing firms and finished goods for service providers. The business of Marks & Spencer and BA highly depends on the supplier and their bargaining power highly impacts the business of these organizations. They have to take decisions in order to select the suppliers for their various requirements.
· Bargaining power of consumers: A highly competitive market benefits the consumers and their bargaining power is high. There in not much competition in the market where Marks & Spencer and BA operate, so the bargaining power of consumers is not high in the market of UK.
· Intensity of competitive rivalry: Various competitors pose a different kind of threats to the business of the organizations. Marks & Spencer and BA have threats from the various competitors and they have to keep track of each action of the competitors in the market due to the competitive market of UK.
· Threat of new entrants: For BA, there is no threat of new entrants as there are high entry barriers for airlines services. Marks & Spencer face little threat of new entrants as entry barriers are not much high for this kind of business.
· Threat of substitute products and services: There is not much threat from substitute products or services in the kind of business Marks and Spencer operate in.
Question3.3: - Judge how the business and cultural environments shape the behavior of a selected organization.
Hint: - Marks & Spencer is the multi-store retail chain of UK which has the presence of more than 700 stores all over the UK. They operate in the various kinds of environment due to the cultural and social diversity of the consumers. They have to deal with the consumers from different ethnicity, language, cultural and beliefs etc. So, the organization needs to understand the business and cultural environment in order to get success among all types of consumers. For the understanding business environment, PESTLE analysis is the best available tool. Following is the PESTLE analysis of Marks & Spencer:
· Political: There are various political factors that have a direct impact on the business of the organization as the rules defined by the government have a direct influence on the all operating processes of the organization. The marketing environment of UK is favorable for the organization as the government is stable in the country.
· Economic: The economic environment of the UK is not much favorable for Marks & Spencer as the interest rates, tax rates, and exchange rates defined within the country do not promote the business in a great manner.
· Social: The social environment plays an important role in the success of the organization as it is directly concerned with the sentiments of the consumers. Marks & Spencer being a UK based organization, it understand all social factors in details and defines its business accordingly.
· Technology: Latest technologies coming in the market influence the business of the Marks & Spencer as they ease the way organization works, however, there are some issues like constraints in change, extra financial spending etc.
· Legal: It is concerned with the various laws and regulations defined by the court of law of UK, it impacts the organization in a way that they have to follow all the legal procedures and rules (Muyldermans, 2010).
LO4: BE ABLE TO ASSESS THE SIGNIFICANCE OF THE GLOBAL FACTORS THAT SHAPE NATIONAL BUSINESS ACTIVITIES
Question 4.1: - Discuss the significance of international trade to U.K business organizations
Hint: - When any organization expands its business into overseas market in order to grow at a better pace and to earn a global brand image, it is known as international trade conducted by the respective organization. There are lots of implications of the international trade on the organization. The significance of international trade to the business of Marks & Spencer can be listed in below manner:
· It helps the organization in getting exposed to the latest and different practices which result in providing better services to the consumers of the organization.
· Dependency of the organization for its business becomes less on the domestic market it is operating in.
· Marks & Spencer would be able to make a global brand itself.
· More financial spending by the organization in order to expand the business in overseas market.
· There is a need for Marks & Spencer to increase their marketing efforts in order to get more benefits from the international market.
· More consumer base due to the availability of a bigger market space (Alon, 2011).
Question4.2: - Analyse the impact of global factors on UK business organizations
Hint: - When an organization expands itself to overseas market, there are several important factors which influence the business of the organization. Globalization means the availability of the services and goods from an organization to all over the globe. Globalization can also be understood as the process which has resulted in connecting all the parts of the globe together. Globalization is the result of technological innovations which have made this globe appear as a very small entity. Another factor for globalization is the industrialization which has resulted in the better functioning industries available all over the globe with different kinds of the products and services. M & S gets affected by various global factors as it conducts its business in overseas market. Emerging market, expansion of the European Union, customs unions, World Trade Organization (WTO), legal, social, cultural factors, Northern American Free Trade Agreement (NAFTA) are some of the important factors to be named here. Emerging market helps the organization is achieving better consumer base as it gets exposure to a relatively larger market which helps in increasing revenues for the firm. WTO impacts the organization in a way that all the rules and regulations defined by WTO for conducting business in the global market has to be followed by the organization and any kind of avoidance from these rules and regulation can result in heavy losses for the organization. (Madsen, 1996).
Question: - 4.3 evaluate the impact of policies of the European Union on UK business organizations
Hint: - the European Union is a group of many countries which have defined various policies for the business in these countries by the organization operating in these countries. They have same currency to be used for all the transaction. All the businesses conducted between the member countries takes place in terms of Euros only. These member countries are also known as Euro Countries. These policies defined by EU have a direct influence on the businesses of the organization operating in these countries. Various policies like custom unions, policies related to the technical safety have a direct influence on the business of BA. Customs duty is applied by the countries if some defined goods are traded among two countries. There is a custom free area as well which was defined by four main developed countries in order to ease the international business (Bhandari, 2006). All the legal goods can travel among these countries without any customs duty. So, it becomes necessary for BA to design its flight route in a manner which minimizes the customs charges. Policies of technical safety influence the business of BA in a manner that a slight change in the policies sometimes results in the change of whole technical stuff of the organization. They have to follow the technical safety standards defined by EU in order to avoid any kind of unwanted situation. Safety of the passengers is much important for the organization, so they have to follow these policies in a positive manner. Finally, this section can be closed by stating that policies of EU impact the business of BA in direct or indirect manner. (Canova, 2003).
References:
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Boldrin, M., & Canova, F. (2003). “Regional policies and EU enlargement. European Integration, Regional Policy, and Growth.” World Bank, Washington, 33-94.
George S. Yip, Tammy L. Madsen, (1996) "Global account management: the new frontier in relationship marketing", International Marketing planning, Vol. 13 Iss: 3, pp.24 – 42
Jagdeep S. Bhandari, (2006) "Free trade and semi-closed borders: Symmetries, consistencies, and contradictions", Journal of International Trade Law and Policy, Vol. 5 Iss: 2, pp.1 - 13
Murat Hakan Altintas, Demetris Vrontis, Hans Ruediger Kaufmann, Ilan Alon, (2011) "Internationalization, market forces and domestic sectoral institutionalization", European Business Review, Vol. 23 Iss: 2, pp.215 – 235
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