Sie sind auf Seite 1von 48

HND Busine ss

Business Environme nt

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Contents
Pages Pass 1 Objectives and responsibilities

3-14

Categories of organisation Mission, objectives and values of organisation Stakeholders Responsibilities

3-3 3-7 7-10 13-14 14-22

Pass 2 Economic, social and global environment


Resources issues and types of economic system Government policy

17-17 17-22 22-33

Pass 3 Behaviour of organisations and the market environment


Market types Market forces and organisational responses

22-28 28-33 33-46

Pass 4 Interaction trade and the European dimension

The importance of international trade

33-46 46-46

Pass 5 Evaluation

References

47

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Pass 1 Categories of organisation A voluntary organisation is a business that isnt driven on profit; they are run by individuals who volunteer to work by not getting paid to run the organisation because it is for a cause such as a charity. A sole trader is an individual who runs their own business by putting in all their own capital to start the business up from scratch. Public limited companies have plc after their name and trade on the stock market. Private limited companies have ltd after their company name, this type of business may be family run. A primary sector is an industry that consists of different industries that produce raw materials such as farms producing crops for retailers. The secondary sectors use the raw materials that are produced by the primary sector such as a supermarket who buy fruit and vegetables from farmers to supply to their customers. The tertiary sector consists of service industries and distribution. Such as businesses that provide banking and tourism. A size of a business depends on how many staff they have, the volume of sales and output they get and how much profit they earn. A small business for example would be a sole trader who may only have one or two workers, just like a partnership. A medium size business usually have around 50-250 members of staff within the company. A large business such as Asda would employ thousands of staff due to them being a public limited company and having more demand from customers meaning they need far more employees to deal with the demand. Mission, objectives and values of organisation

The Co-operative Group is the fifth largest food retailer, the third largest retail pharmacy chain and the number one provider of funeral services and the largest

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

independent travel business. The Co-operative has a strong market position in banking and insurance, they also have 123,000 employees, 3 million members and 4,900 retail outlets. They offer everything from food, financial services, travel, online shopping and healthcare. The group have strong principles that influence each of their businesses, which also reflects their quality, value, honesty and social responsibility. I think that the Co-operative really show they care by not only saying but doing what they say which is being committed to changing the world around us for the better. The Co-operative is a very giving business as last year they gave 7million to the community and charities which they increase every year. As well as being innovators they are also the leaders in ethical trading, social inclusion and environmental policy, unlike other businesses 98% of the electricity they use come from renewable sources. I have noticed that The Co-operative Group came up with the environmental helpfulness first, as they were the first to introduce Braille on their medicines and the first to offer eco-friendly car insurance. I like the fact the Co-op supply their products and services from good sources such as fair-trade products, re-new able energy, recycled packaging and donating a lot of their profits to help tackle climate change and many other charitys, their hard work has been noticed as they have received the Queens award in Enterprise in sustainable development. Co-operative Stakeholders The Co-operative Group has executives, who are responsible for the management to meet the businesses strategic objectives of the society. See appendix 1 for The Co-operative organisation chart As well as the managing executives, the stakeholders of The Co-operative Group are the customers who expect The Co-op to be fair and honest and to provide them with a variety of choice including sustainable, healthy and affordable products by in return the group identify what their customers want and respond to their changing needs, without customers the organisation wouldnt have a business to sell products and services too, this is why businesses will try and do everything to get customers buying from them instead of their rivals. Investors are also stakeholders of the organisation who seek competitive returns on their shareholding, which is invested in a sustainable well-governed business. They engage investors in a yearly structured programme of presentations and meetings to

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

help the co-op understand their investors views on their business strategys and activitys. Employee stakeholders views want a secure, interesting organisation to work for with fair terms and conditions with lots of new opportunities to get involved with and a safe and healthy place to work. The Co-op likes to get feedback by using staff question time sessions. Communities are also a stakeholder of The Co-operative as by them creating job opportunities for the community, the organisation can regenerate communities and support for local cases and initiative, The Co-op communicate with the community by talking to local people in their store, exhibitions, public consultations, focus groups and leaflets, also by working with local charities within the community. Suppliers are important to the business as they need them for transporting their products to their stores, so a long-term relationship has to be kept between the Coop and the supplier for opportunities to grow. The organisations hold regular meetings with their manufacturers, processors and suppliers to explain new business activities and to exchange views. The Government and regulators are a stakeholder of The Co-operative Group as they are such a large organisation so they expectt them to comply with the law, have good business activities that arent harmful to the environment or breaking the law, its also important they create family friendly job opportunities with good training. They engage with parliamentarians, officials, regulators and government on a range of issues affecting their communities and business. The Co-operative Group have strong beliefs in climate change and ethical trading, therefore, non-governmental organisations are also a stakeholder, this is for Co-op to show their leadership on issues by providing clear policies and principles. By working with the non-governmental organisations this helps them understand the current and emerging issues related to their business, such as ethical trading, climate change, and animal welfare and bio fuels. Vision The Co-operative vision is to be the best Co-operative business in the world. The information found below is quoted from their website:

To strive for world class levels of business performance To be open, responsible and rewarding, putting Co-operative values and principles into everyday practice.

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

To enhance the lives of our people, members, customers and the communities in which we trade. To work for the long-term success of the Co-operative sector. As stated on the Co-operative website.

I think the organisation have some good visions as they show that they want to be the number one retailer which will allow more support for them to do even more good with helping communities and climate change. I like that each year they give more and more money to charities. Mission As quoted on The Co-operative group website their mission is to do the following:

Introduce new products and services Grow and expand as a business The more we can give back to our members and the more we can affect the wider world We want to get bigger, better and more successful than ever We are always looking at how we can help our community and the wider world Looking into how we can provide even better service for our customers How we can make a real difference to the environment How we can reduce our carbon footprint better or increase the range of locally supplied produce. As stated on the Co-operative website.

I think it is good how the Co-operative have done their best to make a difference to the world which has been noticed as them already being the best ethical retailer on the high street, but that they arent stopping as their mission is to do more and more for the community and world. Values These are the values and principles quoted from their website:

Self help > We help people to help themselves Self responsibility > we take responsibility for an answer to our actions Democracy > we give our members a say in the way we run our businesses Equality > no matter how much money a member invests in their share account, they still have one vote Equity > We carry our business in a way that is fair and unbiased Solidarity > we share interested and common purposes with our members and other co-operatives.

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Openness > nobodys perfect, and we wont hide it when were not Honesty > we are honest about what we do and the way we do it. As stated on the Co-operative website.

They have very strong values and know what they have to do to make a difference to their employees lives, from communities to the world. You can see that they feel very strongly in making things better and supporting causes to make things better. Comparisons with the Co-operative Group and Tesco PLC The retail industry is the biggest competitive industry to be in; therefore businesses like The Co-operative and Tesco are rivals and try to be competitive with their prices, products and services. Not only that rivals try to say they are supporting causes like using recycled materials and preventing climate change to try and look the most caring retailer to get more customers, but this isnt always true. To compare Co-op and Tesco, I have found that Tescos values arent as meaningful as Co-ops. Tescos values state that no-one tries harder than them to understand customers, be first to meet their needs and act responsibly for our communities. Tesco havent gone into depth unlike Co-op who have strong beliefs and take the time to explain in more detail about them. The Co-operative values are about their business, members, investors and the community, unlike Tesco who only have values for their customers as thats where the money is. The Tesco website doesnt have as much Corporate information about what good things they do unlike Co-op who explain loads about the good deeds they do, this makes me think that Tesco dont do as much for the environment and the community. Tesco dont sell as many fair-trade products, unlike Co-op whos own products all come from good sources like Fair-trade and renewable sources. Tescos aims are more about them making more money and getting more customers to become more successful than their rivals, so their aims come across that they are only thinking of themselves and not thinking that their business activities could be harming the environment, compared to Co-op whose aims are all about helping others more than themselves. Stakeholders needs To define stakeholders I would say it is all about the different individuals and groups whose interests are affected by the activities of a business such as The Cooperative.

