INTRODUCTION TO BUSINESS ENVIRONMENT
Business environment comprises of internal and external factors that have potential to impact the operational activities of the organization. Strengths and weaknesses of a firm are internal factors whereas social, economic, socio-cultural and technological areas are external factors (What Is Business Environment? - Definition, Factors & Quiz, 2014). The present report entails to understand business environment by studying the purposes of different businesses. Further it covers evaluation of impact of competition policy and other regulatory mechanism on the activities of organization. The study also aims at understanding the nature of national environment in which business operates. Along with this the report assesses the significance of global factors that shape the national business activities. Lastly the report entails to understand the behavior of organization in their market environment.
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1.1 Identifying the purposes of different types of organization
The following is the purpose of different types of organizations:
The company like Virgin Group Ltd is a private company. The main aim of the business is to earn profit. The organization operates in various fields such as travel, lifestyle and amusement. The corporation is engaged in handling ventures in transport, food and drink, telecommunication and financial services (Willzdjibobera, 2014). The main objective of this firm is to increase market share and satisfy the needs of the customers. Virgin Group Ltd. also operates gym facilities, online casinos, balloon fights, banking, hone IT, health and life style management and racing teams. Moreover the company is engaged in offering variety of financial services such as credit cards, pension products, insurance products and home loans etc. The main purpose of the company is to make credible contribution in relation to sustainable life styles by meeting the expectations of staff, stakeholders and customers.
The organization like National health services (NHS) is publically funded. The company obtains funds by the means of taxation system. The purpose of NHS is to offer quality health care services to the customers (Jain and et.al., 2014). In addition to this the company also provides free service at certain time period. Such type of organization is controlled and owned by government. There are commenced for the purpose of promoting sustainable growth and prosperity within the nation. The aim of NHS is not profit making but their objective is to provide health care services to weaker section of society at affordable prices. National Health Service is engaged in creating employment opportunities for people belonging to various classes so that they can attain their goal in effective and efficient manner.
Such organizations are non profit businesses. The corporations like Oxfam and Hart. The purpose of Oxfam is to find solution to reasons that result in poverty. Its ultimate goal is to enable people to perform their rights and manage their lives in the most effective manner. The company functions by interacting directly with the communities (Whittington, 2012). It aims at ensuring development of poor people. The purpose of the company is to help people directly in case when local capacity is insufficient. The organization like Hart is charitable trust that helps small groups of businesses that require financial support. The company is established for the purpose of providing benefits to the people of society.
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1.2 Extent to which organizations meets the objectives of different stakeholders
The stakeholders of the Shell are its owners, employees, environmental groups and government. The extents to which the company meets the objectives of these stakeholders have been described below:
The major stakeholder of the company is the owner. Owners are considered the most important stakeholders as they have established the business and gave lot of time and money in making company successful (Capon, 2009). The owner of Shell requires profits from the business. By performing business activities in an efficient manner Shell is satisfying the need of its proprietor. The owner wants that the value of business keeps on rising. The company like Shell is effectively meeting the needs of its owner as has achieved success.
Employees are also vital for the success of the organization. They want security of employment. In addition to this they also require god rates of rewards and promotional benefits. The employees of Shell needs job satisfaction. The corporation is effectively complying with its responsibility by offering high salary benefits to them (Cross and Miller, 2011). In addition to this the company also provides better working place to employees so that their needs can be satisfied and they are motivated to perform the work to their best.
The success of the company is determined by the environmental groups that exist in the external environment of the business. They want that while manufacturing goods the company has to take care of the environment in which it is operating business. Shell fulfills the needs of environmental groups by producing the products with the least destruction of natural environment (Jones and Vagliasindi, 2013). Moreover it makes optimum utilization of resources so as to ensure effectiveness in dealing with environmental condition. By fulfilling the corporate social responsibility towards environment the organization like Shell is effectively fulfilling the needs of environmental groups.
The resources are allocated to the business by regulatory body. Their goal is to ensure that business makes effective and efficient utilization of scarce resources. Shell to a greater extent meets the objectives of government (Nandi, 2010). This is because it is engaged in activities that result in reduction of waste and further makes use of resources in best manner. Along with this Shell makes tax payment within time. Thus this provides assistance to government in meeting its targets.
