Unit 2: Business Environment Organization Purposes

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

Various responsibilities organisations have to its stakeholders (Freeman, 2010):

  • Ordinary general meetings for shareholders
  • Annual reports, business reports
  • Briefings on financial result, briefing on investors
  • Work life balance for employees
  • Work place diversity
  • Respect for human rights
  • Labour management relations
  • Meeting of board of directors
  • Company audits
  • Environmental contribution to society
  • Contributing to education

Admiral Group’s responsibilities to its stakeholders and how it meets these responsibilities:

  • Maintaining Profitability from company’s operation

Admiral group being one of the top motor insurance company along with its other subsidiaries has to ensure that it maintains its profitability across the group and its companies. Because without profitability shareholders of the company will not be able to get return on their investments in form of dividends etc.

  • How Admiral meets this responsibility: Admiral has always maintained a lean workforce in sync with its operational cost, thus reducing the cost incurred by the company it its operation and further boosting its profitability. Also Admiral Group has always diversified in the areas which have huge future potential such as various online portals catering to different segment. This has ensured that group remains profitable through diversification.
  • Proper and timely communication to its stakeholders

With more than 20 subsidiaries, employees and shareholders, it is important for Admiral group to ensure that communication channel among the stakeholder remains in sync and seamless. In a volatile business environment it is important to ensure that there is no confusion or misinterpretation of company’s decision just because of lack of communication.

  • How Admiral meets this responsibility: through use of various communication mediums such as Annual general meetings, Minutes of meeting of board’s meeting. Quarterly results communication, interim reports for shareholders and prompt announcement on its website and other communication medium.
  • Efficient policies related to group’s manpower

Admiral group through its EDP (Employee Development Programme) spread across 8 countries have ensured that all of its employees are up to date in terms of their skill set. This strategy has ensured that employee can achieve their professional growth without becoming stagnant and inefficient hence contributing to company’s growth.

  • How Admiral meets this responsibility: Admiral Group through its equity, reward and recognition, fun and good communication has ensured that employee satisfaction level remains upbeat and positive. Employees of Admiral Group receives shares of up to 3000 GBP every year.

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.

Economic System: An economic system can be defined as an organised way in which a country, state or a region allocates its various resources for production and distribution of goods and services to its population. An economic system is driven by consumers and companies which are involved in production (Knight, 2013).

Types of Economic Systems are as follows:

  • Market economy
  • Command economy
  • Traditional Economy
  • Mixed Economy

Explanation of scarcity and resources in the context of economic systems

Scarcity is one basic and important challenge which all nations have to confront in terms of their economy system. Thus scarcity and resources for each nation is limited in nature. Some countries are resource rich whereas some are poor, in order to deal with such limitation, countries have been prioritising and allocating its resources in an efficient way to ensure that there is no or least possible scarcity of the resource for its people. Scarcity is a basic economic challenge. For example many countries in middle east are rich in oil-which is precious natural resource, but they are poor in other resources. Through proper coordination and understanding economic system helps such countries to exchange such resources with the other scarce resource.

Q 2.2 Using the UK as an example assesses the impact of fiscal and monetary policy on at least two businesses and their activities.

An explanation of fiscal and monetary policy in the UK;

Monetary policy can be defined as a policy framework which attempts to control macro-economic variables in an economy system through use of interest rates. Inflation is one major factor which the policy tries to control.

Whereas Fiscal policy can be defined as those policies whose main objective is to influence the level of economic activity through variation in various policies such as taxation system or government spending. In UK objective of government is to achieve inflation CPI to as low as 2%. Apart from lowering inflation rate, ensuring strong organic economic growth is another objective of UK government. UK government though its fiscal and monetary policies has also been trying to avoid falling in large deficit trap. Bank of England is the key agency which is responsible for decision on UK’s Monetary policies. Thus through variation in interest rates, BoE has been impacting on market growth. Thus Monetary policy is focused on a regulated flow of money in the market along with interest rates adjusted as per market condition (McCallum, 2014).

