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Unit 1 Business Environment
The aim of this unit is to provide learners with an understanding of different organisations, the influence of stakeholders and the relationship between businesses and the local, national and global environments.
Organisations have a variety of purposes that depend on why they were established. Some operate for profit, whilst others do not. Organisations structure themselves and operate in ways that allow their objectives to be met. Every organisation has a range of stakeholders whose interests need to be satisfied, but stakeholders have competing interests that may be hard to reconcile.
Businesses operate in an environment shaped by the government, competitors, consumers, suppliers, and international factors. Learners will understand that some influences on the business environment are direct and clear, for example taxation policies on corporate activities. Other influences are less clear, perhaps coming from the international arena and sometimes with only an oblique impact on the national business environment.
It is within this business environment that organisations function and have to determine strategies and a modus operandi that allow them to meet their organisational purposes in ways that comply with the relevant legal and regulatory frameworks. In addition, business markets take various forms and the structure of a market enables an understanding of how organisations behave. In this unit learners will consider how different market structures shape the pricing and output decisions of businesses, as well as other aspects of their behaviour..
1.3 Essential Content
LO1 Understand the organisational purposes of businesses
Categories of organisation: legal structure; type e.g. private company, public company, government, voluntary organisation, co-operative, charitable; sector (primary, secondary tertiary)
Purposes:mission; vision; aims; objectives; goals; values; profits; market share; growth; return on capital employed (ROCE); sales; service level; customer satisfaction; corporate responsibility; ethical issues
Stakeholders:owners; customers; suppliers; employees; debtors; creditors; financial institutions (banks, mortgage lenders, credit factors); environmental groups; government agencies (central government, local authorities); trade unions
Responsibilities of organisations:stakeholder interests; conflict of expectations; power-influence matrix; satisfying stakeholder objectives; legal responsibilities e.g. consumer legislation, employee legislation, equal opportunities and ant discriminatory legislation, environmental legislation, health and safety legislation; ethical issues e.g. environment, fair trade, global warming, charter compliance e.g. Banking Code
LO2 Understand the nature of the national environment in which businesses operate
Economic systems: the allocation of scarce resources; effective use of resources; type of economic system e.g. command, free enterprise, mixed, transitional
The UK economy:size (gross domestic product, gross national product); structure; population; labour force; growth; inflation; balance of payments; balance of trade; exchange rates; trading partners; public finances (revenues, expenditure); taxation; government borrowing; business behaviour e.g. investment, objectives, risk awareness; cost of capital; consumer behaviour; propensity to save; propensity to spend; tastes and preferences
Government policy: economic goals; fiscal policy: control of aggregate demand; central and local government spending; Public Sector Net Borrowing (PSNB) and Public Sector Net Cash Requirement (PSNCR); euro convergence criteria, monetary policy; interest rates; quantitative easing; private finance initiative (PFI); competition policy (up-to-date legislation including Competition Act 1998, Enterprise Act 2002); Competition Commission, Office of Fair Trading; Directorate General for Competition); European Commission); sector regulators e.g. Ofgem, Ofwat, Civil Aviation Authority; Companies Acts; regional policy; industrial policy; enterprise strategy; training and skills policy
LO3 Understand the behaviour of organisations in their market environment
Market types: perfect competition, monopoly, monopolistic competition, oligopoly, duopoly; competitive advantage, strategies adopted by firms; regulation of competition
Market forces and organisational responses: supply and demand, elasticity of demand; elasticity of supply; customer perceptions and actions, pricing decisions; cost and output decisions; economies of scale, the short run; the long run, multi-national and transnational corporations; joint ventures, outsourcing; core markets; labour market trends; employee skills, technology; innovation; research and development; core competencies; business environment (political, economic, social, technical, legal, environmental); cultural environment
LO4 Be able to assess the significance of the global factors that shape national business activities
Global factors: international trade and the UK economy; market opportunities; global growth; protectionism; World Trade Organisation (WTO); emerging markets (BRIC economies – Brazil, Russia, India, China); EU membership; EU business regulations and their incorporation in to UK law; EU policies e.g. agriculture (CAP), business, competition, growth, employment, education, economics and finance, employment, environment, science and technology, regional); labour movement; workforce skills; exchange rates; trading blocs (e.g. monetary unions, common markets; customs unions, free trade areas); labour costs; trade duties; levies; tariffs; customs dues; taxation regimes; international competitiveness; international business environment (political, economic, social, technical, legal, environmental); investment incentives; cost of capital; commodity prices; intellectual property; climate change e.g. Kyoto Protocol, Rio Earth Summit; third world poverty; the group of 20 (G-20); global financial stability
BARON, P. (2012) Business and its Environment. 7th Ed. London: Prentice Hall.
