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Business Environment

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Various Factors of Business Environment

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Introduction

The combination of all internal and external factors that affects a company's operating situation is referred as business environment. It includes various factors such as customers, suppliers, competitors, change in technology, legal and government regulations, social and economic trends (Aula, 2010). Present report is on Primark which is a subsidiary company of ABF ( Associated British Food ) groups. It was launched in 1969 and by 2012, it had 238 branches operating across UK, Ireland and Europe. It does not manufacture goods itself, its expertise lies in understanding the customers and then working with suppliers to produce goods as per Primark's specification. The profitability of the company relies on high volume of sales which is achieved through economies of scale and efficient distribution of its products. This report focuses on identification of purpose of different types of organisation. Further it also explains economic system and allocation of resources. Lastly it explains the market structure and its impact on determination of the pricing and output decisions of an organisation.

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Task 1

1.1 Type of organization is Primark and their purposes

Primark is a private company established in UK. The company is engaged in the business of fashion industry and offers varied range of products, which includes clothes of men ,women, children, accessories, footwear, beauty products and confectionery. company is listed in top fashion companies along with Zara and H&M (Iskanius, Page and Anbuudayasankar, 2010). Primark has a planned strategy about selling its products at a low price so that it can attract customers more for increasing profits. It has 290 stores . It has its largest office opened at market street, Manchester, England. The basic purpose of company is to maximize its wealth and profits of company. It focuses to provide good quality services to customers so as to build good will among them. The basic purposes of company includes:

  • To provide satisfactory services to its respected customers.
  • To offer products and services at a lower rate so to make the customers realize that its a good company
  • To build a close and healthy relationship with the customers.
  • To opt for strategies that can maximize their profits and wealth, so that company can offer high dividend to its shareholders.
  • The basic purpose of company is to achieve economies of scale so as to work efficiently in different market conditions.

On the contrary to this, another type of organization is public sector organization. Example for this include Tesco is one of the public company listed in UK working in a retail business. Its field of business includes books, clothing, electronics etc. its basic purpose includes to make company strong in food as well as non food divisions. It aims to provide its customers best quality services on a competitive price and to develop its employees talent (Pulver, 2012). Further more it looks forward to provide different incentives to its employees time to time so that it can encourage them to work efficiently in organization giving their best to it.

1.2 Extent to which Primark meets the objectives of its different stakeholders

Primark is a leading private company dealing in fashion industry. Company has different stakeholders to whom the company is accountable for. Company's basic duty is to satisfy heir customers and stakeholders imprinting good image about organization in their mind. Stakeholders are the persons who have an interest and concern in company (Kubasek, Brennan and Browne, 2016). Company has to take care of the concerns of its stakeholders effectively. The different stakeholders of company are enumerated as follows:

Employees

Employees are persons who work for an organization to get the works and objectives to be done properly. Employees expect from company to take care of their interests. Primark always seeks to fulfill the obligations towards its employees. It secures its employees about their job security, rates of pay scale etc. in case of any hazard, Primark also compensates them (Chow and et.al., 2011). Company focuses on to have respectful and truthful relationship with its employees. Employees also get appreciation in reward of excellent work done by them.

Customers

Customers are one of the vital stakeholders for any company. They are responsible for its success. More the customers, more profits and success. Primark desires to deliver best and latest quality fashion product to its customers. They also focuses on the continuous product monitoring as they get some of their products, manufactured from other suppliers. Primark also has established an online customer care system through which customers can register any kind of issues and get its redressed quickly. Customers are getting more conscious about the quality of products, so Primark aims to produce their products ethically (Blanchard, Tolbert and Mencken, 2011). More over, Primark values its customers always and welcomes any kind of suggestion for betterment of future of company.

Suppliers

Suppliers are those from which company get some of their products manufactured. Likewise, every fashion industry primark also get their products get supplied from different suppliers including Europe and Asia. Primark always focuses to provide best raw materials so as suppliers get the manufacture done and gives best results (Chavis, Klapper and Love, 2011). Company should also have good and respectful relationship with its employees. Primark always give equitable business opportunities to its suppliers.
It is concluded that primark always work upon to get their stakeholders satisfied and for the betterment of the people.

