paul reffill

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IntroductionThe business organizations have different purposes depending on their reason of doing

business. Business organizations prepare a structure of them and perform activities which

help to meet their objectives. All the business organizations are required to meet the

requirement of their stakeholders like the customers, investors, employees, suppliers,

government, etc. All of them have their different needs and interests and sometimes it

becomes very difficult for the business to full all their needs. Businesses are required to

work in an atmosphere which is developed by the market forces like the government,

competitors, consumers, suppliers, and international factors. These business

environments can be both at the local level as well as the global level and is very crucial

in developing businesses (Helpman, 1989). Some of the important factors which play an

important role in affecting the business and their stakeholders are the interest rate,

taxation policy, competitive laws, foreign direct investment regulations, etc. The

companies which decide to go global have to face the challenges posed by the regulatory

bodies of different geographies. The market forces are the major contributor towards the

organization structure and its processing.

LO1 Understand the organization purpose of businesses

P 1.1 Explain briefly the following types of organisations and their purposes: Virgin Group LTD, Tesco PLC, MC Donald’s and National Health services (NHS) UK

There are different types of organization present in the market and they have different

purposes. These purposes depend on the reason why they are doing business and their

objectives. Basically there are 4 types of organizations: Sole proprietorship, partnerships,

corporations, and Limited Liability Companies (LLC). Sole Proprietorship is the

organizations in which there is single owner. All the operation of the organization is

looked after by the single person that is the owner. In Partnership form of organizations,

there is more than 1 owner as the name suggests. There are partners who own the

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business. Here the number of partners can range from 2 to 20. Let us discuss the

following type of organizations and their purpose:

Virgin Group Ltd: It is a British multinational branded venture capital conglomerate

conceived by Sir Richard Branson. It is one of them most renowned brand in the world. It

deals with different sectors like mobile telephony, travel, financial services, leisure,

music, holidays and health & wellness etc. This is example of sole proprietorship where

Branson retains complete ownership and control of the Virgin Brand.Tesco plc: It is one

of the most popular retail stores in UK which has presence all over the world. It deals

with general merchandising. Tesco plc was founded by Jack Cohen in the year 1919.

McDonald’s: McDonald's Corporation is the world largest chain of hamburger fast food

seller. It is headquartered in US and serves in more than 119 countries. This was first

started in 1940. This company runs on a franchise model.

National Health services: This is a public sector company in the UK. The systems are

primarily funded through central taxation and they work towards securing the health of

the nation as the name suggests.

P1.2 Considering Tesco PLC, describe the extent to which it meets the objectives of its different stakeholders.Tesco plc is doing a great job in meeting the objectives of its stakeholders like the

customers, employees, suppliers, investors, government, etc. They are providing a good

rate of return to their investors and keeping then happy and satisfied in investing in the

Tesco operations. The investors are always worried about the rate of return they Are

offered and the Tesco is performing very well to meet the needs and expectations of its

investors. They are keeping their employees satisfied and motivated by meeting their

requirements as well. They are giving better services and proper working environment to

their employees (Holden, 1996). They also give awards and rewards to its employees for

their contribution towards the better performance of the company. They also satisfy their

lenders by keeping their confidence intact in the Tesco’s performance. The Tesco plc

satisfies their customers as well by producing goods which are preferred by the customers

and offering thee products at affordable prices. The company also follows the

government policies and pay their taxes in time and keep the government also happy with

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their business. They also maintain strong bond with its suppliers and keep a contact credit

payment process in place (Börzel, 2003).

P1.3 Considering Tesco PLC, explain its various responsibilities as an organisation and the strategies it employs to meet them.There are various responsibilities which are fulfilled by the company Tesco plc which

ranges from social responsibility, environmental responsibility, and employee

responsibility to government responsibility. Tesco indulge in fulfilling in the social

responsibility by organizing and taking initiatives for corporate social responsibility

activities. They fulfil the environment responsibility by increasing awareness about

keeping the environment pollution free and make efforts to contribute minimum to the

environment degradation. Tesco has been working towards implementing various

activities which are important for its brand image (Kamien, 1982). The company is active

in taking plantation initiatives and being responsible in nurturing environment oriented

approach both outside and within the company. Tesco has been known its approach

towards reducing the plastics usage through its retail outlets, minimising waste in the

environmental structure, and decreasing the usage of hazardous materials in its product

line. It has also fulfilled its responsibility towards the employees by giving them the best

facilities and helping them to develop better skills. They also fulfil the responsibility

towards the government by paying proper taxes in the timely manner (Cannon, 1978).

