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Business Environment Factors

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Environmental Factors and its Effects on Business Organization

1632 Downloads I Published: 03 Apr ,2019

Introduction

A well blended and a combined mixture of internal and external i.e. the micro and macro environmental factors of a business corporation which effect its functionality and the operational activities of the organizational structure (Worthington and Britton, 2015). The Internal business environment relates to the components that can be controlled by the administration and are refereed as the micro environment, whereas the external factors are the macro environmental which those which are uncontrollable are and beyond organizational reach. The stakeholders are considered as an important and influencing factors and which also determines the decision making process which includes consumers, suppliers, competitors and investors. These are the significant part of business activities (Kubasek, Brennan and Browne, 2016). The present analysis is carried out the vacuous types of organizations and also their purposes of carrying out the businesses. Moreover the responsibilities of the business corporations and also the strategies employed to meet them.

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TASK 1

1.1 An organization is a structural format of relationships, authorities and responsibilities through which the specific and pre-determined objectives are determined and attained. “A work organisation is a social arrangement for the controlled performance of collective goals”. Organizations can be segmented in many ways (Hamilton and Webster, 2015). For instance, the first way is based on the over-arching purpose or the primary objectives etc.

Private Limited Company: These companies are owned by the individuals or group of people and purposes at earning, increase sales and expansion, achieving market share while providing effective customers services. The businesses under this category are registered with Companies House and have between 1 and 50 shareholders. The shareholders of these companies may include family or friends and the Limited word in company name is to be added on mandatory basis (Fernando, 2011). The terminology is defined as the liability of the company is limited to the capital (shares) invested. The shares however cannot be traded on the stock exchange. If the company goes bankrupt however, the owner would not be personally liable for debts incurred.
Public Limited Company: These business entities controlled by the government and the governing bodies. Tax amount collected from the public is used to fund such corporations. The major purpose of public sector companies is to help and support the social communities. These are the business corporations where shares must be available to the general public through the Stock Exchange, and this therefore means that the PLC needs a Stock Exchange Listing. This is a costly process which may also take a long time which involves the process for obtaining one of these (Wijaya, Spruit, Scheper and Versendaal, 2011). There are certain requirements for having a PLC too; there must be:

  • At least £50,000-worth (Republic of Ireland: €38,092.14) of share capital of which at least 25% must have been paid for.
  • Two shareholders
  • Two directors, one of whom may also be the company secretary
  • A certificate of entitlement (the trading certificate) to do business and borrow capital.
  • Voluntary Organizations: These organizations are also denoted as charitable trusts they support the vulnerable groups which are said to be as non-profit organisation.

Government Organizations: Government service means, employees are under government directly in state and central. Their salaries are determined by government and differs from private sector and partially privatized public sector. defence (Front line soldiers and ordnance factories to produce weapons), Indian post, Railway, shipping, utilities . These employees have benefits like PF, Medical reimbursement, bonus and pension after retirement. Government organizations are also known as departmental organizations. The are fully owned controlled and managed by the government departments or ministries like Railways and Post and Telegraph department.
Charitable: These types of organizations are a kind of business that fits within the non-profit organization (NPO) category and is also referred as as a charity or foundation, which can be run publicly or privately. Many of these organizations may be centred around religious, educational or other public interest activities that are philanthropic in nature. charitable organizations operate as private foundations that obtain their principal funding through a corporation, family, individual or other single financial source.

1.2 Describing the extent to which organization meets the objectives of stakeholders

There are mainly two types of stakeholders such internal and external towards which company is highly responsible. Moreover, in the dynamic and highly competitive business environment company can attain success only when it meets the objectives of stakeholders to the large extent (Hutchison, Noy and Wang, 2010). In this, Qbic hotel meets up the objectives of stakeholders to the large extent in the following way:

