Contents

TASK 2- NATURE OF THE OPERATING ENVIRONMENT.............................................1

2.1 - EXPLAIN HOW ECOMMOMIC SYSTEMS ATTEMPT TO ALLOCATE RESOURCES
EFFECTIVELY........................................................................................................ 1
2.2 - ASSESS THE IMPACT OF FISCAL AND MONETARY POLICY ON BUSINESS
ORGANISATIONS AND THEIR ACTIVITIES.............................................................2
2.3 - EVALUATE THE IMPACT OF COMPETION POLICY AND OTHER REGULATORY
MECHANISMS ON THE ACTIVITIES OF A SELECTED ORGANISATION....................4
TASK 3 - ORGANISATIONAL BEHAVIOUR.................................................................5
3.2 - TO ILLUSTRATE HOW MARKET FORCES SHAPE ORGANISATIONAL
RESPONSES........................................................................................................ 6
3.3 TO ILLUSTRATE HOW THE BUSINESS AND CULTRAL ENVIRONMENTS SHAPE
THE BEHAVIOUR OF AN ORGANISATION.............................................................7
TASK 4: GLOBAL FACTORS..................................................................................... 7
4.1 ANALYSING THE SIGNIFICANCE OF INTERNATIONAL TRADE TO UK BUSINESS
ORGANISATIONS................................................................................................. 7
4.2 ANALYSING THE IMPACT OF GLOBAL FACTORS ON UK BUSINESS
ORGANISATION................................................................................................... 8
4.3 EVALUATING THE IMPACT OF POLICIES OF THE EUROPEAN UNION ON UK
BUSINESS ORGANISATIONS................................................................................8
CONCLUSION......................................................................................................... 9
REFERENCES.......................................................................................................... 9

INTRODUCTION.
Is an absolute necessity in the business world nowadays for organisations to understand the
nature of their operating environment. Whether to evaluate the level at which the
business is meeting its stakeholders objectives (internal environment) orto understand
current market trends and their effects on the business and its activities (external
environment), the an understanding of the operational environment of a business
remains a vital tool for the success of every business and an intergral part of the
strategic business decision making process. This write-up shall, in this light, be
evaluating the nature the business environment (task 2), the effect of the operating
environment on the organizational behavior and how it shapes the decision making
process (task 3), and the effect of policies of the European Union on business
organisations and their decisions (task 3). To do this, one shall be taking a wide range of
examples from the business world to illustrate the issues discussed herein.

TASK 2- NATURE OF THE OPERATING ENVIRONMENT.

2.1 - EXPLAIN HOW ECOMMOMIC SYSTEMS ATTEMPT TO ALLOCATE

RESOURCES EFFECTIVELY.
To ensure proper allocation of the resources within the economy to all citizens, statesmen
need to seek answers to the three basic economic problems of;
What goods and services to produce
How will these goods and services be produced and
for whom to produce
It is the nature of the economic system in place that will determine how these questions are
answered. We shall thus be taking an in depth look at the different economic systems and
how they allocate resources to solve the economic problem.
FREE MARKET ECONOMY.
Also known as capitalism, the free market economy is characterised by the ideology that the
consumer is king. The forces of demand and supply are much the determinant behind the
prices in force within the economy, Firms within the economy are responsible for decisions
regarding their output, but not without first of all understanding the preferences of the
consumers the seek to satisfy.
THE PLANNED (COMMAND) ECONOMY.
This is a centrally planned economy, where the most important decisions are taken by the
state. The command system is principally driven by executive decisions as to the number of
businesses operating in the system, the nature of production processes, the calibre of
people to receive jobs within the system, the type of goods produced and their prices. The
rationale behind this system is the fact that if pricing were to be in the hands of enterprises,
they would be exploitative towards the customer through the charging of high prices for thenr
products.