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

All enterprises have stakeholders whether they are private, profit, public or nonprofitable organisations, the stakeholders of these are people who have an interest in how the organisation performs. The owners of a business are the most important stakeholder, so by meeting their requirements is the sole reason for the business to exist, the requirements expected by stakeholders of a business should be for the organisation to be considered as success. Customers, investors, employees, communities, government regulators and nongovernmental organisations are all stakeholders that have different needs and expectations from The Co-operative Group. Stakeholders of a business come into different groups such as: Employees Shareholders Customers Competitors Lenders (banks) Business customers Suppliers Corporate management The Chief Executive Neighbours The world society Special interest groups The board of directors The national society Government and local government Past employees

Businesses are affected and affect the different groups of stakeholders; this may be that the business isnt doing their best to regard what the stakeholders want. If the business arent doing what their stakeholders want them to do such as supporting charities and issues then it affects the stakeholders, things that affect the business are having to be competitive with prices, supporting issues they may not want to because otherwise they may be given a bad corporate image. The three board types of stakeholders in an organisation are internal, external and connected stakeholders. Internal stakeholders are the employees and management, the external are the community, government and pressure groups and lastly the connected stakeholders are the shareholders, customers, suppliers and the financiers.

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Internal stakeholders such as employees and management are intimately connected with the company; they are responsible for how the business is run. Internal stakeholders interest of the business is for its continuation and growth, because if they dont encourage the business to success they could be out of a job/career. If Tesco for example have surplus funds which management may want to re-invest into other projects, this may cause conflict with shareholders because they may not be interested in a new project and would prefer to be given the extra money Tesco have to be given to them. Employees have a huge effect on the businesses success as without them Tesco wouldnt be able to trade; this gives them the responsibility for all the aspects of work carried out to be done correctly and efficiently. Stakeholders such as the union always seem to be in the media due to wage negotiations with management such as the Royal Mail postage strike was caused due to the union wanting to be paid more and until management had negotiated with them they were on strike. Also Royal Bank of Scotland (RBS) caused conflict by giving themselves too much bonus pay which linked crises with the recession. Stakeholders of RBS were furious when knowing how much they were paying themselves in bonuses.

Customers Customers want the following from an organisation like The Co-operative: Good experience for a shopping trip Fair and honest retailer Lots of choice, quality including sustainable, healthy and affordable products Buy products from a good source

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

The Co-operative are doing what their customers want by finding out what they expect from a retailer by doing customer questionnaires to find out the information they need to know to keep customers happy, which the Co-op do actually carry out, as they do provide a good shopping trip for consumers by the range of choices they are given which are of good quality, sustainable and healthy at a affordable price that come for a good source which is helping to support the community and the world. Customers are very important to a business; therefore The Co-operative is going to do anything to keep them happy by providing them with what they want. The Co-operative website states to enhance the lives of our people, members, customers and the communities in which we trade as stated on the Co-operative website. Stakeholder influence Tesco and The Co-operative will be influenced by their stakeholders in relation to their businesses vision and mission statement. For example the government as a stakeholder are under pressure from organisations like Greenpeace in order to influence the way big supermarket companies like Tesco and the Co-operative to have more eco-friendly business activities such as reducing their carbon footprint and c02 emissions. Because of the influence the supermarkets put their good business activities into their vision and mission statements to show that they are doing it to keep their stakeholders happy. Investors Investors are stakeholders that invest money into The Co-operative Group; they have needs from the business, its important for the Co-op to have good business activities otherwise they may lose customers which means the investors could lose their shares of the business. The investors want the following from the Co-operative: Competitive returns from their shareholdings They need assurance that their investments are with a well-governed sustainable business To be updated on business activities by being engaged on the investors annual general meeting.

The Co-operative state on their website we re-invest in our business by sharing profits with our members which they do, as they share a lot of their profits with charities and giving there investors a good profit on their shares. Reference stated from the Co-operative website.

10

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Employees Employees are a big stakeholder in the Co-operative organisation as they help run the business effectively. The Co-operative likes to keep their employees happy by giving them rewards and benefits for them to enjoy their job. Employees state they want the following from the co-op:

a competitive salary Flexible working hours Happy safe environment to work in as stated on the Co-operative website.

The Co-operative take into consideration what their employees want by undertaking employee review meetings to see if they are happy and what they want from the organisation. The Co-op listen to what their employees want and take measures to do them, which is why they offer staff a competitive salary, along with an award winning pension scheme and 31 days of personal holiday entitlement. The group also provide an employee assistance programme to give them expert advice on a wide range of issues. Communities The community are stakeholders of The Co-operative, because they are a part of the business. The local communities expect the following from the co-op: Job opportunities Fresh local products at an affordable price Help to local charities

The Co-operative do provide what the community want by creating job opportunities for local people, as well as supporting local suppliers which creates even more job opportunities, this also allows local people to try the fresh local products from suppliers in their region. Therefore, being a powerful local business by relying on the community to buy from them, this generates profits, this allows the Co-operative to give something back to the community by helping local causes when it comes to local charities and community groups. Community involvement sits at the very heart of our business. Every year our employees are encouraged to volunteer for community projects and schemes from decorating and gardening at local schools and community centres to carry out maintenance work at animal sanctuaries. As stated on the Co-operative website. Suppliers

11

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Suppliers are also very important stakeholders because without them there wouldnt be any products delivered to stores. Suppliers expect the following from the Cooperative: To be treated fairly and honestly Seek long-term relationships and opportunities for growth To be asked to attend regular meetings with the suppliers, processors and manufacturers

The Co-operative do treat their suppliers fairly and honestly as they are the number one retailer who supplies more fair-trade products from good sources than any other retailer, which makes the Co-op caring to create long term relationships with suppliers who need it the most, such as the third world who supply fair-trade products which come from good sustainable sources, by The Co-op having a relationship with fair-trade suppliers this helps the unprivileged and creates opportunities for them to grow. Governments and Regulators The Government expect a lot from organisations and for them to have safe business activitys, the government and regulators expect the following from the co-operative: For the co-operative to comply with the law Provide secure family orientated job opportunities Provide good quality training To engage them on a range of issues affecting their business and communities To act out new regulations such as providing healthy eating and alcohol drink awareness.

The Co-operative Group do comply with the law by acting out the new regulations by providing healthy foods from good sources, as well as creating job opportunities which helps the government, by them not having to pay out as much job seeker benefits. Non-Governmental Organisations Non-governmental organisations are stakeholders because they support The Cooperative by informing them of environmental issues they could help by changing their business activities. Non-governmental organisations expect the following from the co-operative.

12

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

For them to be showing leadership on issues such as climate change and ethical trading To be provided with clear principles and polices for them to communicate their views To act out on helping the environment and supporting CR issues by supporting issues such as climate change, bio fuels, animal welfare and ethical trading.

