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Unit 1 Global Business Environment Pearson BTEC Level 5

2618Downloads1 I Published: 13 May ,2020


Global market refers to an area where many companies of different sectors are used to sell their products at national and international level. In context with global business environment, it shows factors which impact on operational function of organisation. It includes political, economical, ecological, global warming, rapid growth of population and more. All these elements assist industries to cope up with market changes and do modifications in business structure accordingly (Apăvăloaie, 2014). Therefore, business tycoons who want to move organisation at global level need to analyse concept of these factors which affect the ratios of profit and production. In this report, a manufacturing firm of UK has been taken named by Entertainer. This SME association deals its business in making toys at a UK marketplace. At present, it wants to expand business in international market. Therefore, in this regard, various factors are being discussed and the present report includes drivers for global trade and commerce, complexity for strategic challenges and more.

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P1 Key elements of cost, market, environment and competition that drive global commerce and trade

Today almost every organisation whether dealing in manufacturing or retailing sector wants to expand operational area in other countries also. This would help in selling commodities at international market easily which gives much profitability as compared to domestic area. However, moving business in other locations especially out of territorial region is not an easy task. Employers need to analyse on various factors which may create hurdle in their mission in a proper way (Epifanova and et. al., 2015.). It includes market condition of such places, economical situations, urbanisation and more. These factors create a large impact on brand value along with profit ratios of business both in negative and positive manner. In context with Entertainer, they want to set up its foot in new locations across country in UK. It is a manufacturing firm which produces toys. Therefore, it is necessary for the manager of this company to analyse market situation of target places and other factors which may wide up its business scale in a profitable way. Some factors are described below which need to be considered by management of those companies who want to globalise their business:

Cost: It is the most important factor of an organisation whose impact is on every part of business. Therefore, managers of firms always try to raise funds from various sources through which they can operate functions of business in a proper manner. In context with globalisation, it is compulsory for enterprises to find every component which may help in deceasing expenditure of cost related to manufacture (Doh, McGuire and Ozaki, 2015). Along with this, they should evaluate economic condition of country through which purchasing power of people can be measured. This would help in determining whether opening outlets in targeted locations is beneficial and increase profitability or not. In addition to this, managers are required to measure availability of resources like raw materials, manpower, transportation cost and more along with cost at which they are available. Getting all these things in low cost help in reducing manufacturing expenditure which aids them in getting more profitability.

Market: It is highly amendable for management of a company to analyse situation and various component of market which will help in formulating strategies accordingly. This is highly essential for those companies who want to enter into new market area of foreign countries. Factors present at marketplace which impact on profitability and productivity of operational business of a company in both positive and negative manner are culture, purchasing power, taste of customers etc. Therefore, in order to open outlets at new places of international market, the management must identify culture of people first. As culture reflects taste of customers, preference and lifestyle of them. In context with Entertainer, this firm deals in toy manufacturing industry so, its managers are needed to evaluate demand of customers and manufacture toys as per requirement (Axelrod and VanDeveer, 2014). This firm should made products according to age group. For this process, managers should introduce latest technologies in organisational system so that best quality of such products can be obtained. In addition to this, they must purchase high quality of materials used in manufacturing of toys like fabrics, polyolefins, ploymers, plastic and more.

Environment: Today with rapid changes in technologies, many factors have arisen which create a great impact on environment. Usage of harmful chemicals, non-biodegradable substances like polyethene, nylon and other products made by hydrocarbons and plastic effect environment. Therefore, manufacturing companies are highly advisable to use biodegradable components in products so that environment can be protected from harmful factors. Nevertheless, in context with Entertainer, it produces toys which are mainly made up of non-biodegradable and hazardous elements (Belás and et. al., 2014). Thus, management is required to use highly technical instruments in workplace which are helpful in decomposing wastages and other harmful substances. This will help in enhancing production of company as well as increasing brand value at marketplace also.