Choose at least two organisations to use as examples to support and reinforce your answer;

Marks & Spencer: M&S which is one of the retail giant in UK, has to incur added operational cost due to UK government’s decision of increasing Value Added Tax (VAT) to 2.5 %. This resulted into price changes across all the categories in which M&S use to operate. Thus it has to increase price of the items, inventory was updated, and retail price of each product was changed. This led to dissatisfaction among customers as they had to face sudden price hike hence impacting the overall business of M&S.

Audi: Audi is a luxury car maker, though it is a German car maker, it does have a significant presence in UK. Due to Bank of England’s decision to increase interest rates, CRR and SLR saving money became a more attractive option especially due to prevailing market condition. Hence with consumer focusing on saving, companies like Audi had to witness slump in their sale.

Identify and explain how the UK’s fiscal and monetary policies could impact on your chosen business organisations and their activities in the UK.

Admiral Group which is the chosen organisation has witnessed significant impact from UK government fiscal and monetary policies. For example due to Bank of England’s decision to increase interest rate in a financial year resulted into surge in saving. Due to which there was drop in purchase of new insurance policies since people were focused towards saving their money and take advantage of increased interest rates. Similarly government decision on taxation system has also impacted Admiral group. With increase in VAT there has been rise in the premium prices which has resulted into customer dissatisfaction especially if they are paying high premium.

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Q 2.3 Evaluate the impact of competition policy and two other regulatory mechanisms on the activities of a selected organization.

For this task British Airways is the chosen organisation.

Competition policy: For any free market, competition is an important aspect which seeks to promote and improve overall competitiveness of the market. Competition results into benefits to customers in terms of fair price and good quality of services. In order to achieve these aims in practise, competition policy is enforced. UK’s competition policy is an effective and flexible instrument to maintain competiveness in the market. However there is an important exception in UK’s Competition Policy, i.e. each case has to be judged on the basis of its impact on the public interest.

UK’s Competition law has four core components:

  • Fair Trading Act 1973
  • Competition Act 1998
  • Restrictive Trade Practices Act 1976
  • Resale Prices Act 1976

British Airways is a strong player in the aviation sector of United Kingdom. However there has been allegations against BA that it has been using its strong market position unfairly to competitor’s detriment. For example BA admitted its role in collusion over the surcharge which it used to charge from long-haul passenger. Because of which BA had to pay a hefty fine of 121.5 million GBP which was imposed on it by Office of Fair Trading (OFT) under the Competition Act 1998. Although with imposition of fine BA was able to get its case resolved, however major disadvantage it faced was that its image as a national carrier of UK got a negative publicity. People who were loyal customer felt cheated. Another major disadvantage which BA has to face is the distorted competition. Although it is a major player but due to state aid, and government’s policy to progressively liberalise the market has resulted into fare-war where other player operating on profitable routes are taking advantage of competition policy and increasing their market share through lower cost structure. Positive impact of the competition policy has been in terms of advantage to the end customer. Due to stiff competition quality of service offered to customer has increased significantly. Also companies such as BA has been accordingly improving their services and collaborating with other airlines. For example BA maintains a commercial arrangement with other airlines covering scheduled passenger and cargo services on various small routes (Jones & Sufrin, 2014)

OFT’s leniency policy under which company which comes forward to inform about its involvement in cartel conduct is given full immunity. Thus in case of price fixing over surcharge between Virgin Atlantic and BA. Virgin was given immunity. Although BA cooperated the OFT but it ended up paying fine imposed on it. Thus policy like this has negative impact on business. Despite of Virgin Atlantic’s involvement in the cartel conduct, it got immunity which was unfair for BA.

Also BA corporate conduct was scrutinised against the Civil Competition Law, for its fixing of surcharge level in collaboration with Virgin Atlantic. Although Virgin Atlantic was exempted from this investigation as well. Thus such policies has resulted into brand damage for BA along with heavy financial burden in form of fines. However positive of this is that BA has now enforced strong corporate governance practises and it conducts frequent financial audits to ensure there is no ambiguity in its processes.Order Now

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