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Management: Hotel unit has provided higher management with the all the information which is required for the purpose of decision making. Moreover, in the business organization managers are assigned with the responsibility to make competent and strategic policy framework which aid in the profit margin of firm (Aruoba and Chugh, 2010).
Employees: Business organization has fulfilled the objectives of employees by offering suitable salary to them in accordance with the minimum wage Act of UK.
External stakeholders
Investors: Company provides shareholders with the suitable financial records by publishing the reports at the end of accounting year.
Financial institution: At the time of taking loan business unit has provided banks with the true and appropriate financial information (Davig and Leeper, 2011).
Government: Company submits report to the government authority on a periodical basis which entails the contribution that is made by it in sustainable environment.
Conflicts interests: The term stakeholders is a single word but it comprises of the various key components and characters such as customers, suppliers, shareholders,government etc. There is a vast segmentation in this term on the basis of many criteria. And as there are many categories there will be different ideas, thoughts, views and perceptions. These ideas and views of the stakeholders can't be same on each and every platform and when there is differences in the ideas there will be chances of the conflicts. The organization will have to cope-up with these differences and make plans and strategies for solving the issues of the stakeholders.

1.3 Explaining the responsibilities of an organization towards the stakeholders and strategies to meet them 

Management Company can meet the responsibilities towards the stakeholders by making proper delegation of the roles and responsibilities. The management team should implement some plans and strategies for the welfare of te stakeholders. And also they should work ethically as per the rules and regulations prescribed by the government so as to ensure that any of the stakeholders interests are not violated. (Aydin and Kirişci, 2013).

Employees Business enterprise has responsibility to offer highly safe environment to the personnel. In this, by taking into account UK laws and legislation Qbic hotel can make effectual safety arrangements. The company needs to take care of the interest of the employees as they are the stakeholders and they are the working pillars of the organization. There should be incentive and reward systems for the motivation of the employees. (Gropp, Hakenes and Schnabel, 2011).

Investors Company has responsibility to offer dividend to the shareholders with the increasing rate. In this, by making control on expenses through the means of budget hotel unit can meet it. The companycan meet the requirements of the investors by organizing some investment plans at favourable rates. (Koos, 2011).

Financial institution It is the accountability of Qbic to make timely payment of interest and instalment amount. In this, by maintaining the proper cash flow company can meet such objective.
Government Now, it is the responsibility of the company towards the government to perform activities in a ozone-friendly manner. Thus, by employing the effectual and latest technologies business unit can manage the waste more effectively and efficiently. The organization can meet the requirements of the government by maintaining the working as per the prescribed laws and policies. Moreover the company can implement some strategies relating to the payment of tax etc. (Etro, 2011).

TASK 2

2.1 Explaining the impact of economic system on the allocation of resources

In the present era, allocation of the resources are highly influenced by the economic system which is prevailed in the respective economy. Mutually beneficial exchange between producers and consumers is enabled by markets, and systems that rely on markets to solve the economic problem are called market economies. In a free market economy, resources are allocated through the interaction of free and self-directed market forces. This means that what to produce is determined consumers, how to produce is determined by producers, and who gets the products depends upon the purchasing power of consumers.

Hence, usually there are mainly three types of economic system which exist in the countries are:

Planned economy: In such economic system government takes decision in relation to allocation of resources without any interference of an organization. Direct allocation of resources is done in optimum manner and strategies are formulated by association of workers and cooperatives for achieving this objective (Colciago and Etro, 2010).

Market economy: In this system trade is done without any involvement of government and free movements of commodities is ensured under this method. Demand and supply are major elements which play a significant role in determining the price of products and other activities of business. Vary limited role is played by state in regulating the operations of market economy. Customers and organizations decide about type of products, price of product and availability of the product. If demand of the product rises than organizations take initiatives for increasing the production so that supply can be increased in the market. There is no or less government interference in this type ogf economy. Producers are free to manufacture the amount of goods demanded by the consumers. If demand for a particular commodity or service escalates, the suppliers can raise their prices to generate profits. However, due to the increased prices, the purchasing power of some buyers diminish, which forces them to sell their goods at a more affordable price. This dynamic between producers and consumers makes a market economy thrive. (Feenstra, 2015).

Mixed economy: Mixed economy system contains features of planned economy and market economy. It is partially controlled by government and some operations are regulated by supply and demand. Public sector and private sector corporations are part of mixed economic system and overall activities of business gets affected by regulations imposed by state and supply and demand factors (Eaton, Kortum and Kramarz, 2011). Market forces and government both are major players which influence the decision about which goods and products should be manufactured.