Competition: In this type of factor, management of association are mainly considered upon acquiring highest position at marketplace. Along with this, expanding business is their most admirable objectives. Therefore, in order to gain such objectives and goals, companies are needed to globalise their business. It will help them in gaining high profitability as well as increasing market share also. In case of Entertainer, a manager of this firm has performed various activities in order to achieve aims. They had introduced latest technologies in business structure and provide essential training to employees for working on new system. In addition to this, for enhancing competition at marketplace, administrators formulate various strategies and policies to attract minds of customers towards its products in a unique way. Furthermore, for building effective strategies they must analyse productivity of competitors also. As increasing competition impacts on the business of Entertainer, so this firm needs to create some modification in production and manufacture innovative products (Belás and et. al., 2015). This would aid in attracting minds of customers as well as retain them with longer period of time.


P2 Complexness of strategic challenges faced by organisation while operating in global environment

Moving business in other countries always proves beneficial for increasing sales performance of a company. It will help in getting high revenue as well as increasing profitability of organisations. But before globalising business, it is essential for associations to bring improvisation in structure and production. Managers are needed to analyse trends of marketplace along with needs of customers. Through this, they can formulate effective strategies and policies accordingly which are favourable to gain high achievement of business. In case of globalisation, associated members of firms are needed to identify desires of national and international clients and manufacture products as per their choice (Carneiro and Brenes, 2014). Therefore, management of Entertainer used to create segmentation of marketplace in context with similar characteristics. This would aid them in determining needs of each segment and culture of them. Through this segmentation, demands of each group can be completed on time which will assist in gaining retention of them with products or services in an appropriate way.

While operating business at global level, there are various strategical challenges faced by organisation at international level. It includes different culture of customers, economical conditions of targeted countries where they want to expand business, taxation policies, political rules and more. Therefore, such companies are needed to create modification in business and organisational structure through which they can manufacture high qualitative and wide range of products as well. This will help in providing good impressive commodities to customers which retain them firm for longer period of time (Crane and Matten, 2016). In case of Entertainer, its managers have used various kinds of strategies which are implemented for utilising its resources its resources which aid in manufacturing products at low cost. Along with this, they build strategies for delivering products at marketplace in a proper manner and provide facilities like home delivery and currency exchange. In addition to this, they provide various attractive offers and discounts to customers so that interest of them in its products can be kept for a longer period of time. Hence, some of the main issues faced by Entertainer Company in globalising are described as:-

Customer expectations: In order to sale commodities at international marketplace, it is essential for management of Entertainer to determine needs of clients belongs to different culture. After identification, they should manufacture good quality of products as well as deliver them on affordable cost as well as on less time of duration. After then get their feedback to measure effectiveness of product's quality. Along with this, make proper interaction with customers of different locations who have consumed such commodities in order to know whether their products are manufactures as per expectations or not (Peng, 2016). Through this process, they can evaluate further needs of improvement. Therefore, in order to sales its commodities in more profitable way, management of this company has targeted mostly children of group of 3 to 15 years. For attracting minds of kids, its management used to make toys of organic materials which are better than products of harmful toxic materials.

Cost: Since operating business at global level is a long procedure which includes lot of documentation process, planning and operational activities. Therefore, to perform each activity in a proper manner and open outlets in foreign countries, a company needs lot of capital. So, lack of capital creates various kind of issues and barriers in conducting activities. Along with this, if cost of production is high then companies should sell these products at high cost. Due to this, customers are avoid to purchase toys which are beyond their purchasing power. It will impact on sales performance as well as profitability of business too. Thus, to cope up with this problem, managers of Entertainer are required to develop strategies for decreasing down the expenditure of manufacture.


P3 Cause of globalisation on organisational governance and leadership, structure, culture and functions

Globalisation is a process of moving a business on international level and establish their organisation in other countries. Generally, companies try to open their outlets in such territorial regions where level of economy as well as income of people is high and sustainable. It will help in increasing sales performance of them. But making business globalise create much impact on corporate governance, leadership, business structure, culture as well as operational function of such companies (Savrul, Incekara and Sener, 2014). Organisational governance can be defined as a process through which environment of business hold its discipline. For controlling operational activities, functions of enterprises and work of employees, employers set rules and regulations for each and every kind of action. In case of Entertainer, this firm needs to set policies and rules which are required to follow by all people which helps in taking better decision. Some other factors which are affected by globalisation and present within firm can be described as:-

Leadership: In an enterprise, managers and leaders are main the persons who take various responsibilities in order to manage workforce and entire functions of organisations. They used to influence workers towards goals and objectives of a company by providing them clear vision. In addition to this, they also give necessary training to employees if any changes has been occurred in enterprise. In context with globalisation, due to this functions of managers are impacted a lot. Due to this, they have to redesign the business structure, set new policies, mission and vision of business etc. In addition to this, due to changes in set strategies, work of employees also get disturb and it arise various situation in workplace like resistance of workers, conflict, labour turnover and more (Kolk, 2016). Therefore, leaders and managers have to change their managerial skills and adopt new leadership styles. It will help them in resolving such issues and convince employees to work in effective manner so that higher outcomes can be obtained and demands of international clients can be completed on time.