1.3 Responsibilities of organization and strategies to employed them
The major responsibility of Shell is to fulfill the needs of its various stakeholders. Through this business can achieve its targets in efficient manner. The responsibility of Shell and strategy employed to meet them have been enumerated below:
i) Health and safety
The company like Shell has responsibility to protect health and safety of the employees who are performing various business activities. In order to protect health of the employees and ensures their safety firm has to provide proper working conditions (Prasad, 2010). The corporation needs to provide training to personnel regarding the way to use different business equipment in an effective manner. The responsibility of Shell is to organize health checkup programs for its employees. This will act as a motivation for personnel which will thereby result in increasing their working capability.
ii) Equal opportunities
The company is responsible for providing equal opportunities to the workers so that each worker is motivated to carry out work in the best manner. It is the duty of the Shell in ensuring that the business does not practice racial and gender discrimination (Halbert and Ingulli, 2009). In addition to this company is responsible for making sure that every employee with the business is offered equal number of opportunities so that they can show their competence and skills. The company needs to fulfill such responsibility in relation to employees so that it can attain its future targets in effective and efficient manner.
b. Ethical issues
The company has responsibility towards ethical issues. One of the major issues is pollution. It is the responsibility of Shell to ensure that its products are manufactured by giving due consideration to the environmental aspect (Ahmad and et.al., 2010). The organization is involved in activities including plantation of trees, and recycling of waste so as to reduce the impact of harmful substances that have been used in the production process. Through this company can overcome the ethical issues that can affect the society where the business operates.
ii) Global warming
This is the major ethical issue that creates harmful impact on the environment where the firm like Shell carries its business. The responsibility of the company is to minimize the impact of global warming that is result operations performed by business (Berman and et.al., 2009). Because of rise in the average temperature of climate system of earth such issue arises. The responsibility of Shell is to make use of less energy and to recycle of reduce the amount wastage so as to fulfill its duty towards ethical issues.
2.3 Evaluation of impact of competition policy and other regulatory mechanism on the activities of business
It is essential for the firm to carry out operations in accordance with the competition policy. As per the case study it can be evaluated that Microsoft was blocking its competitors out of the market by anti- competitive practices. Because of this reason anti-trust suit was filed against Microsoft. Due to disobedience caused to European Union laws the company was ordered to make payment of €497 million. This was the largest fine that was ever handed out by European Union. Further the impact of this is that EU started examining the Microsoft’s products and the technologies that are used in the products. The commission also impacted the design of the products design and limits the ability of firm to innovate its products in future.
The impact of the competition policy can be evaluated as such. It is very critical for firm like Microsoft to follow the competition policy in order to ensure fair trade practices within the marketplace. The policy aims at preventing the abuse of monopoly power (The importance of competition policy, 2014.). Negligence of this law will result in market failure. Moreover this has impact on the interest of the customers. The company like Microsoft has been provided in the competition acts that they needs to restrict collusive behavior. This implies that business cannot enter into contract of fix prices and outcomes. It is considered to be illegal. Practice of such strategy will result in strict action that can be taken by government or European Union. Competition policy strive the organizations to carry out business in legal and fair manner (Burbridge, 2007). It is essential for them to consider the interest of public while performing the business transactions. The competition policy states that if the company has 40% of market share then it is required not to abuse the market power. The abuse of market power involves charging higher prices and vertical restraints which imply that firm may use market power to make payment of lower prices to suppliers. It is essential for organizations to act in manner that it does not demonstrate unfair trade practices. The companies needs to work for the interest of customers and provides that quality products and services at affordable prices (Chen and Mohamed, 2008). Competition policy aims at encouraging and enhancing the competitive procedure. It also aims at ensuring that customers are benefitted from the process. This can be achieved by the implementation of competition law into practice.
3.4 Business and cultural environment in shaping the behavior of business
The following are the business and cultural environmental factors that have significant influence on the behavior of organization.
a. Political factors
The organization like Shell can be influenced by different aspects of government policy. The company has to plan its strategy in accordance with the legislation otherwise they may impact its business operations adversely in future. The change in the taxation rates impact the organization procedures and policies (Political factors, 2014). With the increase in tax rates Shell would not be able to save more amount of money for its expansion activities. However in case of reduction in tax rates the organization can save more amount of profit that can be used by it for growth and expansion purpose (Dawes, Zhang and Sarkis, 2005). Moreover this may result in increasing the profits of Shell by 10% - 15%. This assists business in shaping its behavior to greater extent. The government has formulated certain rules and legislation regarding waste management. Shell is making huge destruction to the environment. Thus by such regulation the company can perform its activities in an effective and efficient manner.
b. Socio-cultural factors
Change in the preferences of the customers is the major socio-cultural factor that influences the business decisions. Changing demographics is the significant factor the shapes behavior of the organization like Shell. The company carries out business operations in multicultural country (Gani, 2011). Thus it is critical for the business to determine aspect of customer’s behavior before formulating advertising and marketing plans. Internal decision making of the Shell is influences by socio cultural factors to a greater extend. It shapes to organization’s behavior towards racial discrimination and sexual harassment.