2.2 Assessing the impact of fiscal and monetary policies on the firm's operations

Impact of fiscal policy on Qbic hotel and its business activities: Expansionary and tight policies are two major fiscal policy of the UK government. Under expansionary, the government has increased its spending in the context of business (Manova, 2013). The impact of this on the business of Qbic Hotel is organization develops more job opportunities for the community and it leads to raise the spending power of customers. In the case of tight fiscal policy, government has increased the tax and minimize their spending over the hotel industries. The result of this on the cited organization is the final prices of services have increased that may decreased the sales of hotel services which can bring the lower down the profit level of the firm. The fiscal policies which are Tax-related affects the business activities by changing the amount of disposable income the consumers have to spend. Fiscal policy that involves government spending and adds to the federal deficit can lead to higher interest rates. This can increase the cost of credit and mortgages that may make consumers think twice about purchases. (Chor and Manova, 2012).

Impact of monetary policy on Qbic Hotel and its business activities: When the government increase the supply of money in the market then it becomes easy for Qbic and other hotels to borrow money either from market or bank. This thing reduces the interest rates over the credit funds. This gives benefit to the hotel to easily take loan for long term perspectives. But in case of less supply of money in the market will be create difficulties for the company to borrow money for raise investment level. There is an inter-relationship between interest rates and the value of money. When the Federal Reserve makes the cost of borrowing cheaper, more money starts flowing in the economy. The more money that are out there, the less each one is worth (Levchenko, Lewis and Tesar, 2010).

2.3 Evaluating the competition and other laws on the business organization

As per the Competition act, abuse of an organization dominant position employee either at local or international level, development and operation of cartels, avoiding concerted practice affects the business operations of an organization in the negative manner. The impact of this on Qbic Hotel is to fix the prices of the hotel services (Gross and Juncos, 2010). In addition to this, the management of the organization has stick on the business objectives and other promises related to deliver the good quality services and achieve greater customer satisfaction level. This thing has helped the cited firm to maintain transparency during the payment with the business clients and service users. On the other hand, regulatory mechanism such as Enterprise Act 2002, Enterprise and Regulatory Reform Act 2013 etc also makes impact on the business operations of Qbic Hotel. According to Enterprise Act 2002, this has minimized market dominance behaviour of the hotel companies in the marketplace. It results to the cited firm has tried to reduce the influencing power of politicians parties in business activities (Falkner, 2011). Beside this, effect of Enterprise and Regulatory Reform Act 2013 on Qbic Hotel is management imposing various policies and regulations to protect the rights of the customers and employees from the unethical practices of the business. So, from the above some competition and other mechanism laws evaluation, it has found that these have made positive impacts on business activities of Qbic Hotel. The below are the four pillars of competition policy:-
Monopolistic competition: The concept comprises of several number of firms. While comparing with the Perfect Competition there is not a restriction for entering but, however, in this one the types of the products can be completely different to each other. For instance Builders, restaurants, hotels and bars are some examples for this market structure. In this case The demand curve is downward sloping but relatively elastic in this case.

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TASK 3

3.1 Market structure which determine the pricing and output decision of businesses including

Qbic Hotel: Market structure assists the organizations to take decisions regarding prices and volume of production of goods as per the demand in the market. There are four type of market structures perfect competition, oligopoly, monopoly and monopolistic (Thomas, 2011). When more than one company provide homogeneous services and products to the customers than it is called perfect market structure. The profit margin in such kind of competition is low. On the other hand, in monopoly market structure, there are few organizations who are dominating in a particular market which sometimes create a perfect competition situation for the firms. The level of profit margin is at moderate level and it has created barriers for new companies to enter into this marketplace (Worthington and Britton, 2015). While under monopolistic market structure, organizations are offering differentiated goods and services to the customers that help them to generate high profit level.

Oligopoly:- There are large number of suppliers present which further impacts the decision making power of the enterprise. In these type of strategy, organisation are not able to make the changes in pricing strategy whenever they desire to. Firms under oligopoly are strategically interdependent to other firms, to understand the effect of this interdependence on firms' behaviour understanding of game theory is helpful.

In the case of Qbic Hotel, organization has operated its business in UK hospitality industry where market structure is perfect competition. The reason is different competitors are providing similar hotel services to the customers to selected target marker. On the basis of the current demand in the market and level of competition has helped Qbic Hotel to take decision regarding price and production volume (Kubasek, Brennan and Browne, 2016). There are different types of pricing strategies such as premium, penetration, economy and price skimming strategies use by the cited organization.