1.3 The responsibilities of Primark as an organization and the strategies employed to meet them

Primark is a private organization listed in one of the biggest fashion industry of UK. As it is a big company, it needs to fulfill responsibilities towards the society and its shareholders. Company should cover all aspects while performing its obligations(Laumer, Eckhardt and Weitzel, 2010). It increases and maximize it s growth and profits. Responsibilities towards various sections of society includes:

Government

company should always abide by business ethics that has been formed by government for companies. Organization should always follow code of conduct and different policies and procedures relating to tax, vat legislation, timely filing of taxes.

  • The strategy employed- Primark files reurns of its taxes and completes other procedure time to time. The management has formed a team which concerns about truthful and honest reporting regarding tax filing.
Customers

company should have a mission to satisfy its customers by proving them best goods and services. they should make company realize that this company is perfect in all kind of aspects. Company should focus to bring innovation in its production of goods and services so that sale increases. Company should focus on customer legislation means production should be done from view point of customers. Ethical care should be taken,

  • The strategy employed- Primark as a leading private company , focuses on to provide latest fashion products to customers. As fashion is the thing that keeps on changing, so department of innovation in products always desire to get manufacture products according to fashion, that attract numerous people. Customer care department emphasize on solving their grievances.
Employees

employees of company are the most crucial part of the company , that helps an organization to build up. Company should always take care of concerns , likes – dislikes and their interests. Company should formulate a friendly environment in the company to have healthy work done.

  • Strategy employed- Primark always conducts various training and development sessions so as to train employees. skilled labor is a must for every kind of organization. Management always introduce many incentive program, in which employees get rewarded according to their work.

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Task 2

2.1 Different economic systems and their allocation of resources

The system of production, allocation of resources and distribution of goods and services within a society or a specific geographical area is an economic system (Porter and Rivkin, 2012). Four basic types of economic systems are recognised in the world – traditional, command, market and mix.

Traditional economic system

It is the most ancient type of economy in the world. Long established practices are followed in all the aspects like the work done by people, goods and services provided, use and exchange of resources. These economic systems are not very dynamic and standards of individual is static. The interests of community are given more priority than that of individual interest. The benefit of this system cannot be used by cited organisation as retail business is taking new shape with the emerging technology and increase in competition.

Command economic system or Planned economy

In this type of economic system, government controls the economy. The state decides the use and distribution of resources. The government regulates price and wages and control everything involved in industrial process, from the equipment to the facilities (Popescu, 2013). This type of system may not be beneficial for the cited firm as resource allocation is in hands of government so it would not be able to produce high quality products due to constraint of resources. Cuba follows a planned economic system dominated by state run enterprises. Socialism is a type of command economic system which is followed in China.

Mixed economy

A mixed economic system has attributes of market as well as command economy (Harrison, 2011). The economic decisions can be made in the market by individuals. But allocation and distribution of resources is in the hands of government. Apart from few key areas, it is free from government ownership. In this context, Primark can make major decisions but it has to follow government intervention to get the required resources to develop its products. U.K. follows a mixed economy system where resources are allocated primarily by market forces.

2.2 Impact of Fiscal and Monetary Policy

There are two powerful tools used by the Chancellor of Exchequer and the bank of England to steer the economy in the right direction : fiscal and monetary policy. Monetary policy is carried out by centralised bank or monetary authority which involves changing interest rates and influencing the supply of money. On the other hand, fiscal policy is carried out by government. It involves changing tax rates and level of government spending. The fiscal policy affects the business at two levels – legislation that steers the whole economy and targeted legislation which focuses on specific sectors (Sørensen, 2012). It can influence personal spending, capital expenditure, exchange rates, deficit levels etc. Monetary policy can be used to ignite or slow the economy. The authority is responsible for expanding money supply while keeping inflation in check.

Farming

The monetary and fiscal policies affects the farming sector. When the government lowers the tax rate and increase its expenditure it will have positive impact on farming sector. As the demand of their products will increase which will stimulate economy by creating jobs. While if the tax rates are increased and government spending is decreased, there will be a negative impact on farming sectors. The demand of farm produce will decrease which will lead to unemployment and adverse situation for farmers. In case, the interest rates are low, farmers can easily avail loans for their production but high interest rates may prove hinder in the farming business.