Structure: Business structure of an enterprise also gets affected due to globalisation. When firms are establishing business in new place or sell commodities in international markets then it is needed for them to change organisational culture. In this process, they need to recruit new employees at workplace of diverse culture who have gained knowledge in how to deal with national and international clients (Cavusgil and Knight, 2015). Through efforts and contribution of them, managers can determine needs and demand of clients easily as well as can make good communication with them. This would aid them to hit up the set objectives in an effective manner. Along with this, when employees are much skilled and experienced then managers get advantage to take effective decision as well.

Culture: This factor also get impacted due to globalisation. When new employees are recruited in workplace having different background then it will arise various problems. It includes conflicts among employees, therefore, management of organisation needs to make effective relationship among them. In context with customers, when clients belong from different culture, religion and area then it creates various problems for employers to understand desires of each and manufacture products as per their expectations (Wild, Wild and Han, 2014). Therefore, Entertainer is required to provide a wide range of toys at marketplace as per need of customers by considering their culture most. It would help in enhancing sales performance and increasing profitability of company.

Functions: When a company is going to step up its foot in new era, then it needs to create so many changes in function and operational activities. For bringing modification at workplace and organisational system, they require to evaluate demand of marketplace in a proper way. Therefore, it is essential for management to create alteration in production and manufacture innovative products as per desires of clients.

P4 Effects of ethical and sustainable globalisation on organisational functions

As per situation, entering into new market is all about the unexpected transformation. Therefore, the firms which have large organisation are needed to make various types of strategies and policies as per political rules of targeted country. In addition to this, they should introduce ethics in business which creates positive impact on organisational behaviour as well as on employees too (Cohen and Kietzmann, 2014). Since Entertainer wants to expand its area of operations in international market, therefore, it is highly recommendable for its managers to understand legislations of territorial regions made by their government. It will help in carrying business operations in targeted countries in a legal manner. In context with this, when such companies take out their operations in other countries, then they have faced various issues in expansion. It includes economical issues, political problems and more. So, to cop up from these problems and resolve on time, it is necessary for them to analyse these factors and make planning properly to comply workforce with all such laws.

By complying business operations with all rules and regulations, entire performance of enterprise will get enhance in a high manner. Therefore, ethical consideration is necessary while making strategies which will help in maintaining positivity at workplace and create good impact on employees. In addition to this, managers are needed to provide proper guidance and training to workers which make them able to work as per business demand. It would aid in getting high retention of workers in companies as well as reduce heavy labour turnover.


P5 Various ways through which decision making can work effectively in global context

In an organisation, whole responsibility of managing workplace along with planning, staffing, organising, financing and more are taken by leaders and managers. They perform various activities in order to increase productivity of enterprise and enhance growth of business in a proper way. They also take responsibility to create changes within working organisation and operational activities for manufacturing creative and innovative products at marketplace. Along with this, they introduce high techniques and latest technologies in business structure for creating better modification. Along with this, they should motivate employees to work in a proper manner and give their contribution in achievement of business success. All these processes, can be done by taking proper decision in order to gain sustainability at marketplace of new countries. In addition to this, keeping changes in business structure on regular basis help in utilising resources in more effective way. In context with Entertainer, for operating business in different countries, it wants to develop quality of products as well as provide wide range of them.