The Co-operative work well with non-governmental organisations, better than any other retailer by supporting all issues and changing their business activities to do so. This is proven by the co-operative being the number one retailer on combating environmental issues and making a real difference to local communities. Conclusion The Co-operative Group is following their mission statement more than any other retailer by actually doing what they say they are aiming to do. This makes The Cooperative stand out more than rivals such as Tesco, because in their mission statement they speak more about being the best rather than aiming to help others like the Co-operative do. Internal stakeholders are affected by the Co-op by being provided with job opportunities, with flexible hours for families and students by having good work based training as well as helping communities and customer by them supporting local charities and providing affordable healthy products this is overall good for the internal stakeholders associated with the organisation. External stakeholders are affected by The Co-operative in a good way as they are complying with Governmental laws by engaging with parliamentarians, officials, regulators, government and non-governmental organisations to do what is expected from them such as changing their business activitys to make a difference to others by considering issues like bio fuels, climate change, animal welfare and ethical trading. The co-operative are doing more to tackle environmental issues than any other retail business, and this has been noticed by the public and government as they have been awarded many awards for contributing to help tackle issues. The co-op has been able to make such a difference, other retail businesses are starting to adopt the co-operatives methods of making a difference. Overall The Co-operative is doing everything to keep internal and external stakeholders happy by giving them what they want and expect from a large corporate business. Responsibilities

13

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Stakeholders of a business such as Tesco have key legal responsibilities for their consumers and employees ensuring that they do not discriminate against anyone who is disabled such as not employing them because of it, they need to ensure the health and safety of their staff and customers are protected and create diversity and equal opportunities for everyone by treating everyone the same with respect on how they would be expected to be treated. Organisations also have the responsibilities such as ethical practice, by doing business activities that isnt harming the environment which will keep their stakeholders happy and ensuring that they provide stakeholders with a good pension but not to over pay like The Royal Bank of Scotland did which caused lots of angry media attention. Pass 2 Resource issues and types of economic system Resource issues are: Scarcity Factors of production Allocation of resources Choice and opportunity costs

Scarcity is the excess of human wants over what can actually be produced to fulfil these wants. As stated in the BPP learning media books. There is never going to be enough resources to satisfy the wants and needs of every individual. Poor people need money to live but wealthy people just want more and more money to make them happy when they dont need it compared to the reasons a poor person does. In the poor countries such as the less developed they have a problem of absolute scarcity, down to the country not being able to product enough resources to satisfy the basic needs of the people who live there needing food and shelter to live. Unlike developed countries where there is a relative scarcity most people are able to make their own income due to the large amount of resources we have that enables people to have a consumption of luxury goods and services that we take for granted. There are three main factors of production these are labour, capital, land and natural resources. For goods and services to be made, factors of production are combined and are an essential role that is provided by entrepreneurship, which means the owners of an enterprise have put up their capital being a financial risk for them.

14

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

There are three core problems to the allocation of resources, these being what goods and services will be produced and who they will be distributed to. Decisions have to be made about what products need to be produced relating to the supply and demand for production. When decisions have been made the choice of the most appropriate and efficient production methods and technology will be used. There also needs to be decisions about who is to get what has been produced, as this is the problem of distribution of income among households and among various social classes and groups. Choice and opportunity cost consists of the problem of choice which measures the cost of having a quantity of one commodity in terms of the quantity of other commodities that can be obtained instead.

Economic systems Different countries will use different ways of approaching economic systems. Different economic systems consist of: The market economy The planned (command) economy The mixed economy Economies in transition Efficient allocation of resources Public and private sector initiatives

The free market economy which is also known as capitalism is a type of economy where most of the decisions made are taken through an operation of a market mechanism. Decisions that influence the decision making process is the supply, demand and the ability to pay; the government have little responsibility over what is decided. The planned economy which is also known as the command economy because it is referred to as state controlled. In this economy decisions are made by central planning committees. The government have the control and decision over what can be produced and how many that is, as well as the price of the products and who they are available for. The control by government is to benefit the members of society, which citizens will all contribute for the good of the state of society. Within this type of economic system there is a lot of state intervening.

15

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

The mixed economy is a balance of market forces and state intervention. It is important in this type of economy that activities are regulated by the condition of what the economy is in while others can be left to influence the market. Within a free enterprise sector the decisions about the economy are based on market forces. A welfare sector provides educational, social and medical services for citizens without thinking or caring about the costs whether they have money or not. The private sector is very important for the long-term economic growth. The private sector have been known to use resources more efficiently when operating under competitive market conditions compared to the public sector. Private enterprises are able to meet growing consumer demands by delivering products and services; they also create a lot of new job opportunities for the public. The public-private partnership involved with infrastructure projects are able to reduce the stress on budgets for public spending which enables the government to do more social spending for resources. The private sector has involvement within utilities and infrastructure to extend and improve the efficiency of delivering important services. The private sector is also involved in health and education services provided for people on a high income this frees up space for government resources so they can provide services for people on a lower income. For example, people on a high income may choose to pay for their children to have special schooling and have private health care treatment unlike people with less money who dont pay to go to school or for health treatment because they may receive hospital treatment off the NHS. The government try to enable the private sector to act as the engine of economic growth by strengthening and supporting the enabling business environment. An enabling business environment is one where the set of conditions that affect private sector behaviour encourage the growth of private sector activity and enterprise development as stated in the BPP learning media books. For an enabling business environment to be created the constraints that delay the start of progress for the private sector to grow and create new opportunities for investment and business development are removed. Public private partnership is a range of initiatives that include the private sector and the operation of public services. The private finance initiative is developed by government to help raise money for new buildings and services to be paid for.

16

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Private finance initiatives are used to deliver money without sacrificing the terms and conditions of staff, as well as committing to deliver accountability, equity and efficiency. A private finance initiatives project will be owned by a company to run a special scheme to operate, build, finance or design a project. The companys involved may be a bank, building firm or a facilities management company. Public private partnerships aim to create diversity in the way that public services and projects are delivered; this promotes innovation, competition, choice and a transfer of skills. The roles for a private finance initiative are to deliver a public service such as street cleaning, to perform a service at a function such as catering and to plan a major project such as construction of a bridge. Their responsibilities invest into project financing and to own an asset such as a building and to overall have the responsibilities of management.

Government policy A policy is set by government when they are involved in a activity, and they have a desired outcome in mind they want to achieve. The government have set the following policies in the UK: Fiscal policy Monetary policy Industrial policy Social welfare policy

An important feature of fiscal policy is that the government are required to plan what they spend and how much they need to raise or borrow to create an income. The planning needs to be considered to establish how much taxation there should be coming from different sectors within the economy such as companies, low and high income earners. Fiscal policy covers the income and expenditure of the government. The UK policy is adopted to promote employment and high and stable levels of growth.

17

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

The social welfare policy is made to protect and improve the standard of living for people. This policy is set for the UK for the welfare and social protection and the development of welfare in the society. Welfare is defined as providing a range of services to protect people experiencing conditions such as old age, sickness, the unemployed and people in poverty etc. The government spend at least 50% on the social welfare expenditure. The UK industrial policy focuses on improving the nations competitiveness by investing into human capital, strengthening laws, making improvements to infrastructure and researching and developing promotion for innovation. The factor of industrial policy is a government role to protect the industry from any competition by focusing on the conditions that influence its competitiveness and external business environment. Economic growth Economic growth can be measured by an increase of the total of expenditure within the economy as well as the total income for companies, and individuals in the company, and lastly the total output of the economy. To measure these gross domestic product and gross national product can be used. Gross domestic product is the result of all economic activity within the economy, and gross national product is the gross domestic product of amounts people or businesses have earned in the UK from their overseas assets, of which amounts are paid to overseas holders with UK assets. Economic growth is important as it is linked with investment, profitability, technical innovation and a healthy trade balance. Our global economy is always increasing so what happens in the world to the economy will affect our national economy, so its important that we maintain price and non-price competitiveness. Growth is also important for the economy because it creates more jobs for the unemployed, which is good because it lowers unemployment. The growth of the economy is based on how much national income is increasing. Economic performance/indicators The confederation of British Industry (CBI) gives surveys that provide indications of conditions and business trends. The survey measures how optimistic manufacturing companies are, by the balance of response from the companies who state if they are more or less optimistic about the future that before with the annual growth of the gross domestic product.