2.2 - ASSESS THE IMPACT OF FISCAL AND MONETARY POLICY ON

BUSINESS ORGANISATIONS AND THEIR ACTIVITIES.
This Paper compares the dynamic impact of fiscal policy on macroeconomic variables
implicatively insinuated by an astronomically immense class of general equilibrium models
with the empirical results from an identified vector autoregression. In the data we find that
positive innovations in regime spending are followed by vigorous and sedulously assiduous
increase There is a vigorous relationship between between public expenditure , reforms and
magnification as fiscal adjustments are engendered by reforms and magnification. Assessing
the effect of monetary policy and wage bargaining on employment and inflation in the
European monetary coalescence in the first step a kay kensyen is developed. Fiscal policy
changes can be targeted to affect certain groups (e.g. increases in betokens-tested benefits
for low income households, reductions in the rate of corporation tax for minuscule-medium
sized enterprises, investment allowances for businesses in certain regions) Consider too the
effects of utilizing either monetary or fiscal policy to achieve a given increase in national
income because authentic GDP.
Lower interest rates will lead to an incrementation in both consumer and fine-tuned capital
spending both of which increases current equilibrium national income. Since investment
spending results in a more astronomically immense capital stock, then incomes in the future
will withal be higher through the impact on LRAS. When the economy is in a recession
(when business and consumer confidence is very low and perhaps where deflationary
pressures are taking hold) monetary policy may be ineffective in incrementing current
national spending and income. The quandaries experienced by the Japanese in endeavoring
to stimulate their economy through a zero-interest rate policy might be mentioned here. The
regime has introduced a lower starting rate of income tax for lower income earners. This is
designed to provide an incentive for people to work extra hours and keep more of what they
earn. Changes to the tax and benefit system withal seek to reduce the peril of the poverty
trap where households on low incomes visually perceive little net financial benefit from
supplying extra hours of their labour. If tax and benefit reforms can amend incentives and
lead to an incrementation in the labour supply, this will avail to reduce the equilibrium rate of
unemployment (the NAIRU) and thereby increase the economys non-inflationary
magnification rate. (DR. ALORK, GOYAL, MRIDULA GOYAL- BUSINESS ENVIRONMENT
(2001). 1426).

2.3 - EVALUATE THE IMPACT OF COMPETION POLICY AND OTHER

REGULATORY MECHANISMS ON THE ACTIVITIES OF A SELECTED
ORGANISATION.
The role of competition policy and other regulatory mechanisms on both the internal and
external climate of businesses cannot be overemphasised. Competition policy is aimed at
setting a plain field for all businesses to run their activities, by ensuring fair play in the
procurement of their needs and in the marketing of their products. Its main impact is the fact
that it allows the opportunity for small businesses to have a stake at survival within an
economy dominated by large industries
Competition policy also aids the economy to set standards for which business within a
particular industry is conducted. Rules on food hygiene and environmental protection do not
only ensure the business climate is appropriate for all businesses, it also ensures that
consumers are well protected whilst using the products of these businesses. Protection of
brand names and trade marks also go a long way to ensure protection of companys and
their business.
All these cited points are applicable to the selected aforementioned organisations in activity
2.1, Just Eat, Subway and Dominos, as the demand and the chain of supply ranging
from the tastes, needs, expectations and how much diversified and expanded are these
companies menus are, mode of service delivery and the technological advancements
structurally made to capture and the interests of its stakeholders locally, regionally and/or
nationally and internationally. The resource context streams the direct control and allocation
of the selected organisations resources available and the elements of the market systems
within the economical framework for profit making, and/or better service delivery.

TASK 3 - ORGANISATIONAL BEHAVIOUR

3.1 - ANALYSING THE SIGNIICANCE OF INTERNATIONAL TRADE ON
UK ORGANISATIONS
There are several different market structures in which organizations can operate. The type of
market structure a firm faces has some impact on its pricing. The type of structure will
influence organization behaviour and profits it can generate. The structure of a market refers
to the number of businesses in a market. When there is no competition, the market is said
5

to be concentrated. However, organizations are never free to set their own prices if they
want to make the enough profit. A scale from perfect competition to monopoly and monopoly
competition can be found below.
Perfect Competition: in perfect completion, there are large numbers buyer and sellers. No
firm can influence the pricing of goods. They are price takers in this market structure and
must charge the same as everyone else. A perfectly competitive market is a market where
competition is at its greatest possible level. Some characteristics of a perfect completion
market are:
There are no barriers to entry into the market.
No single company can influence the market price or market conditions.
There will be a large numbers of companies in the market.
There is no need for government regulation, except to make markets more competitive.