PALMER, A. and HARTLEY, B. (2011) The Business Environment. 7th Ed. Maidenhead: McGraw-Hill.
WEATHERLEY, P. (Editor) and OTTER, D. (Editor) (2014) The Business Environment: Themes and Issues in a Globalised World. 3rd Ed. Oxford: Oxford University Press.
Purpose of this assignment
Task 1 - Case study - PRIMARK
Primark is a subsidiary company of the ABF (Associated British Foods) Group. The company was launched in 1969 in Ireland trading as Penny`s. By 2000, there were over 100 stores across Britain and Ireland. By 2012 Primark had 238 branches across the UK, Ireland and Europe. Primark has become distinctive for offering unbeatable value whilst never losing its innovative, fashion-driven edge.
Like many retail fashion businesses, Primark does not manufacture goods itself. Its expertise lies in understanding its customers and working with its suppliers to produce goods to Primark’s specification. It then gets the right goods to the right places at the right prices. Its profitability depends on sheer volume of sales. Primark`s value-for-money prices rely on low costs. These are achieved in part through economies of scale and efficient distribution.
Primark’s products are mainly sourced from suppliers in Europe and Asia. Its key sourcing countries are China, India, Bangladesh and Turkey. Putting the manufacturing of garments into these countries creates jobs. These are often at better rates of pay than other types of work on offer, improving overall standards of living.
Read more: http://businesscasestudies.co.uk/primark/beyond-corporate-social-responsibility/introduction.html#ixzz4L0Tk1slY
You are required to;
1.1 Identify what type of organisation is Primark and discuss its purpose. In addition identify and discuss the purpose of one organisation within the following categories;
- The public sector
1.2 Describe the extent to which Primark meets the objectives of its different stakeholders
1.3 Explain the responsibilities of Primark as an organisation and the strategies employed to meet them
Task 2 – Individual questions
2.1 Different countries operate different economic systems to attempt to allocate resources effectively. Research and explain the type of system operated in the following countries and reasons why you think they follow these systems.
- United Kingdom
2.2 In the UK the Chancellor of the Exchequer and the Bank of England plays a significant role in regulating the economy. The tools used by them are referred to as Fiscal and Monetary policies respectively.
You are required to assess the impact of fiscal and monetary policy on the following type of businesses
2.3 Competition is an essential element in the efficient working of markets. However businesses are of different sizes and that can create unfair competition. In the UK as in other European nations Competition policies are used to encourage and improve the competitive process, and to ensure consumers feel the benefits of that process.
You are required to identify at least five competition policy and other regulatory mechanisms in the UK and evaluate their impact on the activities of a selected organisation(s).
Task 3 – Essay
With the aid of practical examples and using suitable organisation(s).
You are required to write as essay ( no more 1500 words) to;
3.1 Explain how pricing and output decisions of businesses is determined in the following market structures
- perfect competition
3.2 Illustrate the way in which market forces (demand and supply) shape organisational responses using a range of examples (diagrams are essential)
3.3 Judge how the business and cultural environments shape the behaviour of a selected organisation
Task 4 - Debate - BREXIT
On 23 June, the UK finally settled the question that`s been rumbling close to the surface of British politics for a generation: should the country remain within the European Union or go it alone.
The EU is a single market in which no tariffs are imposed on imports and exports between member states. "More than 50 per cent of our exports go to EU countries," says Sky News. Membership of the bloc means we have always had a say over how trading rules are drawn up.
Britain also benefits from trade deals between the EU and other world powers. "The EU is currently negotiating with the US to create the world`s biggest free trade area," says the BBC, "something that will be highly beneficial to British business." Strong arguments have been made by both the Remain camp and the Leave camp.
Amongst several arguments put forward by supporters of the Leave camp is that Britain’s links with the EU are holding back its focus on emerging markets – there is no major trade deal with China or India, for example leaving would allow the UK to diversify its international links. Whilst the Remain camp disagrees with this argument and argues that 44 per cent of Britain’s exports go to other EU countries. Putting up barriers with the countries that Britain trades with most would be counterproductive (The Telegraph, 2016).
Britain risks losing some of that negotiating power by leaving the EU, but it would be free to establish its own trade agreements. Your local MP is concerned and worried about how Brexit will impact on local businesses that trade locally and internationally.
You have been asked to provide an objective report (no more than 1500 words) for your local MP to;
4.1 Discuss the significance of international trade to UK business organisations
4.2 Analyse the impact of global factors on UK business organisations
4.3 Evaluate the impact of policies of the European Union on UK business organisations