Table of Contents
There are different organizational types operations in the marketplace and these organizations deals with several market factors shaping future of the organization. Market environment is a major determinant of the organizational strategy to operate in the marketplace. In present paper role of different business organizations would be understood so as to know different organizational types and role of stakeholders to the success of organization. National environment in which business operate would be important to determine economic scenario under which organization would determine its economic strategy. Further organizational behaviour in the marketplace would be assessing to understand operations for the business organizations in accordance with the marketplace factors. Finally present paper would look into impact of global business scenario on the organization.
LO1: UNDERSTAND THE ORGANISATIONAL PURPOSES OF BUSINESSES
1.1 Identify the purposes of different types of organizations
Organization can be defined as the group of people whether small or large and cooperating under the direction of executive leadership to attain the defined goals. Organization can be a single person or group of people; these can also be of smaller size or can be of national level such as BBC and Tesco.
There are four different types of organizations existing in UK and can be given as under:
- Public sector
- Private sector
Public sector organizations are generally held by government or bodies formed by government sector for collective interest (Davis, 1997). There can be different types of public sector organizations such as government shareholdings, government controlled organizations, quangos and public corporation organizations. Public organizations are set through act of Parliament to gain benefit of large scale production or to safeguard area of huge employment. Some of the common examples of public sector organizations in UK include BBC & Bank of England. Private sector organizations are held by individuals or group of individuals for their own interest. Individual organizations can be in form of sole traders, partnership, franchises, companies and cooperatives etc. Some of the common examples include Alliance group and Camden group services. Private organizations are set up to provide services and turn profit.
1.2 Describe the extent to which an organization meets the objectives of different stakeholders
Operations of the organizations depend upon the stakeholders up to a large extent as they play critical role in success of the organization. Stakeholders can be defined as people who can affect or gets affected by attainment of objectives set by the organization. For present context Book People has been selected which sells books. Stakeholders for the organization can be divided into two parts i.e. external and internal stakeholder. External stakeholders of the company include publishers or suppliers, customers, government agencies, financial institution and society. While internal stakeholders of the organization include shareholder, employees, trade unions and different departments within the organization. Further stakeholders can be categorised under two heads which are primary stakeholder, those who define organization and vital to existence such as employees, customers and suppliers (Freeman, 1984). Secondary stakeholders are those who may affect the relationship with the primary stakeholders of the company such as competitors, pressure group and government bodies. For Book People company publishers have the aim to sell large books through organization and in case organization fail to meet objective publisher would seek to break contract. Customer are having objective to fulfil their needs though book supplied by company and in case company fails to attain it a bad service would result in loss of customer. Company attempts to meet objectives of all stakeholders by maintaining coherence between different stakeholders.
1.3 Explain the responsibilities of an organization and strategies employed to meet them
There are several responsibilities which Book People Company has towards their stakeholders such as customers, suppliers, government agencies, shareholder, employees and society etc. Organization has responsibility towards employee to provide them suitable work environment, provide employee welfare and stability in terms of career growth. Book People have responsibility towards their publisher to maintain high selling number so that they can also sale profitably. Responsibility of Book People towards customers is to provide good customer service and meet knowledge needs through proper books. For society Book People is responsible to maintain corporate social responsibility and not to affect the environment adversely. For Shareholders company has responsibility to meet their objective to enhance overall value of money employed by them. In order to meet these responsibilities company operate within the stipulated laws and regulations (Davis, 1997). For example before setting up a new warehouse company should analyze regarding negative impacts which would have on environment due to setting of warehouse. By implementing new human resource policy, company should analyze impact which would be there on employees and any negative impacts should be countered by suitable changes in policy. Another way of categorizing the responsibility for organization towards their stakeholders can be social responsibility, environmental responsibility and management responsibility.
LO2: UNDERSTAND THE NATURE OF THE NATIONAL ENVIRONMENT IN WHICH BUSINESSES OPERATE
2.1 Explain how economic systems attempt to allocate resources effectively
Allocation of resources in organizational context depends upon the fact how nations, individuals and companies distribute key resources such as land, labour and capital. Depending upon the country there are different levels of economic systems prevailing which would attempt to allocate resources effectively. Two prevalent economic systems in UK are given as mentioned below:
- The Planned economy: An economy where in prices are being set by government agencies rather than the market forces would be known as planned economy. Government agencies would decide the way in which goods would be distributed and such economies are generally associated with communist or socialist countries (Terpstra, 2004,). Means of productions are owned by public and government makes decision regarding allocation of resources. Wealth distribution is done by state and there is low degree of control for market forces in resource allocation. Some of the important advantages include elimination of duplication of resources, low unemployment rate, low degree of inflation and controlled way to achieve goals. Disadvantages of such economies include no free choice, low variety in goods and high level of supervision.