18

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

A survey produced by CBI asks individuals and companies questions that relate to the current business and economic conditions such as questions on the companies output, employments, prices and order as well as how confident they are for the future of their business. A question like are the prices you charge higher, lower or about the same? could be asked to a company to reflect on issues about the recent economic crises questions, this can indicate to government how organisations are coping with the economic climate, by having to raise the prices of their products or services to deal with the recession. The surveys taken tend to focus on one sector and doesnt indicate the capacity position of the economy as a whole. So one sector of the economy may have a normal working capacity yet another sector may have lots of spare capacity to continue expansion. Stakeholders Stakeholders are groups and individuals who have an interest in a business and are affected by the businesses activities. People who are interested in a business are shareholders, lenders, customers, suppliers, customers and local/national communities. Supporters of a stake holding economy say that interest groups have the right to have a say in the decisions a business make, such as trade unions who should be involved in decisions that affect the workforce. Banks are found to be included in decisions over a companys decision to invest. Communities also have a say in any projects that affect the local environment, for example, when new building projects are being arranged I have been sent letters to make me aware of the plans and have been given the opportunity to voice my opinions regarding the project. Customers should be able to have a say in the quality of projects that they are provided with by businesses, in case they are being given unsafe produce. Government should have a larger say over what companys can do, to protect the interests of the stakeholders. Such as when large supermarkets try to get away with paying very low prices to farmers and other suppliers, if this is known then the purchasing behaviour of supermarkets like Asda can be regulated by Government agencies.

19

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Employees may not be involved in decision-making when it comes to the organisation they work for, this causes problems if decisions are being made to close or expand a company. Depending on the type of employee you are within the business, depends on what decisions regarding the business you may be involved with, this may either be what status you have in the business or if you are full time, part-time, temporary or working on behalf of an agency. Interest groups are groups of people that represent the interest of the trade union, for example, pressure groups are a collection of people that promote a cause such as Greenpeace who promote the welfare of the environment. The aim of pressure groups is to influence people who are given the power to make big decisions, such as people who have political power. Pressure groups also compete with rival pressure groups but do sometimes work together when they have common interest and have the same aim that they wish to achieve. Pressure groups have different methods to influence law by either giving money of their time to help an election campaign. Overall they attempt to influence members of the executive who have law making input, who can decide the effectiveness and strength of law enforcement. The global economy Globalisation consists of a process of national economies that are increasingly integrated because of power wielded by transnational corporations also known as TNCs. The world economy over the last three decades has seen an increasing concentration of economic production resulting from the formation of transnational corporations- multinational corporations, which operate trans-nationally. It is now estimates that some 50% of world production (including exports, overseas production, home production and sales) is undertaken by TNCs. As stated in the BPP learning media book. Multinational companies and financial institutions have became more powerful that national governments making their influence over economic and financial affairs very limited because of this. Because the corporations have so much power it means that rich states are unable to resist the pressure. Agencies such as the World Bank are putting more power into transnational corporations, this causes pressure on national governments, of which protests have been made against the World Bank by the way they put the interest of wealthy corporations in the developed world above the interested of the planets poor

20

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

majority. For example, Grand Metropolitan had removed their Green Giant food production to South Wales in the UK so they could have their manufacturing done by paying low wages. Another example of this is when large multinational companies like Nike take advantage of developing countries by getting their products produced there so they can pay fewer wage for labour to make themselves more profits. Overall In a mixed economy the total economic activity is managed by public and private sectors. Politics can influence the decisions of those in the public sector. Relationships between the state and the public sector are varying degrees of control and regulation. The government are a major buyer and supplier to particular industries. They also influence business by general conduct of economic policy that affects the demand, corporation tax, company law, investment and other regulations. The government are influenced by pressure groups. Government promote the growth of new industries by subsidising domestic businesses, placing restrictions on import tariffs and impose standards. Businesses also influence government by representing members of employers associations, lobbying and joining committees. Macro environment Within the command economy the state pans at the macroeconomic level central authorities decide between allocating resources for (a) current consumption goods that raise living standards in the present, and (b) investment goods that will help build for the future. As stated in the BPP learning media book. The macro-economic policy influences stakeholders who have an interest in an organisation to persuade them to raise the standards of living by providing goods and services that are priced cheaply for those who are on a low income of which this will help the way in which they may live. For example, if stakeholders such as government, influence a company who provide nursery day care to lower their rates, to enable the unemployed to be able to afford their children to be looked after while they go looking for employment. This would help towards the global economy by there being less unemployed people claiming benefits. Government and the local community could also influence an idea for a business to provide a product or service that will help benefit the future of the global economy. For example, the government influencing colleges to provide free education for the unemployed to learn new skills such as numeracy, literacy, team building and

21

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

confidence by an organisation, providing this service to people who have found it difficult to find work will help build for the future. As when people are growing up with no great education could cause problems on how the world would eventually turn out. It is important every local community has access to an organisation that can provide them with developing new skills and interest; this will give good results for the future and will create more people earning their own income which overall will benefit the global economy.

22

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Pass 3 Market types A lot of businesses face competition because there are a lot of similar companys out there selling the same products and services, so they have to be competitive with their prices and advertising, for consumers to choose them. Organisations that influence the market for their goods are able to have freedom in setting their own prices and how they advertise. Competition between businesses tends to control profits and prices as well as the companys long-run survival that will depend on whether they have successful innovation and product development. Different market types are: Perfect competition Monopoly Oligopoly Duopoly Monopolistic competition

The most important fact for a business is the amount of rivals there are in the market. For example, if you own the only supermarket located in one town then you have a lot of power because the locals are most likely all going to be coming to you, but if there was another supermarket to open near yours then you would have competition, so you would have to slash your prices to stay ahead of your rival supermarkets. The perfect competition happens when there are a large amount of people in the market that no-one can influence the price of products and services. The perfect competition arises when a market price is fixed by the total quantity that is supplied and the total quantity that is demanded. Such as, if buyers want more, then the prices will go up, but if the business offer more on sale then the prices will go down. For example, if a shop makes 300 sweet bags a day at 50p each then they become more popular and have 400 customers a day then they would have to turn down the 100 customers because they wouldnt have sweet bags. Because of the popularity

23

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

they could raise the price of the sweets bag to 1 but this could turn away customers preferably the extra 100 so that you are back to 300 customers a day but by raising the price it could get the sweet shop 200 rather than 150 a day. Other businesses that have a perfect competition are: Cinemas Concessionary goods pricing College location Snack shopping

Cinemas hold a monopoly power over their customers because if people have come to see a movie they must likely want food to go with it, because of this cinemas such as Cineworld sell drinks, popcorn, hotdogs and sweets. As customers are in one place and do not have an option to bring in their own food and because Cineworld would confiscate it, they have no choice but to buy from the food stores within the cinema, of which Cineworld take advantage of this by rising prices and over charging for food. Other businesses do this such as colleges who overcharge on the products they sell because they know students dont have enough time to walk into town on their launch break, so they hold a monopoly over the students. The consequence of perfect competition, is that in a single market if a business is charging more than the market price they will lose their customers to its rivals, but if a company is charging less than the market price then they will be swamped with customers. Monopoly happens when there is only one supplier providing a certain service or product such as Seven Trent water. The people who live in the region have no choice over what supplier of water they can use. This gives Seven Trent the monopoly power because they seem to charge customers whatever prices they want. All water companies hold a monopoly position in the area of which they serve as customers are only able to purchase water for their homes from the local water provider. Water providers are able to charge what they like yet still make sales without a marketing effort. For monopoly power to happen for a long time, they must set barriers to entry which will keep other businesses out. For example, the business De Beers who own a key resource without having any close competition. De Beers have ownership over the world supply of diamonds of which ownership other companies do not have so it gives them the monopoly power.

