Business Environment and Economics

Question: Describe about the organizational purpose of business,Nature of national environment and Global factors shaping national business? Answer: Section 1: Organizational purposes of business 1.1 Purposes of different types of organization The major types of organizations that generally exist are public sector municipality, private companies, partnership concerns and non-profit organizations. The public municipalities generally cater to the needs of the public and community at large. The public municipalities generally deliver government services and cater to the needs commercial services like military, police and infrastructure. Private sector organizations are the part of economy that are controlled by private organizations (Andrle, 2012). Unlike the public government private sector majorly focuses on earning profits rather than serving to the communal needs. A nonprofit organization (NPO) is the type of organization that uses surplus of its revenues for the communal benefit. Thus, in this type of organization, revenue is majorly used for reinvestment in the different strategies. The NPOs unlike the other organizations generally helps the community and the employees by investing in different sustainable functions (Wa lsh and Yu, 2012). 1.2 Extent to which the organization meets objectives of stakeholders The organizations generally have different types of roles for different segments of stakeholders. The internal stakeholders include employees, shareholders and unions and the external stakeholders include customers, suppliers and local community members. In case of the employees, the organizations generally devise different performance appraisal strategies that will help the employee to increase their productivity levels. The shareholders are majorly concerned with the high level of profits and goodwill of the company thus the organizations in this case focuses on meeting the organizational objectives and the necessary sales level so that the organizations are able to retain large degree of profits (Bartolucci, 2012). In case of the unions, the major roles of the companies are to focus on assessing the needs of the trade unions and devise different strategies for the trade unions so that they can cater to the needs of the different level of employees. The customers and the local community are the external stakeholders of the company and the major base of success for any company. Thus, it is the duty of the company to provide high quality products at affordable price range to the customers and the community so that the goodwill of the company is maintained (Ummer, 2012). 1.3Responsibilities and strategies of the organization The responsibilities of the organizations changes according to the type of stakeholder needs. For instance, in case of employees and shareholders the organization is responsible for creating value and meeting the personal and professional needs of the employees. In case of the community, the major responsibility of the organization is to provide sufficient amount of labor on producing high quality products with affordable price range. The trade unions are generally the external groups that regulate the demands of the employees. Thus in case of trade unions it is the duty of the company to keep the trade unions satisfied with different types of benefits and also negotiate efficiently with the trade unions in order to make them productive (Couch and Wu, 2012). Section 2: Nature of national environment 2.1 Resource allocation by economic systems According to Gersbach and Hahn (2012) there are majorly four types of economic systems prevailing in different countries namely the traditional economic system, the free-market economic system, planned economic system and the mixed economic system. The countries adopting the traditional economic system generally produce products that are related to the beliefs, customs, traditions and religion of the country. Mixed economic systems are also known as the dual economic system that comprises of the characteristics of both free and command economic systems (Gersbach and Hahn, 2012). The major benefit of the mixed economic system is that the market is mostly free from the government ownership. The command economic system is the type of economic system that is completely controlled by the government and the regulations and working of the organizations are managed under governmental control. The free economy or the socialist economy is the type of economy where no control or regulations are generally set for the operating organizations (Walsh and Yu, 2012). The resource allocation patterns of the different types of resources are different in the four major economies. In free or socialist economy, the resources are allocated by market price without any intervention from the government. In planned or capitalist economy, the resources are allocated with the help of the government regulations and are regulated with the help of demand-supply trend within the organization. The mixed economy generally focuses on allocation of resources based on both government participation and demand-supply regulations within the market (Gurtuna, 2013). 2.2 Impact of fiscal and monetary policies on business decisions Gourvish (2012) stated that there is a striking difference between the fiscal and the monetary policies. The aim of the fiscal policy is to control the level of inflation, maintain positive economic growth and encourage employment opportunity levels. On the contrary, the aim of the monetary policy is to influence the demand, supply chain of the market, and regulate the interest rates in the market operations. The government regulates the fiscal policy. If the government thinks that the economic condition is going out of control, then with the help of the fiscal polices the government will slow down the production rate of the organizations. The increment in the level of taxes will also slow down the economic growth of the business. In case of monetary policy the government will be able to regulate the interest rates and will be able to accordingly control the level of money supply and personal consumption of the population of a particular country (Keel, 2012). 