Unit 1 Business Environment
The Business Organizations Assignment Help have different purposes depending on their reason for doing business. Business organizations prepare a structure of them and perform activities which help to meet their objectives. All the business organizations are required to meet the requirement of their stakeholders like the customers, investors, employees, suppliers, government, etc. All of them have their different needs and interests and sometimes it becomes very difficult for the business to fill all their needs. Businesses are required to work in an atmosphere which is developed by the market forces like the government, competitors, consumers, suppliers, and international factors. These business research can be both at the local level as well as the global level and is very crucial in developing businesses (Helpman, 1989). Some of the important factors which play an important role in affecting the business and their stakeholders are the interest rate, taxation policy, competitive laws, foreign direct investment regulations, etc. The companies which decide to go global have to face the challenges posed by the regulatory bodies of different geographies. The market forces are the major contributor towards the organization structure and its processing.
LO1 Understand the organization purpose of businesses
P 1.1 Explain briefly the following types of organizations and their purposes: Virgin Group LTD, Tesco PLC, MC Donald’s and National Health services (NHS) UK
There are different types of organization present in the market and they have different purposes. These purposes depend on the effective organizational structure and the reason why they are doing business and their objectives. Basically, there are 4 types of organizations: Sole proprietorship, partnerships, corporations, and Limited Liability Companies (LLC). Sole Proprietorship is the organizations in which there is the single owner. All the operation of the organization is looked after by the single person that is the owner. In Partnership form of organizations, there is more than 1 owner as the name suggests. There are partners who own the business. Here the number of partners can range from 2 to 20. Let us discuss the following type of organizations and their purpose:
Virgin Group Ltd: It is a British multinational branded venture capital conglomerate conceived by Sir Richard Branson. It is one of them most renowned brand in the world. It deals with different sectors like mobile telephony, travel, financial services, leisure, music, holidays, and health & wellness etc. This is an example of sole proprietorship where Branson retains complete ownership and control of the Virgin Brand.
Tesco plc: It is one of the most popular retail stores in the UK which has a presence all over the world. It deals with general merchandising. Tesco plc was founded by Jack Cohen in the year 1919.
MC Donald’s: McDonald’s Corporation is the world largest chain of hamburger fast food seller. It is headquartered in the US and serves in more than 119 countries. This was first started in 1940. This company runs on a franchise model.
National Health services: This is a public sector company in the UK. The systems are primarily funded through central taxation and they work towards securing the health of the nation as the name suggests.
P1.2 Considering Tesco PLC, describe the extent to which it meets the objectives of its different stakeholders.
Tesco plc is doing a great job in meeting the objectives of its stakeholders like the customers, employees, suppliers, investors, government, that will show the effective impact etc. They are providing a good rate of return to their investors and keeping then happy and satisfied in investing in the Tesco operations. The investors are always worried about the rate of return they Are offered and the Tesco is performing very well to meet the needs and expectations of its investors. They are keeping their employees satisfied and motivated by meeting their requirements as well. They are giving better services and proper working environment to their employees (Holden, 1996). They also give awards and rewards to its employees for their contribution towards the better performance of the company. They also satisfy their lenders by keeping their confidence intact in the Tesco’s performance. The Tesco plc satisfies their customers as well by producing goods which are preferred by the customers and offering the products at affordable prices. The company also follows the government policies and pay their taxes in time and keep the government also happy with their business. They also maintain a strong bond with its suppliers and keep a contact credit payment process in place (Börzel, 2003).
P1.3 Considering Tesco PLC, explain its various responsibilities as an organization and the strategies it employs to meet them.
There are various responsibilities which are fulfilled by the company Tesco plc which ranges from social responsibility, environmental responsibility, and employee responsibility to government responsibility. Tesco indulges in fulfilling in the Corporate business responsibility by organization behavior taking initiatives for corporate social responsibility activities. They fulfill the environment responsibility by increasing awareness about keeping the environment pollution free and make efforts to contribute minimum to the environment degradation. Tesco has been working towards implementing various activities which are important for its brand image (Kamien, 1982). The company is active in taking plantation initiatives and being responsible for nurturing environment oriented approach both outside and within the company. Tesco has been known its approach towards reducing the plastics usage through its retail outlets, minimizing waste in the environmental structure, and decreasing the usage of hazardous materials in its product line. It has also fulfilled its responsibility towards the employees by giving them the best facilities and helping them to develop better skills. They also fulfill the responsibility towards the government by paying proper taxes in the timely manner (Cannon, 1978).