24

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Monopoly happens when there is only one buyer for a product such as the manufactures who provide hydraulic mining equipment. The only company who brought from there were British coal as they needed the supply of mining equipment to get coal to provide products and services for their own customers. Oligopoly happens when there are only a few large suppliers, whose decision making affect each business. We can distinguish oligopoly from monopoly by asking whether the business in the market can set their own prices (monopoly) or must take account of the prices set by other businesses (oligopoly). If an oligopolist sets a price higher than that charged by others, the company can expect to lose a lot of sale (but not necessarily all sales, unlike perfect competition). As stated in the BPP learning media book. The UK soaps and detergents business Proctor & Gamble an example of a market within the oligopoly. Duopoly is a market that consists of two businesses competing with each other with a homogenous product; it is a case of monopoly and competition. In the duopoly market an organisation can influence the price as well as the other business having an influence on it also, the profits that are made will depend on the decisions that the business has made. For example, if British Airways were to lower their flight fares, they would need to gain theory on how Virgin their rival would react. Because British Airways put a 10% sale on their flights, then their profits will rise, as long as Virgin doesnt cut their fares also otherwise British Airways will fail. Businesses in a duopoly market need to guess on how their rival is going to respond of they make a move such as lowering prices. Monopolistic competition occurs when a large number of firms sell closely related, but not homogenous products. Instead, the products are said to be differentiated and not seen as perfect substituted by consumers. There is a heavy reliance on nonprice actions e.g. advertising to differentiate the product. As stated in the BPP learning media books. Monopolistic competition consists of monopoly market and perfect competition. A restaurant is an example of monopolistic competition because its easy for the owner of the restaurant to start in business but it is harder for them to actually stay in it, so its important for the restaurant to convince customers that they provide a better

25

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

product and service that their competitors, in order for them to start up and be successful and have reliable customers who keep coming back. Competitive advantage A business can have a competitive advantage over another business by having a larger capacity, market share and economy of scale compared to another business who is their rival competitor. Two factors within competitive forces in an industry are: The nature of competition within an industry Environment factors that characterise the nature of competition of an industry compared to another business within the industry

Competitive forces that influence the state of competition in an industry such as capacity is how much the business is able to produce, if an industry is able to produce a large amount of products or services then it will give them a competitive advantage over other industrys who may not be capable to produce as much capacity. If a business has a large market share. of which a market share is the sales of products by a business in the industry as a percentage of the sales of the products or service by all organisations in that industry. If the percentage of market share a business has is high then this gives them a competitive advantage over the businesses that have a smaller share of the market. If a business has a large capacity they will have a large economy of scale because the more they are able to produce the cheaper it will become to produce each product which saves them money on raw materials. If the business are able to produce more for less than they are able to offer customers cheaper prices on products and services which will give them a competitive advantage in the industry. Behaviour/strategies adopted by firms The behaviour and strategies that are adopted by firms consist of: Market structure Forms of anti-competitive behaviour Competition and collaboration

A market structure is the number of sellers and buyers who operate within a market, as well as the extent to which the market is concentrate by buyers and sellers finally what the degree of competition or collusion is between sellers and buyers.

26

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Most businesses would like to have a monopolist position to be able to control the output of their market and set their own price levels. If businesses adopt the strategy of lowering their prices then it can increase their market share because they can gain the share of customers that would usually shop at its rivals. The main types of anti-competitive behaviour are price fixing, insider dealing and cartels. A cartel is an agreement between organisations within the oligopolistic industry, were they agree on issues such as pricing, market shares, allocation of customers and the total output in the industry. This method of cartel benefits organisations by agreeing on different matters in the oligopolistic industry. Insider trading is a criminal offence which is used to encourage individuals to get information about an organisation that they shouldnt have, such as information about contracts or to have inside knowledge an individual may do this offence to make money. For example, an individual may quiz someone who works at the stock exchange to find out information about a certain transaction etc to make money for themselves. If a business wants to maximise joint profits they may result to price fixing to act as if the market was a pure monopoly. To stop price fixing the government set prices in order to eliminate price fluctuations for commodities of which the demand is stable, but if a private company were to engage in setting high prices for commodities it can be illegal. Businesses adapt strategies of lowering their prices in order to gain competitive advantage over their rivals which can then lead them to have a larger market share percentage, this is a good strategy of which businesses have adapted because it benefits the customers by paying less and it benefits the company by being more successful than their rivals resulting in larger profits. The bad behaviour of which businesses have adapted to make money are by insider trading, for example, when a business may get someone to work for another business to find out all their business product, services and advertising ideas in order to steal their ideas and develop them first. Regulations Regulations are where regulatory bodies such as Oftel, Ofgas and Ofwat will monitor the behaviour of businesses such as water providers like Seven Trent.

27

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Regulators are a legal aid for consumers who have been treated badly by companys who have monopoly power. The competition commission is an independent public body who look into markets and the regulation of the major regulated industries. The competition commission investigate inquiries in response to a complaint made to them by the office of fair trading, for example, an inquiry may be regarding protecting consumer interests, while ensuring that companies are competitive and fair. Regulatory bodies will look into a complaint that a customer has made about a business. Because utility businesses such as water providers hold the monopoly over customers choice but have to use them as they are in a particular region, then this gives Seven Trent for example monopoly power by them taking advantage of the fact customers have to stay with them unless they want to go to the effort of moving region to have a different supplier of water. Water providers tend to increase the prices of their services to make lots of profit, as well as increasing prices the water providers tend to treat their customers badly when problems arise such as experiencing bad water pressure or service. If customers arent happy with the services that they are provided with and are facing issues regarding them then they will contact a regulatory body such as OFCOM who will try to help the customer with the problems they have. The public is represented by a regulator who has the customers problems at interest against the powerful companys within the monopoly industry. Regulators are there for customers, to help improve the level of service they receive from the monopoly industry by giving them a bad image in the media of which should help trigger them to stop treating customers unfairly just because they have so much power over them. Demand Organisations are unable to sell any products or services to consumers unless there is a demand. Things that determine a demand for a product or service are: Demography Advertising and social factors Price Income

Demography is a study of the population that gathers information on how and why consumers buy. The study is used by market research organisations. If research has been done on the population by producing statistics on something marketers want to know, for example, how much of the population consists of people who go to the pub to buy alcohol they would then do research into the age and

28

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

lifestyle of people within the population. If the statistics show that a lot of people do have a lifestyle of going to the pub and drinking then they know that there is a demand for alcohol, the statistics proven would be valuable to a beer producer, so they know that if they were to make a new range of beers that there would be a demand in the market for them. If the price of a product or service is high then only people with the money to buy it could afford it, leading there to be only a demand from people on a high income. For example, if there was a Gucci bag selling for 10,000 then people on a low income may not be able to afford it, but for wealthy people with a lot of disposable income would. If the price of a service was cheap then there would be a lot of demand for it from low income people, but maybe not as much of a demand for it from high income individuals. For example, you can receive a basic car wash from a company for at least 2.50 which there would be a demand for from people on a low income. But people of a high income may not demand it because they may prefer to pay a lot extra to have their more expensive cars cleaned inside and out, rather than paying to have only just a basic wash for 2.50. If a product is advertised well then it can create a large demand for the item just because of the way it has been advertised through media channels. For example, there was a huge demand for the iPhone because of not only customers knowing how good Apple products are, but the way they launched their advertisement campaign on television. Adverts showing a close up of the phone showing you everything it is capable of doing, by advertising all the special features of the phone created a demand for it not only that but Apple said they were going to only produce a limited number which made everyone who had a high income who could afford the phone queue outside the phone stores to ensure that they got one. So if a business advertises a product well that they know could be the next new trend then they could get a large amount of demand making the product a success. Supply A supply is what businesses are willing to sell at a given price. Supply and demand work together to establish the market price of a product or service. Supply depends on the price of a product, if a product is priced high then businesses will be willing to produce and supply it, but although a high price will attract the producers, it will more than likely turn customers away looking for alternative cheaper products. If this happens a high priced product may result in over supply because more is being produced more than consumers want. So this triggers

29

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

a price war, for the business to be able to sell what they produced they will have to lower their prices to be competitive with other businesses that may sell the same stock as they do but for cheaper, in the hope to attract customers to buy from them. As with demand a business must distinguish between the total market supply and the individual business supply. Supply does not only depend on the price of a product but it is also affected by the prices of other companys products and by the costs of production and technology. Those affects can affect the supply for a business very fast, but it could take longer for suppliers to respond to whats happened because of different reasons. Supply and demand of a product are determined by the interaction it made in the equilibrium price, which is found by drawing the supply and demand curves on the graph and seeing where they cross.