- Market economy: In market economy buyers & seller decide regarding future of goods and it mainly depends upon the spending made by households for various goods. Prices of goods would depend upon the cost of production. Some of the key advantages for market economy include production in accordance with demand, high number of variety, democracy & freedom and high competition. Some of the disadvantages include wasting resource, inflation, price control by firms and possibility of large inequalities.
2.2 Assess the impact of fiscal and monetary policy on business organisations and their activities
UK government has five objectives to attain which includes providing complete employment, government borrowing in controlled manner, equilibrium in BOP, sustainable economic growth and managing inflation at appropriate level. In order to attain these objectives government makes use of two macroeconomic policy tools which are monetary policy and fiscal policy. Monetary policy is mainly concerned with the supply of money and interest rates prevailing in the economy of UK. Government may use interest rate to control flow of money in the market. Fiscal policy of the country relates with decisions made by government related with their spending & borrowing. Government can make changes in spending and taxation to affect the aggregate demand so as to control boom & burst in economy cycle of UK (Leathy, 2004). In beginning of 2011 there was incremental VAT of 2.5% imposed by UK government due to which Tesco and Camden group services incurred cost as they have to print new prices and update their material. Retail giant like Tesco have to change their entire price tags which involved manpower and cost. Change in currency rate may affect decision taken by these organizations and reduce their competitiveness. By increasing government spending in education and health there would be higher aggregate demand and need of manual labour.
2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organization
Legal bindings can be used as an important tool in situations where external costs are imposed and consumer protection can be done by avoiding market situations such as monopoly and oligopoly. The Competition Commission is a public body in UK established through Competition Act 1998 so as to ensure healthy competition between companies in UK so as to benefit economy, consumer and companies. For example in case of mergers done by Tesco in UK CC monitors whether merger would result into acquisition of share greater than 25% hence reduction in competitive market position (Worthington, 2007). CC also intervenes in situations when aspects of system are not operating with high effect and in market competition is being prevented by market players. Another government body for regulatory mechanism in UK is Office of fair trade (OFT) and role of OFT is to ensure market work well for consumers. Some of the crucial issues referred by CC are also handled by OFT in areas such as communication, electricity, gas and water. For example CC investigated whether transfer of newspaper from Newsquest Limited to Johnston press worked against public interest. It was concluded that transfer of title did not work against public interest. Other regulators include OFWAT related to economy of water and Press complaint commission to regulate British press.
LO3: UNDERSTAND THE BEHAVIOUR OF ORGANISATIONS IN THEIR MARKET ENVIRONMENT
3.1 Explain how market structures determine the pricing and output decisions of businesses
Pricing and output decisions are made in the organization based on the market structure and overall competition prevailing in the market. In monopoly structure organizations affect the market by determining prices & output and this would depend upon the overall market share gained by the organization. Generally firms having 100% market share would be considered as monopoly while as per competition commission firms with 25% market share would be counted as monopolist. Tesco can be considered as monopolist in UK retail market with more than 29.9% market share while other major market players such as Asda 17.5% market share, Sainsbury 16.5% market share and Morrison 12.3% market share. In Duopoly like situation which is similar to Oligopoly two organizations would be having dominant market share and price would be determined depending upon the strategy adopted by these two organizations. There are possibilities that these two organizations can make merger and form monopoly, can set similar prices and develop co-operation strategy. Most popular examples of duopoly can be seen in UK’s aircraft industry where in Airbus and Boing are two major players having major market share for the entire industry.
3.2 Illustrate the way in which market forces shape organizational responses using a range of examples
Market forces can be considered as the interaction activity for the demand and supply for the goods and these phenomena shapes the economy. Reaction given by an organization towards economic change or market forces would be known as organizational response. There would be high impact of the market forces on company as these factors have ability to change profit or overall reputation which an organization has in market (Dransfield et al, 2004). Market demand for the product needs to be assessed by company in appropriate manner as this would help the organization to keep their customers happy and set appropriate profits level. Wrong prediction for the demand would affect organization as either customer would not be satisfied or company would be overstocked. Hence market research is an important factor which organization should follow and accordingly response should be given by the organization for changes happening in marketplace. There are three major market forces which shapes the entire market and even have impact on the organization and these factors are cost pressure, information demand and customer responsiveness. For example food chains in UK are not using GM ingredients as result of consumer negative response towards their material (Worthington & Britton, 2000). Cost pressure can work adversely for the organization as higher price would lead to lower demand for the product in market. Consumers are making information based decisions in present age due to which higher information imparted for the product would help the organization to get favorable decisions from the customers.