Managers are required to formulate new aims and objectives of association as per business requirement. Along with this, provide proper guidance to employees and assign work as per their skills. It will help in gaining their productivity and high contribution to hit target of business as well (Globalization Challenges for Businesses. 2018). All these processes, can be done by taking two type of decision as discussed below:

Programmed decision making: This type of decision is stated as tried and tested process which is taken by leaders and managers of a company in order to obtain better outcomes. They collaborate with each other in taking programmed decision by allocating the past performance of company. It includes various strategies through which aims and objectives can be accomplished in an effective way. Moreover, these are the proper and traditional strategies which was being utilised and thus gave the positive outcomes. Example can be taken up of employees which mainly resolve the issues by troubleshooting them. This is being done by an individual in repetitive manner. Hence, it is necessary for management of Entertainer to make proper decisions. Along with utilise all decisions on right time.

Unprogrammed decision making: This factor includes the factors which are exists in external environment and impact on business activities. Therefore, it is essential for managers to determine impacts of these and make decisions in short period of interval. Decisions involved in such type of process are taken for changing existing technologies and adopt new ones. (Kasemsap, 2015). This would help in increasing productivity of workplace along with enhancing profitability.

P6 Assorted routes to internationalisation which can adopt by organisation, including key barriers

There are various type of barriers come while launching business at international market. Hence, it is necessary for associations including Entertainer to identify these factors and find solutions to resolve the same (Ferraro and Briody, 2017). Through proper determination, they can take decisions in an effective manner which helps in expanding business easily. Some obstructions in this process can interrupted as:-

  • Lack of funds is an important factor which creates a large interruption in running business at global level. So, to reduce this barrier SME’s can take loans from banks or convince investors to make investment in their firms
  • Culture is also acts a barrier which needs to be considered by managers in a proper way. It will help in carrying out operation of business at international level in an economical manner. Therefore, it is advisable for employers to recruit high talented workers in organisation and give them proper training.
  • In order to launch business in new market area, a company needs to make innovation in its products. It may include various types of risks in creating modification in business structure. But taking risks by analysing all factors in a proper manner help in enhancing business as well as acquiring good position at marketplace from competitors. (Huhtala and et. al., 2014).

Route to internationalisation:

Joint venture: It refers to a business contract under which two or more companies make agreements to join business for some period of time. It helps them to reduce shortage of funds and resources by joining their business, because each of the parties are equally responsible for profitability, loss and costs. Thus, it seems to be a perfect way for small companies like Entertainer to launch business in international market. Therefore, joint venture is considered as an important tool for international expansion which allows enterprises to access the complementary resources as well as capabilities of each other and achieve targeted objectives as well.

Franchising: It has proven as best route for successful expansion of business internationally. In manufacturing sectors like Entertainer, use franchising to grow business in emerging markets in strategical manner. In UK alone, franchising accounts for turnover of £850 billion. The main reason behind this is that it provides real benefits to both brand owner and franchisees. Therefore, firms like Entertainer can generate income stream by a franchise business model for international expansion.

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From this report, it has summarised that globalising the business enhance sales performance of a company. Along with it helps in increasing profitability as well as gaining high advantage of competition. But for expanding business at global level it is necessary for such companies to analyse factors which are present in internal and external environment. These factors create huge impact on business operation in both positive and negative manner. By compiling business with rules and regulations of countries where they want to expand business helps in reducing negative impact and increase profitability.

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  • Apăvăloaie, E. I., 2014. The impact of the internet on the business environment. Procedia Economics and finance. 15. pp.951-958.
  • Axelrod, R. S. and VanDeveer, S. D. eds., 2014. The global environment: institutions, law, and policy. CQ Press.
  • Belás, J. and et. al., 2014. Significant attributes of the business environment in small and meduim-sized enterprises. Economics & Sociology. 7(3). p.22.
  • Belás, J. and et. al., 2015. The business environment of small and medium-sized enterprises in selected regions of the Czech Republic and Slovakia. E+ M Ekonomie a Management. (1). p.95.
  • Carneiro, J. and Brenes, E. R., 2014. Latin American firms competing in the global economy. Journal of Business Research. 67(5). pp.831-836.
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  • Cohen, B. and Kietzmann, J., 2014. Ride on! Mobility business models for the sharing economy. Organization & Environment. 27(3). pp.279-296.
  • Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.
  • Doh, J., McGuire, S. and Ozaki, T., 2015. The Journal of World Business Special Issue: Global governance and international nonmarket strategies: Introduction to the special issue. Journal of World Business. 50(2). pp.256-261.
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