Above is a supply and demand diagram which businesses use to judge the demand against the supply in order to fix a price for a product or service. In every business they must know the equilibrium price so they dont set their prices to high. Supply and demand is based on the price and quantity in a market, it will predict prices to set in a competitive market, the price will equalize the quantity demanded by consumers, and the quantity that is supplied by manufacturers, this will result in an economic equilibrium for the price and quantity. If the supply and demand graph has an out-ward shift it means that the demand increases both equilibrium and quantity. When the amounts of consumers are buying the product the quantity is demanded at a price given, when this happens, it is also known as an increase in demand. At each point, a greater quantity is demanded, as

30

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

for the curve at D1 to D2, as for example, the more people wanting a product raises the equilibrium price from P1 to the higher P2. A movement along the curve is described as a change in the quantity demanded. An increase in demanded for a cup of tea, for example, would come from changing tastes, incomes, discount prices and market expectations, this would cause the entire demand curve to shift changing the equilibrium price and quantity. Factors affecting supply are the prices of other products, the costs of making the product and changes in technology and other factors such as change in weather, strikes and natural disasters. Elasticity Elasticity is a formula that is used to work out the following: Price elasticity of demand Income elasticity of demand Cross-price elasticity of demand

The price elasticity of demand is a formula that is used to measure how far the quantity demanded changes as the price changes. The formula that is used is the percentage change in the quantity demanded divided by the percentage change. Price elasticity of demand measures the responsiveness of the quantity of a product demanded to changes in its price. The income elasticity of demand measures the effect of changes in consumers incomes on demand. And lastly, the cross-price elasticity of demand measures the demand for a product that is affected by changes in the prices of related products. Costs and output decisions A business output decision considers total revenue, average revenue, and marginal revenue and profit maximisation. All companys want to make a profit, its the main reason for anyone to set up in business. Profit is equal to the total revenue taking away any total costs of any level of output. A business would need to consider the total revenue which is the quantity sold multiplied by the price per unit, as well as the average revenue that is the price per a unit they have sold and lastly marginal revenue being the total reverie earned from the sale of one extra unit of output.

31

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

If the company want to achieve profit maximisations then they need to produce and sell more units of products, this means the total costs will increase and the total revenue will do also. Short run and long run costs A businesses output decision should be seen in both the short-run, when some factors of production are fixed and the long-run when all factors of production can be varied. A long run is a long period of time that a business are able to allow full flexibility in all the inputs used, and short run being a short period of time that the amount of at least one input is fixed. The difference between short-run costs and long-run costs are that in the short-run only the amount of labour input is variable and in the long-run all resource inputs are variable. In the short run a companys average cost curve is U-shaped because of the returns beyond a certain output level, overall the company can maximise their profits. In the long-run a businesss curve can be shifted, making them to achieve less on average costs at any level of output which can be depicted by a long run average cost curve. Economies of scale Economies of scale are factors that cause an average cost to decline in the long-run as the output increases. Economies of scale depend on the size of a businesss factory, if a business has a large factory and are capable of producing a large amount then it can lead to the organisation growing and having a larger market share of the industry. But when an organisation has a small economies of scale it means they are only able to produce very little and have a smaller market share. For example, a small hardware shop in a high street wouldnt be able to sell as much as B&Q because they wouldnt have as much room to store enough stock to compete with them, as B&Q have a large economies of scale and the hardware shop having a small one. B&Q are able to sell their products low priced due to having a lot of customers and buy in bulk. When a hardware store would have to put their prices up high because when they do get customers they need to be able to make a profit on everything they sell.

32

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

If economies of scale are important then there is an argument that is in favour of businesses being able to grow, this occurs through mergers, organic growth such as building up the companys own resources and takeovers. Growth of organisation For an organisation to grow they will use the following ways: Outsourcing Technology Innovation Labour Market trends Cultural environment

An organisation may produce new products or services that are in trend, such as mobile phones because they are demanded by everyone, so if they want to introduce an innovation to gain market trend and new customers then by producing something new and exciting that could beat what competitors are offering could make them more popular and cause their business to expand. For example, before the company Apple introduced the iPhone, mobiles that were on the market were boring, Apple introduced something exciting that had never been done before, this made their company grow as well as them introducing the iPod which also beat rival firms who sold the MP3 player. Everyone is interested in new technology that comes out such as the Wii when something new and exciting comes out its the must have gadget that everyone must have which starts a trend. When the Wii was introduced a lot of shops were out of stock because they couldnt deal with the demand, this was because of Nintendo only having a small factory in Japan and they couldnt keep up with production. Because the Wii was so successful they were able to grow and hire more labour by either outsourcing or getting more staff working in production. The Nintendo crisis just shows that if you have a good enough product that is new technology and advertised in a good way it could increase the amount of demand for your product making you have to increase production and workforce.

Pass 4 The importance of International trade

33

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

International trade is when different countries work together to supply products and services to each other. An export is used to define UK-made products or services that have been sent overseas for the use of other countries and an import is when the UK receives products of services from other countries. Its important for the UK economy because without the use of international trade the world would be a poorer place to live, not only that but we wouldnt have coffee, cotton clothes or foreign holidays and overseas countries wouldnt have the products that the UK specialise in either. Importance of international trade for customers: Increased choice of products and services Cheaper products More employment opportunities

The reasons we use international trade is only an extension of why we trade within a nation. It makes more sense to rely on other countries to grow coffee beans than it does for us trying to grow them ourselves as we dont have the weather unlike other countries. Importance of international trade for businesses: Market developments Product developments Economies of scale Increase product life

International trade is important for companies because it leads to growth by being known and to sell your products or services worldwide its a sense of achievement knowing that some people worldwide rely on you to supply them something they need. Exporting overseas is attractive for businesses because it opens new market segments of which they could provide for. If a business isnt doing so well in the UK because of a domestic market it can persuade them to seek other markets overseas in hope that their product or service may do better there. Its risky for a business to just rely on one geographical market as demands for a product can fluctuate when a recession hits, so by selling worldwide youre not depending on just one country to keep your business running. Organisations are also able to benefit from cheaper labour by getting products produced overseas which is important for the business so they are able to sell