Housing

The housing sector is affected by the monetary and fiscal policies of government. If the interest rate is low, more people will be willing to invest in homes and so housing sector will prosper (Gebauer, Paiola and Edvardsson, 2010). But if interest rate is high, there will be decline in housing sector. In the context of fiscal policy, if there is low tax rate and more government spending, then it will be beneficial for housing sector and vice -versa.

2.3 Competition policy and its impact

Competition is an essential element in the efficient working of a market. But some business of different types and sizes may create an unfair competition. Different laws and policies are developed to keep a check on such unfair competition practices. 1998 Competition Act is the major competition policy used in UK to ensure fair competition. Competition policy are the policies established by the government which are meant to prevent and reduce the abuse of monopoly power. Abuse of monopoly power can be detrimental to the interest of consumers and may lead to market failure so government need to intervene and protect public interest.

Competition Act prohibits anti-competitive agreements between businesses and abuse of dominant position by an organisation (Ebert, 2014). Cartels are form of anti-competitive activity that are formed with the aim to increase prices by reducing competition and as result, they directly affect the purchaser of goods and services. Office of Fair Trading (OFT) is responsible for detecting and stamping out cartels. This is done by relying on the information provided by purchasers of goods and services concerned. OFT can impose substantial financial penalties in case of cartels (Wild, Wild and Han, 2014).

Moreover, as per Enterprise Act 2002, engaging dishonestly by an individual in a cartel activity is a criminal offence. Individuals found guilty by court can be subject to imprisonment and imposed with heavy penalty. Further, company's directors whose company breaches the provisions of competition law, may be subject to disqualifications provided by competition orders which will prevent them for being involved in the management of the company. In case, where a cartel covers more than three EU member states, then, such matter may be taken over by the European Commission.

Task 3

3.1 Effect of Pricing and output decisions on business organization

A rational, profit maximizing firm will always look forward to produce quantity where marginal cost is equal to its marginal revenue (Blanchard, Tolbert and Mencken, 2011). Market structure shows organizational and other characteristics of market, which includes perfect competition , monopoly, Oligopoly and duopoly market structures that determines effects of pricing and output of Primark as follows-

Perfect market

Perfect market is a market where there are large number of buyers and sellers ,having homogeneous products and services. In this there are no barriers on entry and exit and price is determined by market and not by sellers. Primark is dealing in fashion industry. So it is obvious that company sell its products by having clear knowledge of its demand and supply (Siewiorek and et.al., 2012). The management of Primark is entitled to set their pricing and output decision on the basis of market demand and supply for increasing their market share.

Monopoly market

monopoly is a market structure in which there is only one seller in whole market and fulfilling the needs of buyers. It is one and only organization presented in market= which operates and meet out demands of different customers. It has control over the price and supply of products. In this there is no competition. If Primark would have been working in monopoly market structure it would wholly and completely take over the output and pricing decision making.

Oligopoly market

oligopoly market is a market where there are few number of sellers in a market which has a control over market as well as buyers. It has its own market structure. In this sellers often collude and work according to same strategy as decided by all sellers in order to reduce competition and avoid unhealthy trade practices (Gecevska, Chiabert and Cus, 2010). Primark as one of the leading company in UK , along with ZARA and H&M has formed their oligopolistic market structure ,where they can decide prices at their own and carry on operational activities.

Duopoly market

Duopoly market is one where there are only two sellers presented in a market. these two firms have dominant control over market. The firms enjoys there independence. The products offered by sellers are differentiated.