LO2: Understand the Nature of the National Environment in Which the Business

Operates

P 2.1   Giving relevant examples, briefly explain how different economic systems such as: command, free enterprise, mixed and transitional systems attempt to allocate resources effectivelyIf we talk about the types of the economic system prevailing across the world, then there

are basically three types of economies present which are: free market economy,

command economy and the mixed economy. The economic systems have different

driving forces which work towards the allocation of resources effectively. In a free

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market economy there is total freedom top the producers and the buyers to exchange in a

way that is a win-win situation for both the parties. This type of structure enables the

problems to ne handles automatically by the system and the market is responsible for the

allocation of resources. In the free market economy the stakeholders have a lot of options

to choose from because of the independent market forces (Whitley, 1994). The business

decides what to produce depending on the preferences and demands of the customers.

The businesses are required to keep the customer preferences as the top priority but with

a motive of making profit. The activity of producing goods and services decides the

profits of any company. The products are offered to the customers in the market and the

market forces decide the flow of products to certain customers depending on their

disposable income and their interests. On the other hand in the command economic

system, the controlling authorities are responsible for the effective allocation of

resources. Here by controlling authorities we refer to the government and its related

organizations. In the command economic system, the decisions are made based on the

need basis. The companies have the right to decide what to produce, for whom to

produce, how to produce, how much to produce, etc. The allocation of resources in such

a system is done by proper planning and strategy. So according to some of the

economists, the command economy is better than the free market economy. In the mixed

economy, there is a combination of the free market economy and the controlled economic

system. The free markets forces are controlled under the controlling authorities so they

have the advantage of both the economies hence the resources are more efficiently

allocated. Here the decision of what to produce is partially decided by the consumer

preferences and partly by the government intervention. The decision of how to produce is

decide by the firm itself under government surveillance. The customers for whom the

products are produces are decided by the consumer purchasing power, their interests, and

government policies as well. Most of the economies in the current scenario are mixed

economies and it is very beneficial for both the parties i.e. the producers and the

customers (Young, 1999).

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P2.2 Considering Tesco PLC UK, assess the impact of fiscal and monetary policy on their activitiesThe government policies and the related regulations play a very crucial role in

formulating the fiscal and monetary policies of any country to keep a balance between

the expenditure of the government with respect to its earning to meet its objectives. This

is done by the government by formulating policies and by the help of central planning

system. The economies of any country are majorly governed by the two policies

formulated by the government of that country: fiscal policy and the monetary policy. The

main elements of the economy will be affecting the business are the tax rates and

government spending. The fiscal policy can take the form of automatic or discretionary

depending on the present conditions and the government preferences (Fatás, 2001). The

fiscal policy determined by the government has to play a major role in the growth of any

economy and the employment opportunities of the economy. The fiscal policies can

enable the consumers and the producers to have the access to capital. The business has to

take into consideration the tax rates in developing its strategies and taking various

business decisions (Kollmann, 2002). Tesco plc also gets affected by these fiscal and

monetary policies which are formulated by business. In the UK they are not favourable

for the company to expand in different geographies. The tax rates are high so the

company has to conscious about its investment plans and recruiting strategies. Higher the

tax rate, it would be more difficult for the businesses to pay back to their investors and

lenders and more will the risk. Also higher taxes will mean less disposable income with

the customers and hence less possibility of earning high revenue by the businesses. If the

customer expenditure is less it means the supply demand issue will be brought into

picture which will not be good for the health of any economy. The monetary policies on

the other hand also play some similar roles. It is basically concerned about the control

over the supply of money in the market. The amount of money supply in the market is

responsible for many decisions being taken by businesses. This supply of money is in

total control of the government, the controlling authority and this can be regulated

depending on the satiation by adjusting the interest rate, tax rate, etc. All these will affect

the supply of money available in the market. All these regulations done by the

government will indirectly also affect the foreign exchange rate which has a direct impact

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on global businesses. The interest amount to be paid will be high as the base rate

increases. It will decrease the profit amount and will demotivate the organizations to do

business. It will affect the market sentiments in a negative way and organizations will

avoid taking loans and do business. The businesses will also get affected due to high

foreign exchange rate due to high interest rate and will have to pay more for import of

raw materials (Scherer, 1990).

P2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of Tesco plc UK.Tesco plc is a UK based organization which is dealing with supermarket chains all over

the world. The company has a very strong brand name in the retail sector and is very

popular in the field of grocery and general merchandising. As we have mentioned that the

company has gone global and has a presence in various parts of the world. So they also

have to face a lot of cross border rule and regulations to do business outside the local

environment. They have to follows the legal complication of different nations before

doing business in that geography. In the UK, the company had to face the regulation of

the competition law which was incorporated by the UK government in the year 1948.