34

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

products for cheaper as it costs less to make. Businesses tend to use developing countries to get production done by taking advantage of not having to pay them as much as they would have to in the UK, which I dont agree on as a lot of multinational companys do this. For the UK to produce their own bananas it would have prohibitively high opportunity costs by having to grow them in hot houses because we dont have the climate so we benefit being able to import abroad because it is cheaper. Japan have very little natural endowment of resources so they rely on resources from overseas, so the USA who produce more products more efficiently than any other country in the world, import a huge amount of products such as cameras and cars from South Korea and Taiwan. A country has an absolute advantage when their country uses fewer resources to produce a product compared to another country. A comparative advantage a country has in the production of a product is when that product can be produced at a lower opportunity cost. An opportunity cost of a product is the alternative products that will be offered to facilitate its production. The world economy will benefit if all countries will import from other countries those products that other countries are better able to produce than themselves, of which is a comparative cost advantage also, if countries concentrate on making products that they are good at and export what they have left. As well as exporting, companies are also able to sell internationally by global ecommerce which relies on the internet to sell their products worldwide. For example, eBay enables anyone to enter foreign markets and sell products and send them overseas. Also franchising, for example Subway started in the USA thanks to licensing, you are able to get a Subway sandwich in almost every high street in the UK. A new foreign market will represent an opportunity and a risk to a business. An organisations market entry strategy should aim to balance the two elements. Balance of payments The balance of payment is a record that is kept about a countrys trading deals with the rest of the world. When dealings are recorded they are either put down as a credit or a debit. Debit being the amount of money that has left the country and credit being the amount

35

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

entering the country. The balance of payments also known as the balance of trade helps keeps tags of the amount of money going in and out of the country. The UK has had a trade deficit for many years. In 2005, the deficit goods were a record 65.5 billion, up from 33.6 billion in 2001 Britain typically runs a surplus on traded services. In 2005 this was 17.9billion, up from 11.3billion in 2001. Taken together, the deficit on goods and services was 47.6 billion, compared with 22.3 billion in 2001. as stated in the BPP learning media books. The countrys trade balance is the difference between the value of its exports and the value of its imports. This means if imports are greater then the amount of exports as they are in Britain at the moment, from above reference, then the UK is running a trade deficit. A country, for example, the UK is running a surplus if exports exceed imports. Other problems of balance of payments are the exchange rates on different countries currency such as sterling and the euro. The two main areas are: Current account-trade in goods (visible trade) and services (invisible trade) Transactions in assets and liabilities

UK membership with EU The idea of creating a single common market goes back to the time when the European Economic Community (EEC) was set up in 1957. This is now referred to as the European Union. Before the EEC was set up, co-operation has commenced with the European coal and steel community in 1995. The original size member countries of the ECC (Belgium, France, Italy, Luxembourg, Netherlands and West Germany) had removed all restrictions on trade in coal, steel and iron ore between the six countries. The aim has been to gain economies of scale and allow more effective competition with the USA and other foreign producers. As stated in the BPP learning media book. In 1973 the UK joined in membership with The Single European market. The EU went from six to fifteen members, making the European Union undergo the biggest enlargement ever in the terms of scope and diversity. For a country to be a member of the union they have to agree and fulfil the political and economic conditions which are known as the Copenhagen criteria which a member has to: Respect human rights
HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

36

Protect minorities Be a stable democracy Rule the law Have a functioning market economy Adopt common rules, standards and policies

The EU assists the members in taking on the EU laws and because of this provides them with a range of financial assistance of which will improve their economy and infrastructure. The European Union has fifteen states which are members, as well as room for further expansion. It is a free trade area and a customs union with a common external tariff. The single European Market Act Customers inspection has been removed for most products, but as a consequence companies have had to introduce a value added tax VAT system. Members are asked to achieve harmony within the EU and for their own country. VAT is also known as indirect taxation, while there have been moves to harmonisation, there are still differences between rates imposed by member states. The Common Agricultural policy which is also known shortened as CAD which has been designed to ensure there is a well balanced supply of food available at a sensible price, as well as at the same time ensuring farmers are still given enough income for their needs. Because farmers knew they could be paid a high price for what they produce under the common agricultural policy it encouraged them to expand their productions. The high price paid to farmers then resulted being a burden on the community budget which as to subsidise sales of food left over for countries outside the European Union. Because of this it has led for countries such as New Zealand and Australia to complain, as they do not subsidise their agriculture and are suffering because of it. For them to tackle the problem, the EU are trying to change CAD which results in farmers being paid less, which the EU hope will bring food prices within the EU closer to the levels around the rest of the world, reduce costs to the EU budget and reduce prices in the shops. Because of the EU cutting the price of income farmers could receive, they are compensated for this which works out less expensive in the long run.

37

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

The single market consists of an amount of standardisation that ensures consumers will benefit from free trade. There is a free movement that consists of capital, services, products and people. Import duties and levies in the EU All states collect VAT and charge the same amount of tax of which people have to pay to bring products back to your country on imports from different countries in the world. This is important to opening up national markets to businesses in the EU countries. The government in the past have tried to protect their own industries by charging high duties. So that for example, if a person was to buy a foreign car the higher duties would make it more expensive which made people just stick with a car from home which is what the government wanted in order to protect their own industries. This has led to issues for the car industry as differential pricing in other member states had convinced customers to buy where they can get it the cheapest, and by them driving the car to their home state to save money. Social policy and the social chapter The social policy promotes close co-operation between the member of states and especially in matters that relate to working conditions, training, social security, employment and collective bargaining. The policy also tells the state to observe the equal pay provision and for them to provide harmonisation of social security measures of which to accommodate migrant workers. The European Commission have presented a social charter to the EU heads of state which gave out a number of social and worker rights that they are told to apply across the whole community such as right to health protection and safety in the workplace and the improvement of living and working conditions. In 1991 a Maastricht Treaty was signed that set out a timetable for economic and monetary union for the EC, this included a social chapter which gave details of the social charter considering the community and the maximum hours they can work, equal opportunities and minimum working conditions. Regional policy A regional policy is a set of aims given to influence the geographic distribution of economic activity. A regional policy can include: Tax incentives for investing Making planning restrictions for businesses to develop more relaxed Infrastructural developments
HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

38

Developing new towns to reduce the pressure of population in major conurbations

A regional policy can be shown as an example of small-scale economic planning, by having government as an authority rather than a director Pass 4 -Task A International trade is important for businesses to buy and sell products and services across national borders. Businesses tend to buy products from a country that sells for a low price and then re-sell the products to a country that has the highest price of products. The largest component of international trade in value and volume of goods is oil.

Jaguar are a company who exports cars overseas, they used to be a successful exporter but now due to the recession there exports abroad are in trouble. Jaguar are losing sales because their cars can be expensive and because of the credit crunch people dont have the money to spend on luxury cars which means there sales are declining, therefore the exports abroad are low. Due to Jaguar failing in the recession the government are currently offering them a funding package to help them get them back on their feet so that they dont have to make 14,500 redundancies. The government are offering 2.3 billion package to help struggling car industries as they are near collapse and have had to make 450

39

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

people redundant and arent having enough overseas sales to pay for their business activities. Below shows statistics of sales Jaguar have made during 2003-2006 as you can see from the figures in 2004 they made the most sales of 32535 and had their lowest number of sales in 2006 when they sold 23165. In 2007 to 2009 the figures sold would be much lower due to the recession which started to hit businesses in 2008. Year Sales 2003 29240 2004 32535 2005 26328 2006 23165

Other businesses who are suffering from a drop in overseas sales are JCB and CAT, this is because they export abroad, figures show that there has been a 30.5% decline in exports overseas, which shows that businesses are losing sales here in the UK. Jaguars economic position is declining and without government funding they will do bankrupt and thousands of people will lose their jobs, this is why the government will help big organisations like Jaguar so it saves people being unemployed which means less people claiming benefits like jobseekers allowance and income support. Other businesses like whisky exporters have also fell by 2.8% over the last year and by almost 10% in the last quarter of 2008, so Jaguar arent the only business whose exports are declining, especially when whisky from Scotland is one of the most popular items to be exported from UK to Japan so it shows that even the most popular of goods that arent so expensive are also declining. Pass 4 Task B The free movement policy ensures that the 27 countries in the EU are able to move freely around the EU if they are doing some sort of labour for that country. The free movement of workers is a fundamental right in the EU, the policy is there to support workers within the community, and it also aims to put an end to discrimination based on the nationality of workers. The free movement of labour policy has an impact on all of the countries within the European Union. Below will show an image naming all the 27 countries who are members of the EU and the graph shows gross domestic product that each country holds.