3.2 Market forces shape Qbic Hotel responses

There are some market forces which affect the business operations of Qbic Hotel either in positive or negative manner and these are as follows:

Demand and supply: Demand is a market force which affects the success of any business entity around the world. UK is large market and have a huge population who always look forward for new items in food products. Because there are good disposable income of the consumer. The demand for car are increase day by day. The current level supply of goods including their demand affects the action of the organization. From the study, it has found that demand of hotel services in the UK is increasing with the alarming rate which creates new opportunities for the growth of the businesses. The consumptions related to these services have also increased with time. In this situation, Qbic Hotel gives response in terms of by raising the number of different existing and new services along with this setting of unique distribution channels in the UK market. (Hamilton and Webster, 2015).

Elasticity of demand and supply: Demand and supply of the goods change as per the consumption rate of the consumers. Qbic Hotel adopts the different strategies to maintain the sales of the services in different seasonal conditions. The result of this is company has always made balance between the demand and supply of the goods. (Fernando, 2011).
Economic of sales: This is a type of cost benefits which attain by an organization via volume of production, lot size, sales strategies etc over cost per unit product. To accomplish this, Qbic Hotel has given the response in the form of bring the reduction in the wastage of the resources and unnecessary business activities from the different process which bring the increment in the cost of the hotel services (Wijaya, Spruit, Scheper and Versendaal, 2011).
Governments

Governments hold much sway over the free markets. Fiscal and monetary policy have a profound effect on the financial marketplace. By increasing and decreasing interest rates the government and Federal Reserve can effectively slow or attempt to speed up growth within the country. This is called monetary policy. If government spending increases or contracts, this is known as fiscal policy, and can be used to help ease unemployment and or stabilize prices. By altering interest rates and the amount of dollars available on the open market, governments can change how much investment flows into and out of the country.

3.3 Business environment is the mixture of all the factors that is internal and external which affects the operations and the productions of the entity. Internal environment includes the employees and shareholders. External environment includes the government and the consumers . The entity has to manage the policies, rules and regulations with having the structure of the perfect market. Changes in the company should be done by the management of the entity according to the taste of the consumer of the entity at the time of the merger and the joint venture also affects the policies of the entity. Competitors are the important part of the business which plays a crucial role in executing the advantages of the competition of the entity. Principles of the proper utilization of the resources which are available in the firm, company has to make or produce the best quality products so that consumers increase their purchasing power and by that company attains the high profit. Along with this entity has to provide the training to their staff members so that they can make the proper product and improve their performance and company can lead to the leading position in the market (Wijaya and et.al., 2011).

TASK 4

4.1 International trade plays a very important role for the business organisation. Basically according to trade union, international trade is when the all the business activity has been carried out between the different countries. It is to be observed that earlier the activity of international trade has been carried out at very low level but as the technology has been advance an with the time the practice of international trade has been increased across the world. International trade has emerged as one of the great factor of contributing into economy globally. Generally what happen in an international trade is the process of export and import of goods and services has been carried out between the countries by which several exercise duties has been implemented on these good. Such exercise duties shall enable to contribute towards the economy of a country. Now for the business organisation, international trade is very much important as it will raise the demand of good and services which the company has been producing. If the demand of any good shall get increase, export of that product shall get increase by which the profits which have been attained by company shall be raised. In this manner a business organisation shall be able to increase his assets and profits with the operation of international trade.

Advantages:

All the countries are not gifted with same set of natural resources and therefore it is not possible for nations to be self dependent on everything and hence with the help of international trade a country can import from other countries the products which can’t be made by them. (Fernando,2011). In terms of geopolitical relations between countries international trade can be helpful because when two nations are dependent on each other due to international trade chances are they will not indulge any war with each other and hence international trade indirectly helps in maintaining peace between countries.

Disadvantages:

The biggest disadvantage of international trade is that it leads to exploitation of importing country by the exporting country as importing country is price taker and therefore it has to pay the price fixed by exporting country. For example crude oil cannot be produced by every country and that is the reason why crude importing countries are at disadvantage all the time due to near monopoly of oil exporting nations.
International trade can lead to domestic turbulence because sometimes nations export products even though domestically they are scarce leading to rise in prices of such products which create frustration in the minds of general public and anger towards the ruling government.