Oligopoly: An oligopoly is a market structure in which few companies dominate the market.
In oligopolies, they must pay attention to the pricing decisions of competitors or other
organizations in the market.
Monopolistic Competition: is the sole seller of a goods and services or is a market structure
in which there is only one producer or seller of a product However, in monopolistic
competition firms most produce the quantity were their marginal revenues equal their
marginal costs.
In conclusion, Market structure does affect organization pricing decisions, but organizations
are never simply free to set their own prices if they want enough profits marking.

3.2 - TO ILLUSTRATE HOW MARKET FORCES SHAPE

ORGANISATIONAL RESPONSES.
The interaction of the market forces of demand and supply are of prime importance to every
business. Every business needs to understand fluctuations in the demand and supply of
their products not only to determine its effect on their profits, but also to direct their strategic
orientation. To understand the way market forces shape organisational responses, let us
take a look at the figure below:
6

Figure:

Demand and

supply for Flip-

flops (Source:
www.raybromley.com)

The figure above shows the demand and supply curves of a company that produces flipflops. Initial price and quantity demanded are at P1 and Q1. As a result of changes in
weather, there is an increase in the demand for the product from Q1 to Q2 during the
summer. This would require the company to increase the supply of the product from Q1 to
Q2 in order to accommodate the demand for the product. As such, supply increases from the
green to the purple line in the right direction.
Conversely, let us assume that demand for the product dropped as a result of the weather in
winter. The company wpild have to decrease the quantity supplied from the purple to the
green line, which will mean a corresponding increase in price from P2 to P1, and the quantity
demanded for Q2 to Q1

3.3 TO ILLUSTRATE HOW THE BUSINESS AND CULTRAL

ENVIRONMENTS SHAPE THE BEHAVIOUR OF AN ORGANISATION.
To ensure they achieve the goals they set, businesses need to understand and tailor their
decisions to the nature of the business and cultural environment. To do this, they resort to
the SWOT matrix, which is an analytical tool that assesses the internal environment of the
business through the identification of its strengths and weaknesses (S and W) and the
opportunities and threats they are exposed to.
Once these four variables have been studied, the business can move on to matching them
to get the different strategic orientations they can adopt in order to foster their business. The
figure below illustrates a typical SWOT analysis for an unnamed company.
7

Figure: SWOT matrix (SOURCE: www.stepheny.hubpages.com)

From the figure above, the top half represents the internal assessment of the company
through its strengths and weaknesses, while the bottom half represents the assessment
of the external environment of the company through its opportunities and threats.
Once this is done, the next phase consists of matching the variables to determine the
strategic orientations of the company. This will lead to the following combinations
-

ST strategy that maximises the use of the business Strengths to overcome the
Threats faced by the business

the SO strategies that capitalises on the

strengths of the business in order to

maximise the opportunities open to the business

-

the WT strategies which builds on the Weaknesses of the business in order to

counter the Threats faced by the business

the WO strategies that entail an amendment of the Weaknesses of the business to

put it in a position capable of maximising the Opportunities available to her.

TASK 4: GLOBAL FACTORS.