40

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

I have considered just a few countries and the impact the policy has on their country.

Belgium

Belgium plans to lift restrictions on workers from the most of the new EU member states- the latest to do so in the 27 nation bloc as stated on the BBC website. Belgium are lifting the restrictions of the free movement of labour on their country to make it easier for their population to get work permits in areas of the economy that are hard to get in to and fill, which are careers such as accounting and nursing. Work permits are issued if a worker has a residence permit for being in that country, as well as being willing to work full time and will comply with normal labour standards and agreements.

41

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

The policy procedure had made it hard for some people to get work in Belgium so by lifting the restrictions it may have a better impact on them. Austria

Austrias population also have to apply for work permits this controls employers in Austria to post workers to certain sectors. This restricts Austria resulting with a lot of unemployment they say this is because they are geographically close to new members of the EU. Denmark

Denmark allow workers that come from the eight states who joined as members in 2004, to have the option of looking for a job, of which they have a time limit of 6 months to do so. If they are successful they are able to receive work permits and residence in Denmark. UK

The UK is one of three countries (Ireland and Sweden) who have not placed any restrictions on workers coming from new members of the EU who joined in 2004. If people from other countries in the EU wish to work in the UK then they have too of worked in the UK continuously for a year before they can register to be eligible to receive benefits such as income support and jobseekers allowance. Because the UK experienced an unexpected large influx of workers from Romania and Bulgaria (600,000 workers in 2 years) the UK government had to announce new restrictions so that workers from central Europe who were low skilled could only work in jobs doing food processing and other low maintenance jobs. But for workers from central Europe who were highly skilled would have to apply for a work permit if they wanted to perform skilled jobs in the UK. Overall The free movement of labour policy impacts countries in the EU; this resulted in them having to impose new restrictions to deal with the force coming from the policy that has been put in place. For example because the UK had a large influx of foreign workers coming to Britain they had to put the restriction of workers only being able to claim benefits if they have worked in the country for a year. This is to restrict foreign workers moving to the UK to benefit of UK benefits. So by allowing a year to go by before you can receive a benefit results in tax contributions being paid from the worker, as everyone who works has to pay tax on their earnings. The government used a similar phrase to impose this measure without contributing to the pot, you

42

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

arent eligible to take from it which I believe is fair, all UK and foreign workers should contribute paying tax before expecting to be entitled to take any benefits out of it. Social policy and the social chapter My chosen policy is the social policy and the social chapter of which I have already covered above. This policy has an impact on UK organisations. Because of the social policy put in place to create harmonisation businesses have to follow the measures and adapt them to their business activities. This impacts organisations because it is important that they are acted out. To set up an organisation you have to agree and follow what the policy expects you to do as a business. For example firms should do the following: Provide employment and pay above or nothing under the minimum wage Accommodate migrant workers Provide health protection and safety at work Provide resources for the protection of disabled workers Arrange a pension scheme with employees Allow men and women to receive the same treatment Only allow employees to work the maximum hours stated Equal opportunities

The force of the policy influences businesses to do good things that arent harming their employees such as, if they were paying an employee a wage that was under the minimum wage rate (5.80 for ages over 22) then it would affect their living because it wouldnt be enough to live on, not only is it bad for a business to under pay staff but it is also illegal. It is important businesses do not discriminate and that they give work to anyone who is qualified to do the work, they also shouldnt deny them or treat them differently because of a disability they may have. When the social chapter was introduced it implemented that there should be equal opportunities, health and safety protection, minimum working conditions, maximum hours and information and consultation of workers. The UK government refused to sign the treaty because of if they followed the new measures it would increase costs of production making EU products less competitive in world trade. Critics of the UK position argued that the refusal to adopt minimum working conditions (and minimum wage) would make the UK the sweatshop of Europe. One

43

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

of the first acts of the incoming labour government in 1997 was to sign up to the social chapter. As stated by BPP learning media books. If the UK were to sign the treaty it would dramatically change the UK because workers would have less disposable income which would cause a recession by businesses closing down. It would also make us work like people do in the developing countries where they work all day for little money.

Task C

The EMU is about countries taking on the euro currency, which is now an established currency and has replaced old currencies such as German marks and French francs.

44

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

Gordon Brown made a detailed assessment of five economic tests believed to define whether a clear and unambiguous case could be made to support joining a single currency. There are:

Whether there can be sustainable convergence between Britain and the economies of single currency Whether there is sufficient flexibility to cope with economic change The effect of investment The impact on the financial services industry Whether it is good for employment. As stated in the BPP learning media book.

After Gordon Brown did the assessment of five economic tests he stated it is not in the interest of the UK to join in the first wave of EMU barring some fundamental and unforeseen change in economic circumstances- making a decision to join, this parliament, it not realistic. There are a lot of arguments for and against the EMU as follows: For the EMU:

The good thing of the EMU is that the policy creates stability and as being a member will require them to keep strict economic judging. If the UK were to take on the EMU in an election it will give them a political advantage. Considering facilitation of trade it will stop the risk of having currency fluctuations that would usually affect investment and trade between countries who have taken on the euro. The UK is seen as a leading global financial market which would also be jeopardised. Investment from the EU would be likely to unfavourably affect economic performance

Against the EMU:

By the UK being economically linked with strong European economies it will result in having a weak economy. If the UK receives a weaker economy for taking on the EMU we may have to be bailed out from countries that have a stronger system. Businesses are using the EMU as an opportunity to raise the price of products and services. By having a new currency it will confuse consumers and businesses by having to adapt to how the new currency works.
HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

45

The UK will lose its national pride from getting rid of sterling (British pound). By taking away British notes and coins it will take away our national identity, but by not having euro coins and notes it will make us different to the other members. The UK will have a loss of national control over economic policy resulting in the European central bank controlling the UKs money if they joined EMU. The UK will have to stay in line with the strict European policy criteria and the economic policy will put great stress on price stability. The monetary policy will bring a large number of people out of work.

I am against the UK joining the EMU because I think that by the UK being one of the countries who have turned it down, makes us different keeping the UK with its British pounds will make us unique compared to other countries who have taken it on. I think the correct choice was made by Gordon Brown and government as they considered all the pros and cons of doing so. If we were to take on the euro it would confuse people and businesses, firms will also start charging customers more and taking advantage of the consumers who arent quite sure how to work out the price of something. Because businesses may start charging more customers will have less disposable income which will then trigger lots of other financial problems. If the UK has problems with recession by having the sterling then I wouldnt want to know the effect the euro will have because I dont think it will help and will only make the UKs economic position worse. Pass 5 I enjoyed doing the research for this assignment, I found out definitions of words that I didnt know before doing this assignment such as monopsony and oligopoly. Completing this assignment has gave be a greater understanding and view of business environment and what its about, I know have a larger understanding of what comes into it. I think I could have improved my grammar and evaluate my work more effectively to get my point across. I also would have liked to of used more sources for my references, I think I depended on the BPP learning media book to much for my references.

46

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

References In order as found in assignment. The co-operative website. www.cooperative.coop/corporate/groupoverview/ourvisionsandandaims BPP Learning Media books, Business Essentials, Business Environment. Page 132scarcity. Page 146- enabling business. Page 175- the world economy. Page 142macroeconomic. Page 245- oligopoly. Page 247- monopolistic. Page 293- balance of payments. Page 295- UK membership with EU. http://news.bbc.co.uk/1/hi/world/europe/3513889.stm source used in pass 4 task

47

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.

48

HND BUSINESS. BUSINESS ENVIRONMENT ASSIGNMENT.