3.3 Judge how the business and cultural environments shape the behavior of a selected organization
Cultural changes have high impact on the organization and shape the organizational ability to sell their products & services in the market. Social & cultural environment surrounding environment include factors such as behaviour range in which individual consumer engages themselves, personal life, demographic variable of population and values etc. PESTEL factors shows organizational working in the given environment, where in for political factors corruption, environmental laws, government type, labour law, political change, tariffs and tax policy are important factors. For economic factors important elements are labour supply, economic grown, exchange rates and disposable income of consumers (Blair, 2002). For social factors health consciousness, age distribution, career attitudes and population growth rate are some of the major factors. For technological aspects degree of automation, rate of technological change and emerging technology are some of the factors responsible for change. For environment weather, climate and pollution are important elements while for legal antitrust law, consumer law and discrimination law holds importance. Taking example of Coca-cola for political factors, Coca-cola falls under non alcoholic beverages hence under FDA category of food. Hence government policies would be one of the key factors in ensuring manufacturing of these beverages. Similarly changes in legal factor would make changes in taxation, accounting standards and environmental laws for the organization.
LO4: BE ABLE TO ASSESS THE SIGNIFICANCE OF THE GLOBAL FACTORS THAT SHAPE NATIONAL BUSINESS ACTIVITIES
4.1 Discuss the significance of international trade to U.K business organizations
International trade has played a major role in development of UK’s economy where in from year 1950 UK trade volume has increased by 1700% while GDP has incurred growth of more than 600%. Expansion in global economies has added higher level of significance to the UK economy. In present age business scenario not even a single economy has capability to satisfy needs of its population by itself hence countries export their surplus goods to other countries and import goods which are not available in the home country so as to strike a balance and ensure availability of goods (Anderton, 2008). Emergence of low cost economies such as India and China has helped businesses in UK to lower down their cost through outsourcing and import of goods with lower cost so that consumer needs can be satisfied with availability of higher number of goods variety at lower prices. International trade involves shifting the goods and services for comparative advantage while international outsourcing is the import of goods which could have resulted in much higher cost if produced domestically. International trade for UK allows businesses to focus their attention on their core activities while subsidiary activities can be done in the low cost economies so that businesses in UK can gain higher profits. International trade in a country would include export to other country and gaining receipt along with import from other countries and making payment for the goods. Balance of payment method can be used in order to measure overall import-export situation of a country. UK makes best possible use of the human resource and gets services outsourced through other countries.
4.2 Analyze the impact of global factors on UK business organizations
Economies in world are divided in terms of trade blocks which play a vital role in the overall international trade. Organizations such as World Trade Organization (WTO) tries to lower down barriers in the international trade internationally while at regional levels trade blocs have been formed where in group of organization make agreement with each other so that there can be free trade zone prevailing in these countries (Finch, 2004). In trade blocs’ tariff and non tariff strategy is being used by the organizations to reduce trade and this impact the overall efficiency of the market. UK is a part of one of the biggest trade block i.e. EU which is having GDP of equal size to United State. Role of EU is to develop free trade zone between its member countries and maintain currency stability. Policies framed by EU related to the agriculture, transportation, communication and competition affects businesses in UK. Several policies have been framed so as to reduce import by the organization and one of the examples of such policy is quality standards imposed by EU for dairy products. Protectionism in any country shows the attempt made by government on free trade of goods and poses double tax on the consumers and tax payers. For example for European taxpayers tax payers incurs cost of €50 billion every year while consumers incur cost of €50 billion via inflated prices for the goods. Developing countries attempt to include their products into international trade so that a globalized economy can be developed. Hence developing countries involves free trade zone, acceptance for direct foreign investments and financial flow between various countries.
4.3 Evaluate the impact of policies of the European Union on UK business organizations
Attaining membership for Economic monetary union implies that economy has been handed over to the EU and by accepting Euro as currency UK would not be having freedom to control over its monetary policy where in country can set its interest rate to curb access liquidity in the market. Rate cuts in UK would support international trade and exports would gain through rate cut policy in UK. A single interest rate policy for all countries does not seem beneficial for UK and it has become quite expensive for UK. Fiscal policy of the country would be restrained where in balance budget can go maximum up to 3% unless country is into deep recession situation and this factor has not given importance to the fact that UK’s debt to GDP is more than 30% (Palmer, 2004). UK has structural differences from the core economies under Euro zone and this would result into insufficient economic convergence for UK. Tax harmonization also would not be helpful to UK where in countries having high tax rates would drive industry and this would result into high rate of unemployment in UK. It has been revealed that there is high volatility in Euro prices as compared to dollar and sterling which covers more than 3% and this would disturb the fiscal policy and currency market in UK. Present Greece crisis has shown the benefit of maintain sterling as currency for UK but in case UK gets compatible with the Euro zone currency then there are chances that better investment environment and employment opportunities can be created in UK as well.
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