4.2 The company using the various businesses in the international trade and the integration of the economy or the nation by which they affects the various business by the different factors. The factors of the international are divided in the two factors that is micro and macro factors. Micro factors are the insiders of the company so it can be controlled by the members of the entity. Macro factors are the outsiders of the company so they can not be controlled by the staff members of the entity. These factors having the positive impacts or the effects so that company can achieve the targets and the objectives and also having the impact on the other companies also. Some factors are technological, social and economical (Hamilton and Webster, 2015). Company has to use new and innovative techniques for making the products so the consumers can easily purchase the product from the market and by that company can increase the sales. In the economic factors company includes the supply of the products, currency rates and both the policies that is fiscal and monetary. These factors affect the stability of the company in the market and reduces the cash flow of the company and by that company can reduces the profit. Company have to achieve the targets then they have to use the new and innovative technique.

Social factors-UK business organisation that operate globally, it's vital for them to design their business strategies according to the social and cultural differentiation which vary from region to region. It consist of language, life patterns, religion etc, has significant for a successful business management. These factors give the deep understanding of behaviour, lifestyle patterns and tastes of any population.
Legal Factors-Government law and regulation are the factors that explained to change in and can affect the business strategies. For a profitable business process, it's vital for the business organisation to take into account the legal issues that persuade in a specific situation and should have the ability to find ways they can react them where a change in law affect them. So that organisation must be up to date and have known how about the environmental legislation, employment, health and safety law etc.

4.3 European policies plays a very important role in regulating the UK business organisation. It can be seen that there are many business organisation in UK which shall carry all the business activities. In order to regulate such activity in perfect manner (Kubasek, Brennan and Browne, 2016), several policies has been initiated by EU of which one of the most important policy is international trade. By the operation of international trade the economy of the country has been raised. It not only profited the country but several other profits has been incurred by the organisation. By the policy of international trade the practices of trade between the countries are motivated by which a business activities are being pushed. There are various policies of EU which shall be introduced to protect the interest and rights of the business organisation for an example, enactment of employment law shall gives a protect layer to all the rights and interest of the employee who has been working in an organisation. Not on employee the policies also protected business organisation from any kind of fraud or misrepresentation by various other organisation. The policies which have been introduced by EU safeguard the organisation as well as its employee (Worthington and Britton, 2015).

Conclusion

From the above carried out analysis the significance of the types of the organization and also the description of the extent to which the organization meets the objectives of the various stakeholders is evaluated. Further the responsibilities of the organization and the strategies employed to meet them are analysed. Moreover how the economic systems attempt to allocate the resources effectively and also impact of competition policy and other regulatory mechanisms on the activities of a selected organisation.

References

  • Aruoba, S.B. and Chugh, S.K., 2010. Optimal fiscal and monetary policy when money is essential.Journal of Economic Theory,145(5), pp.1618-1647.
  • Aydin, U. and Kirişci, K., 2013. With or without the EU: Europeanisation of asylum and competition policies in Turkey.South European Society and Politics,18(3), pp.375-395.
  • Chor, D. and Manova, K., 2012. Off the cliff and back? Credit conditions and international trade during the global financial crisis.Journal of international economics,87(1), pp.117-133.
  • Clifton, J. and Díaz‐Fuentes, D., 2010. EVALUATING EU POLICIES ON PUBLIC SERVICES: A CITIZENS'PERSPECTIVE.Annals of Public and Cooperative Economics,81(2), pp.281-311.
  • Colciago, A. and Etro, F., 2010. Endogenous market structures and the business cycle.Economic Journal,120(549), p.1201.
  • Davig, T. and Leeper, E.M., 2011. Monetary–fiscal policy interactions and fiscal stimulus.European Economic Review,55(2), pp.211-227.
  • Eaton, J., Kortum, S. and Kramarz, F., 2011. An anatomy of international trade: Evidence from French firms.Econometrica,79(5), pp.1453-1498.
  • Etro, F., 2011. Endogenous market structures and strategic trade policy.International Economic Review,52(1), pp.63-84.
  • Falkner, G., 2011.The EU's decision traps: comparing policies. Oxford University Press.
  • Feenstra, R.C., 2015.Advanced international trade: theory and evidence. Princeton university press.
  • Fernando, A.C., 2011.Business environment. Pearson Education India.
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