2.3 Impact of competitive policy and regulatory mechanisms The competition policies and regulatory mechanisms are highly prominent in case of retail sector that faces stiff competition from both local and international players. In UK the retail shops generally face sever competition. Tesco, which is one the biggest retail market of UK with around 35% market share generally, sets price as per the competition policies of UK. The cost of pricing strategies of Tesco depends on the pricing policies of different other retail sectors operating in UK. Tesco generally adopts a low pricing strategy in order to gain competitive advantage in comparison to other retail sectors. Section 3: Behavior of organizations in market environment 3.1 Pricing and output decisions determination The pricing and output decision are generally based on three types of market conditions namely monopoly market, Oligopoly market and perfect competition market. In monopoly, the seller selects the price and the buyer does not have any option of changing the price levels. In oligopoly market, the organizations generally set the price after considering the price level of the top competitors. In case of perfect competition, the companies generally operates in stiff competition market thus the organization does not have the opportunity of taking the price. Rather the price decision is bestowed upon the consumers and they are the price takers (Kuzmina, 2013). 3.2 Shaping of market forces by organizational response The following market forces generally shape the organizational responses. The demand and supply of different products generally helps in shaping pricing, promotional and selling decisions of organization. The economies of scale also shape the production rate in an organization. Cost and output rate of the products are determined by the rate of products demanded within the organization. The customers perception and actions also shapes the organizational resource demands and resource needs. The demand of the product depends on the changes in customers taste and preferences. If the products are of high price, then the organizations generally adopts to the policies of premium quality products (Lee, Lee and Lee, 2013). The economies of scale on the other hand generally help the organization to produce large volumes of the product with low cost of production. However, a company will be able to avail the economies of scale only if the demand for a particular product is very high within the target customer segment. 3.3 Shaping of business and cultural environments The political and the cultural environments of the country in which the particular organization is situated can change the overall business scenario of the organization. For instance, the business services of Tesco in UK are regulated by the changes in the political environment of UK (Mankiw, Taylor and Ashwin, 2013). The major economic factors like the interest rates, GDP rates, employment rates and inflation rates also regulate the overall situation of UK. In UK, the political situation of the country is favorable for types of trading organizations. Hence, the organizations are able to establish congenial trading relationships with the global organizations. Section 4: Global factors shaping national business 4.1 Significance of international trade to UK business organizations International trade has improved in the recent years due to the modern production techniques, advanced international corporations and efficient transportation system. With the advent of international trade system, companies like Tesco can operate in other countries with reduced amounts of barriers. In absence of international trade regulations companies in UK like Tesco will not be able to trade globally with Asian and EU countries. The UK international trade regulations have acted as competitive advantage for the UK organizations and have helped them in securing good trading relationships with the global organizations (Ummer, 2012). 4.2 Impact of global factors on UK organizations The major global factor that may influence the business structure of Tesco includes International competitiveness, international business environment, tariff and taxes and exchange rate policies. Thus, Tesco while operating in UK keeps its focus on the performance of the Global competitors like Walmart. The pricing and promotional strategy of Tesco depends on the policies and strategies of global and domestic competitors. Exchange rate is one of the major components that influence the global operations of Tesco. Since Tesco has many branches outside UK hence the company will have to monitor the current currency rates in order to make it feasible for the company to fix the prices accordingly (Parkin, 2012). 4.3 Impact of European Union on UK organizations The major policy that affects the working of companies in UK includes employment policy, regional policy, taxation policy, inflation policy and educations policy. These policies generally have direct impact on the working process of the UK organizations. Thus, while conducting business in UK, Tesco requires to abide by the polices of EU. Tesco is operating on a global basis thus the company needs to abide by the common regulations under the EU polices in all operational countries. Tesco faces legal obligations from the EU countries in case of violation of any policy (Abbey, 2012). References Abbey, 2012. Inflation And Financial Development: Evidence. American Journal of Economics and Business Administration, 4(4), pp.227-236. 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