c. Educational factors
The educational factor has greater impact in shaping the behavior of organization like Shell. With the increase in literacy rate the economy of UK will go up. As with this number of people getting employment will also be enhanced. Thus Shell can recruit highly skilled personnel within its organization (Ghannadian, 2006). Moreover the amount of training that is offered by business is the major educational factor that determines the success of the organization. On the job training is also critical element that shapes the behavior of Shell. With the increase in the skills and ability of the employees to perform task, work can be carried out in appropriate manner. Thus this would result in achievement of organizational goal within specified duration of time.
4.2 Analysis of the impact of global factors on UK business organizations
The UK business organizations are affected by range of global factors which are beyond its control. The impact of such external factors can be analyzed as under:
a. Technological factors
One of the major global factors that affect the UK business organization to greater extent is technological change. There has been emergence of drastic change within technological aspect. In order to comply with the updated technology the business has to bring change in its procedures and strategies (Haigh and Brubaker, 2010). This requires huge investment. The introduction of new technology also requires highly skilled professional in order to carry it. Thus Shell is impacted by such factor to a greater extent which requires company to spend large amount of funds as well as resources.
b. Legal factors
The government has access to business activities both internally as well as externally. There are certain legislations formulated by regulatory body of the country where the business operates. In order to ensure survival of the organization it is critical for them to fulfill the legislation laid by government (Kelliher and Henderson, 2006). The government has formulated regulation in order to control the amount of goods produced by Shell. This is done to safeguard the interest of customers as well as to protect them from the use of harmful substances. Certain legislation has been developed by government for the business operating UK. The employee’s protection regulation implies that Shell needs to perform activities in the best interest of personnel. The development of such legislation compels business to bring changes in its organization’s structure, processes and activities.
c. Environmental factors
The global factor such as environmental factor has huge impact on the operations of the business. Natural environmental factors have ability to influence the operations of Shell. Company needs to comply with the environmental regulations at every stage of business development (Kemp and Vinke, 2012). The availability of raw material, labour, power and certain other factors is determined environmental condition in which business operates. Change in the climatic condition also put huge influence on the organizational operational activities.
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4.3 Evaluation of impact of policies of European Union on UK business organizations
The impact of two policies of European Union on UK business organizations can be evaluated as below:
There are certain policies developed by European Union. These policies lay greater impact on the UK business organizations like Mark and Spencer. The commission has designed policy in relation to employment. This policy states that organization needs to create employment opportunities for people (Manning, 2013). This will directly contribute to the GDP of UK as with the implementation of employment policy the number of people having job will also enhance. Certain programs such as New Deal have been developed to provide assistance for unemployment. It is essential for the organizations operating in UK to implement employment policy otherwise European Union may charge heavy fine from them. Thus this policy has overall impact on the economy of the country. It has been stated that in order to adopt change it is essential for organizations under European Union to keep match between labour market and supply (Tokuoka, 2013). This has to done for the purpose of keeping business productive and competitive. It is vital for Mark and Spencer to recruit people who possess right type of skills necessary for employment. Moreover this implementation of such strategy would result in improving the quality as well as working conditions within organization.
Taxation policy of European Union is comprised of two components. This includes direct and indirect taxation. Direct taxation is that which is paid by the member states only. However indirect taxation is that which ahs impact on the movement of goods and ability to provide services freely within the market (Boyce and Dwan, 2003). This policy of European Union provides organization like Mark and Spencer to follow strict rules and regulations related to taxation. This would assist firm in saving more amount of money which would further improves revenues of the company. It is analyzed that in order to make business flow smoothly it is essential to consider taxation policy of European Union (Bracci and Maran, 2013). With the increase in tax rates the Mark and Spencer can save less amount of money from the part of profit. Thus it has to concentrate on the ways to prevent tax through fair trade practices so that it can formulate expansion and growth plans for organization.
It can be concluded from the study that the purpose for which the different organizations comes into existence depends upon the type of business. The factors prevailing in external as well as internal business environment greatly impacts the operational activities of the organization. The company has to meet the objectives of its stakeholders such as employees, owner, environmental groups and government in order to survive in the market for long run. It has been inferred that Shell has to fulfill its responsibility towards ethical issues and employees in order to achieve success for business. Moreover this creates satisfaction within the employees and community when their needs are fulfilled. Further the global factors such as technological, legal and environmental have impact on the operations of the business.
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