LO2: Understand the Nature of the National Environment in Which the Business Operates
P 2.1 Giving relevant examples, briefly explain how different economic systems such as command, free enterprise, mixed and transitional systems attempt to allocate resources effectively
If we talk about the types of the economic system prevailing across the world, then there are basically three types of economies present which are: free market economy, command economy, and the mixed economy. The economic systems have different driving forces which work towards the allocation of resources effectively. In a free market economy, there is total freedom top the producers and the buyers to exchange in a way that is a win-win situation for both the parties. This type of structure enables the problems tone handles automatically by the system and the market is responsible for the allocation of resources. In the free market economy, the stakeholders have a lot of options to choose from because of the independent marketing strategy (Whitley, 1994). The business decides what to produce depending on the preferences and demands of the customers. The businesses are required to keep the customer preferences as the top priority but with a motive of making a profit. The activity of producing goods and services decides the profits of any company. The products are offered to the customers in the market and the market forces decide the flow of products to certain customers depending on their disposable income and their interests. On the other hand in the command economic system, the controlling authorities are responsible for the effective allocation of resources. Here by controlling authorities we refer to the government and its related organizations. In the command economic system, the decisions are made based on the need basis. The companies have the right to decide what to produce, for whom to produce, how to produce, how much to produce, etc. The allocation of resources in such a system is done by proper planning and strategy. So according to some of the economists, the command economy is better than the free market economy. In the mixed economy, there is a combination of the free market economy and the controlled economic system. The free markets forces are controlled by the controlling authorities so they have the advantage of both the economies hence the resources are more efficiently allocated. Here the decision of what to produce is partially decided by the consumer preferences and partly by the government intervention. The decision of how to produce is to decide by the firm itself under government surveillance. The customers for whom the products are produced are decided by the consumer purchasing power, their interests, and government policies as well. Most of the economies in the current scenario are mixed economies and it is very beneficial for both the parties i.e. the producers and the customers (Young, 1999).
P2.2 Considering Tesco PLC UK, assess the impact of fiscal and monetary policy on their activities
The government policies and the related regulations play a very crucial role in formulating the fiscal and monetary policies of any country to keep a balance between the expenditure of the government with respect to its earning to meet its objectives of personal development. This is done by the government by formulating policies and by the help of central planning system. The economies of any country are majorly governed by the two policies formulated by the government of that country: fiscal policy and the monetary policy. The main elements of the economy will be affecting the business are the tax rates and government spending. The fiscal policy can take the form of automatic or discretionary depending on the present conditions and the government preferences (Fatás, 2001). The fiscal policy determined by the government has to play a major role in the growth of any economy and the employment opportunities of the economy. The fiscal policies can enable the consumers and the producers to have the access to capital. The business has to take into consideration the tax rates in developing its strategies and taking various business decisions (Kollmann, 2002). Tesco plc also gets affected by these fiscal and monetary policies which are formulated by business. In the UK, they are not favorable for the company to expand in different geographies. The tax rates are high so the company has to conscious about its investment plans and recruiting strategies. Higher the tax rate, it would be more difficult for the businesses to pay back to their investors and lenders and more will the risk. Also, higher taxes will mean less disposable income to the customers and hence less possibility of earning high revenue by the businesses. If the customer expenditure is less it means the supply-demand issue will be brought into the picture which will not be good for the health of any economy. The monetary policies on the other hand also play some similar roles. It is basically concerned with the control over the supply of money in the market. The amount of money supply in the market is responsible for many decisions being taken by businesses. This supply of money is in total control of the government, the controlling authority and this can be regulated depending on the satiation by adjusting the interest rate, tax rate, etc. All these will affect the supply of money available in the market. All these regulations done by the government will indirectly also affect the foreign exchange rate which has a direct impact on global businesses. The interest amount to be paid will be high as the base rate increases. It will decrease the profit amount and will demotivate the organizations to do business. It will affect the market sentiments in a negative way and organizations will avoid taking loans and do business. The businesses will also get affected due to high foreign exchange rate due to high-interest rate and will have to pay more for import of raw materials (Scherer, 1990).
P2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of Tesco plc the UK.