4.1 ANALYSING THE SIGNIFICANCE OF INTERNATIONAL TRADE TO
UK BUSINESS ORGANISATIONS.
Economics is that the congruous allocation and efficacious utilization of resources. Global
economics is that the allocation of economic resources around states. It signifies of universal
trade. In the Global trade to UK business organizations, the products are engenders and
sold in competitive organisations. Engenderment efficiency is to provide quality and lower
price of products to the peoples of world. The international trade to UK business
organizations is that buys goods and accommodations from a country which provide the
lowest price and sell goods and accommodations to a country which provide the highest
price. UK business organizations have the prospects of expedite of their economic
development. They can import machines and adjust peregrine technology. They send their
researchers to progressive countries to assimilate cognizance which are paramount to
require of their developing economics. UK business organizations purchase resources for
their business from the poorest nations. Gratification of customers could be misused. (Robin
Sharma, Horn by W Business Economics, 2001)

4.2 ANALYSING THE IMPACT OF GLOBAL FACTORS ON UK BUSINESS

ORGANISATION.
The internal atmosphere of a business is as of much influence to the business as is the
external/global environment. This is mainly due to the fact that the nature of the business
world today makes it hard for a any business to operate in isolation, having to either souce
or handle their products or operations from several locations around the world. The impact of
the global environment on a business is studied through the analysis of four factors in a
framework known as the PEST framework. The analysis of the impact of global factors on

UK businesses will thus warrant a discussion on the four arms of the PEST framework
( Political, Economic, Social and Technology)
a) Political
Since government is at the helm of everything within the state, it is natural that the
political atmosphere of a business operational base affects the business. Political
change can determine the future of business strategy, especially where such change
is brought about by coup or by democratic elections. In the UK, business men would,
at this time, be hoping for a change of Government to the hands of the Democrats,
hoping that that it will boost the UK economy in their favour. Political unrest in the
form of wars and the ideologies of the government in power do affect the strategic
orientation of a company.
b) Economic
A wide array of economic factors exist that affect strategic decisions of businesses.
The nature of the economic system is a major one as it determines the ease at which
businesses can enter or leave the market. This will also determine the orientation of
tax policies, interest rates and prices of commodities. These will in-turn affect
purchasing powers of households, leading to an effect in demand for products, thus
causing businesses to review their strategies. Following the recession, the business
world in the Uk has been cutting jobs and changing prices in order to meet their daily
business needs.
c) Social
Businesses are nowadays becoming increasingly aware of the necessity to tailor
their businesses to the socio-cultural needs of the environment they operate.
Lifestyle changes, religious beliefs and cultural undertones all affect businesses in
the UK and abroad. Businesses selling sexual lubricants will thrive within the UK, but
will not make any profit in countries where homosexuality is prohibited, like the
Gambia.
d) Technology
Continuous advancement in technology have affected the way businesses manage
their sales and money (Accounting), train and manage their staff, make their products
available to all markets (even those with whom they do not share common

10

languages) and their ability to meet customer demands faster as a result of the
involvement of machinery in production systems

4.3 EVALUATING THE IMPACT OF POLICIES OF THE EUROPEAN UNION

ON UK BUSINESS ORGANISATIONS.
A policy is a procedure to monitor decisions and achieve outcomes. A policy is executed as a
procedure. Policies are assumed by the board of authority within the European Union on UK
business organization where procedures are established and assumed by senior
administrative officers. Policies can assistance in both particular and objective decision
making (Andre Clark Business Environment, 2009). Approaches to support specifically
choice making should help senior management for choices that think about the Realities
from claiming making choice. Over approaches on help in the target choice making would
compelling. The impact of policies from claiming European union of the uk association in the
following:
Those impacts of policies are built to evade destructive impact that looks for certain profits in
the uk business organisation. Business procuring policies give organisation to remove
antagonistic impacts. Organizations have policies that executed through securing
methodology. The uk business association made an impact with expanded proprietorship
through policy. policies impacts the situations that approaches try to effect once
governments, humanities, expansive organizations is with settling on An arrangement
progress. Legislature will be should settle on a approach choice should build imposes from
claiming expanding assessment income. The approach settling on methodology incorporates
a test should assess arrangement impact that arrangement will be unforeseen punishments.
(Richard Welford, Andrew Gouldson, 2003)

CONCLUSION
This work fixates on the utilization of the business environment and the paramount role plays
for the UK governments and plan for environmental amendment. It is a process of starting
and developing a business and avail to engender an inspiriting business environment. The

11

upgrade of convivial responsibility is contributing to making business magnification. It is vital

for salubrity to focus of political attention.

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