3.2 Effects of market forces on organizational structure

Market forces are those factors of demand and supply which has an effect on the price and quantity of goods and services offered in a market, which is also been influenced by buyers and sellers. demand and supply are two important forces that effects market the most. When the demand for a product increases its price falls and and vice versa (Gecevska, Chiabert and Cus, 2010). These are the forces which decides price level in an economy whose activities are not limited by government. All organizations are subjected to market forces. Primark is also operating according to the strategies of market forces. It satisfies the following key factors in an organization such as quality, cycle time, satisfaction of consumer and profitability. Company should have proper knowledge of demand and supply so that company can timely fulfill supply in respect of demand. Primark has always researched on demand of its fashion products so that it can timely satisfies the needs of its customers, making them happy. Care should be taken while analyzing market forces as poor interpretation can lead to bad effect of market force , leaving customers empty handed.

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3.3 business and cultural environment

Business environment means which contains internal and external environment factors that affects the functions of company including employees , customers management,supply and demand. Culture environment are those which includes set of beliefs ,practices ,customs and behavior that are found in each kind of religion and population (Laumer, Eckhardt and Weitzel, 2010). these are very important for ant organization. Business and culture environment plays an important role in shaping an organization. business environment defines the set of conditions that are political, social and institutional in nature. while cultural environment defines about the cultures and beliefs of an organization . So there should be a balance between business and culture environment aspects. Primark ,as a company involved in fashion retailing company, has a controlled balance between these two. Primark always produces its products with a view point of its customers and their beliefs (Laumer, Eckhardt and Weitzel, 2010). So that it would be helpful in attracting its customers. Cultural environment helps the business to analyze the taste of its customers.

Task 4

4.1 Significance of International Trade to UK business organisation

Exchange of capital, goods and services across the borders is known as international trade (Solomon, 2014). Global factors that impact UK business organisation includes scale of international trade, increase in multiculturalism in UK organisation, increasing level of inter-dependency on national economies etc. The trading countries can be benefited mutually if each country has comparative advantage to manufacture products to be traded.

More market opportunities are created for UK business organisations by international trade. The potential of a company will be restricted if it only sells its products domestically and not introduce them to foreign markets. As the brand has established goodwill in the UK market, it is capable to maintain a steady sales performance from domestic market. In this context, Primark has established its branches in emerging economies across UK, Ireland and Europe. Thus, the number of customers and sales volume can be increased under international trade, as business organisations have new market opportunities.

A substantial amount of exports is made only to EU countries. The Britain's links with EU are holding back its focus on emerging markets like there is no major trade deal with India and China (Welford, 2013). UK organisation establish their brands worldwide through international trade to enhance competitiveness and increase market share in both domestic and foreign market. Primark increases its sales and profitability by setting up branches globally. In sight of this, international trade is key element for expansion of UK business organisation and enhancement of its sales volume.

4.2 Impact of policies of European Union on UK business organisation

European Union (EU) is a politico – economic union which presently consists of 28 member states. The regulations and directives established by EU are required to be adopted by member states and business organisation operating in EU (Fernando, 2011).

Uniform tariffs, value added tax (VAT) and consumption tax are imposed by EU to promote free trade between its member states. It has also established competition policy to ensure fair competition in the market. It is responsible for anti-trust issues, mergers approval, working for economic liberalisation and breaking up cartels. The EU is currently negotiating with US to create world's largest free trade area which will prove highly beneficial for UK business organisation. However, some policies of EU like exchange rate problem which involves additional transaction fees during currency conversion results in increased production cost which is disadvantageous for cited organisation.

Conclusion

From this report, it can be articulated that there are different types of economic systems in the world. Mixed economic system is best for the cited organisation as the allocation of resources is determined by market forces and except few key areas, Primark can make major decisions. Further, the organisation should understand the significance of international trade and consider various global factors and their impact on business organisation. The UK business organisation should consider the impact of EU policies and make major trade deals with other countries as well for expansion of its business.

References

  • Aula, P., 2010. Social media, reputation risk and ambient publicity management. Strategy & Leadership.38.pp.43-49.
  • Porter, M. E. and Rivkin, J. W., 2012. The looming challenge to US competitiveness. Harvard Business Review.90(3). pp.54-61.
  • Popescu, G. H., 2013. Macroeconomics, Effective Leadership, and the Global Business Environment. Contemporary Readings in Law and Social Justice. (2). pp.170-176.
  • Harrison, R., 2011. Learning and development. Development and Learning in Organizations: An International Journal.26(1).
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