Tesco plc is a UK based organization which is dealing with supermarket chains all over the world. The company has a very strong brand name in the retail sector and is very popular in the field of grocery and general merchandising. As we have mentioned that the company has gone global and has a presence in various parts of the world. So they also have to face a lot of cross-border rule and regulations to do business outside the local environment. They have to follow the legal complication of different nations before doing business in that geography. In the UK, the company had to face the regulation of the competition law which was incorporated by the UK government in the year 1948. This law was passed with the prime motive of creating a healthy and robust competitive market where every competitor has a fair chance to compete with its competitors. This also helps for stopping the big players to take the advantage over the small players and every player in the market gets equal opportunity to flourish. These laws are in favor of customers in giving them multiple options to choose from. This also helps in the fair pricing of the products and services offered by different organizations. Tesco has faced some problems due to these policies. They cannot get into taking decisions in fixing their prices. The company has faced challenges in complying with the proposals of the British government (Yip, 2006). The government has imposed heavy penalties on the organizations in the past that broke any rule or regulation in the competition law hence Tesco has to careful enough on this front. These policies have also served as roadblocks in expanding the business to new locations and new markets. There are many other laws like the competition laws which are imposed by the British government which Tesco has to follow. There are many human resource related laws which the company has to abide by. For example Minimum wage policy which was introduced under the National Minimum Wage Act in the year 1998, workplace safety regulations which come under the Health and Safety Wage Act 1974, maximum work hour policy, etc. All these acts decide that how Tesco will treat its employees. Another act known as the Sales and Good Act makes Tesco fulfill the requirement of contract terms with the suppliers in buying raw materials and in selling the finished goods from its retail outlets. The recruitment policy followed by Tesco makes the company follow the anti-discrimination laws prevailing in the UK. This helps the employees in the UK from getting discriminated from each other on a different basis. Other acts followed by Tesco are race relation act, disability act, employment equality regulation etc.
LO3: Understand the behavior of organizations in their market environment
P3.1 Explain how market structures determine the pricing and output decisions of Tesco plc the UK.
Deciding the price and output of any organization is the most critical decision to be made. This decision impacts the success of any business and should be taken after considering a number of factors. These decisions are highly influenced by the market structure. A market is defined as a place where buyers and sellers interact with each other to exchange goods and services. Market structure is basically the way in which these interactions between the seller and the buyer happen. The seller themselves does not the liberty to decide the output and final price on their own rather they have to consider the market structure before doing the business research. Market structure is basically characterized by the number of producers in the market and the type of products sold in the market. If the numbers of sellers are more and they produce similar kind of products, then, in that case, the price and output of the products and services are decided by the supply and demand mechanism. But in the market structure where the goods and services offered are distinct from each other, the decision making lies with the producers. They can decide whether to substitute a product with other and how much to produce (Spar, 2006). Same is the case with Tesco plc. The market structure where the Tesco is operating, for example in the UK, there are many other players in the market which are offering the same products as the UK, hence the price and output of the products offered by Tesco is being decided by the supply and demand mechanism. The decisions are made by Tesco after taking into considerations the strategies and practices followed by the competition. On the other hand in a perfect competition market structure, the number of buyers and sellers are too high so any individual cannot fix the price and output and the decision is made according to the market sentiments. The buyers and sellers can easily enter and exit the market. They have to follow the market pricing in order to be alive in the competition. In other market structures, the producers have the total control over the price and output of the products and services offered by them.
P3.2 Illustrate the way in which market forces shape Tesco plc responses using a range of examples
The market forces are very much responsible in the way a particular organization behaves in a market. Market forces are responsible for deciding the pricing of the products as we have seen in the above segment. Similarly, these market forces are also involved in another business-related decision-making process. The market forces communicate with each other in order to have better profits and this depends on the market structure. For Tesco plc, the decision making is done depending upon the market preferences i.e. the customer preferences, the competitor analysis, price elasticity, supplier relations, etc. All these forces drive the way Tesco behave in the market. In a perfect competition, the number of buyers and sellers high and they play a crucial role in deciding the prices of the commodities traded on the market. This is often termed by the economists as the price taking property rather than a price making the property as the sellers get to know that at what price they should sell their products instead of deciding it themselves. Are the products being sold in the market are similar then the producers cannot bargain over their product as they are similar to other available in the market. Due to this, the sellers are forced to accept the price prevailing in the market and decide the same price for their products. The market forces decide the trend of the market and interact with each other. The sellers then have to act according to of the conditions set by these market forces. Another form of market structure is a monopoly, where the seller has the complete control over the market and have the liberty to decide the output and price of the commodities offered by them. The pricing of the products is non-elastic and producer has the complete control over it.
P3.3 Judge how the business and cultural environments shape the behavior of Tesco plc the UK.
The business management and cultural environments are very much responsible for shaping the behavior of much organization. Same is the case with Tesco a well. The businesses in the current times are not autonomous and operate under different cultural environment. The behavior of the organization in different markets heavily depends on the culture of that market which may include the society ideologies. This differs from one location to another and while doing business companies like Tesco which is present all over the world have to incorporate in their business practices. The culture of the UK where the Tesco is based is inherited from ancestors and the customer preferences define the behavior of any organization. Different regions of the UK market differ in their business and cultural environment. The retailers in the UK have to deal with different cultures and the beliefs and encapsulate that in the business. The UK has a diverse culture and the businesses like Tesco behave accordingly. In Tesco, the competitor strategies are formulated very carefully taking account the different market environment and different culture in different regions of UK. The regulation and competitive laws of the UK are responsible for making the firms compete with the competitors fairly.
LO4: Be able to assess the significance of the global factors that shape national business activities
P4.1: Discuss the significance of international trade to Tesco plc UK
In the recent times globalization has become very popular and the companies have realized the importance of going global. They have realized the benefits from expanding the business to different geographies. There are a lot of forces which motivate the companies to go global. These are the cheap labor present in certain parts of the world. There are also many geographical locations which are technologically very advanced so opening business in those geographies will help the business to take the advantage of those advanced technologies and use it all over. There are places where the cost of production is very low; the cost of raw materials is very low, so opening business in those locations will be very profitable for the businesses. Same is the case of Tesco plc. This company has also realized that doing business in more than 1 nation makes the organization use its resources optimally that are present in different locations. It makes the utilization of resource management with the company in a more optimal way. On the other hand expanding the business to foreign locations can also take the advantage of international trade policies. These days for being successful and make huge profits it has become a necessity for many organizations to expand globally. It gives the organizations like Tesco plc the opportunity to make use of the diverse workforce. These will bring better profits to Tesco plc.
P4.2 Analyse the impact of global factors on Tesco plc
There various global factors which are present in the market which has a huge impact on the organizations which are operating in the global space. Tesco plc is one such organization which had to face many such global issues. One of the most common is the political system and its regulations imposed on Tesco in expanding its business in different geographies. The UK-based businesses which are operating at global scale face two major challenges in coping with the dissimilar business environment. Any sort of hostile transformation in government policies or structure in any of the major economy will have a far-reaching impact on the UK business. Political factors including the policy changes by the European Union plays a major role in reshaping the UK business. The political changes affect fundamental economic drivers of the countries, and hence, the tax rates, interest rates, etc. get affected. Tesco has to deal with all these factors while doing business and expanding worldwide. The political factors in the EU have a huge impact on the working of the company Tesco plc.
P4.3 Evaluate the impact of policies of the European Union on Tesco plc
The policies of the European Union have a great impact on the Tesco plc. As discussed in the above segment, changes by the European Union plays a major role in reshaping the UK business. The European Union had a great impact in influencing the political regulations and policies. UK is one of the most important members of the European Union and the policies set by the European Union have to be obeyed by the UK industry also. So Tesco has to follow the policies set by the European Union. There are many factors and policies set by the European Union which affect the Tesco plc. Some of these are the taxation policy, interest rate policy, process of business operation, etc. Higher the tax rate, higher is the amount paid by Tesco plc which in turn decreased the profit margin and demotivates the company to expand its business in new geographical areas. The treaties being signed by the European Union is not factorable for the Tesco plc to expand its business in Europe. The most common example is the Common Fisheries policy. This is one of the most controversial policies till date set by the European Union. This policy had a great impact on the fishing industry and prevented the fishing companies from expanding.
Here we can conclude this paper by stating that the market structure, policies set by the government, market forces, etc. play a very key role in shaping up a business and in deciding its future. In the current scenario, it has become very necessary for companies to go global and expand enormously but the global factors sometimes act as roadblocks to them. Hence, the government should keep this in mind and should formulate such policies which should prove to be a win- win situation for both the government organization and behaviour like Tesco plc. These policies can have the form of monetary and fiscal policies and should favor the businesses and motivate them to expand in new geographical regions. These policies should not affect the profit margins of companies and should prove to be beneficial for the companies to expand.
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Holden, M., & Garrod, D. 1996. The Common Fisheries Policy: origin, evaluation, and future (No. Ed. 2). Oxford: Fishing News Books Ltd.
Spar, D. L. 2006. Markets: Continuity and change in the international diamond market. The Journal of Economic Perspectives, 195-208.
Whitley, R. (Ed.). 1994. European business systems: Firms and markets in their national contexts. New York: Sage.
Börzel, T. 2003. Sharing and Taking EU Policies: Member State Responses to Europeanization (No. p0035). Belfast: Queens University Belfast.
Cannon, C. M. 1978. International trade, concentration, and competition in UK consumer goods markets. Oxford Economic Papers, 130-137.
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