This law was passed with the prime motive of creating a healthy and robust competitive

market where every competitor has a fair chance to compete with its competitors. This

also helps for stopping the big players to take the advantage over the small players and

every player in the market gets equal opportunity to flourish. These laws are in favour of

customers in giving them multiple options to choose from. This also helps in the fair

pricing of the products and services offered by different organizations. Tesco has faced

some problems due to these policies. They cannot get into taking decisions in fixing their

prices. The company has faced challenges in complying with the proposals of the British

government (Yip, 2006). The government has imposed heavy penalties on the

organizations in the past that broke any rule or regulation in the competition law hence

Tesco has to careful enough on this front. These policies have also served as roadblocks

in expanding the business to new locations and new markets. There are many other laws

like the competition laws which are imposed by the British government which Tesco has

to follow. There are many human resource related laws which the company has to abide

by. For example Minimum wage policy which was introduces under the National

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Minimum Wage Act in the year 1998, workplace safety regulations which comes under

the Health and Safety Wage Act 1974, maximum work hour policy, etc. All these acts

decides that how Tesco will treat its employees. Another act known as the Sales and

Good Act makes Tesco to fulfil the requirement of contract terms with the suppliers in

buying raw materials and in selling the finished goods from its retail outlets. The

recruitment policy followed by Tesco makes the company follow the anti-discrimination

laws prevailing in the UK. This helps the employees in the UK from getting

discriminated from each other on different basis. Other acts followed by Tesco are race

relation act, disability act, employment equality regulation etc.

LO3: Understand the behaviour of organisations in their market environment

P3.1 Explain how market structures determine the pricing and output decisions of Tesco plc UK. Deciding the price and output of any organization is the most critical decision to be

made. This decision impacts the success of any business and should be taken after

considering a number of factors. These decisions are highly influenced by the market

structure. Market is defined as a place where buyers and sellers interact with each other

to exchange goods and services. Market structure is basically the way in which these

interactions between the seller and the buyer happen. The seller themselves does not the

liberty to decide the output and final price on their own rather they have to consider the

market structure before doing so. Market structure is basically characterized by the

number of producers in the market and the type of products sold in the market. If the

numbers of sellers are more and they produce similar kind of products, then in that case

the price and output of the products and services are decided by the supply and demand

mechanism. But in the market structure where the goods and services offered are distinct

from each other, the decision making lies with the producers. They can decide whether to

substitute a product with other and how much to produce (Spar, 2006). Same is the case

with Tesco plc. The market structure where the Tesco is operating, for example in UK,

there are many other players in the market which are offering the same products as UK,

hence the price and output of the products offered by Tesco is being decided by the

supply and demand mechanism. The decisions are made by Tesco after taking into

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considerations the strategies and practices followed by the competition. On the other

hand in a perfect competition market structure, the number of buyers and sellers are too

high so the any individual cannot fix the price and output and the decision is made

according to the market sentiments. The buyers and sellers can easily enter and exit the

market. They have to follow the market pricing in order to be alive in the competition. In

other market structures, the producers have the total control over the price and output of

the products and services offered by them.

P3.2 Illustrate the way in which market forces shape Tesco plc responses using a range of examplesThe market forces are very much responsible in the way a particular organization behaves

in a market. Market forces are responsible for deciding the pricing of the products as we

have seen in the above segment. Similarly these market forces are also involved in other

business related decision making process. The market forces communicate with each

other in order to have better profits and this depends on the market structure. For Tesco

plc, the decision making is done depending upon the market preferences i.e. the customer

preferences, the competitor analysis, price elasticity, supplier relations, etc. All these

forces drive the way Tesco behave in the market. In a perfect competition the number of

buyers and sellers re high and they play a crucial role in deciding the prices of the

commodities traded in the market. This is often termed by the economists as the price

taking property rather than a price making property as the sellers get to know that at what

price they should sell their products instead of deciding it themselves. Is the products

being sold in the market are similar then the producers cannot bargain over their product

as they are similar to other available in the market. Due to this the sellers are forces to

accept the price prevailing in the market and decide the same price for their products. The

market forces decide the trend of the market and interact with each other. The sellers then

have to act according of the conditions set by these market forces. Another form of

market structure is monopoly, where the seller has the complete control over the market

and have the liberty to decide the output and price of the commodities offered by them.

The pricing of the products is non-elastic and producer have the complete control over it.

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P3.3 Judge how the business and cultural environments shape the behaviour of Tesco plc UK. The business and cultural environments are very much responsible for shaping the

behaviour of much organization. Same is the case with Tesco a well. The businesses in

the current times are not autonomous and operate under different cultural environment.

The behaviour of the organization in different markets heavily depends on the culture of

that market which may include the society ideologies. This differs from one location to

another and while doing business companies like Tesco which is present all over the

world have to incorporate in their business practices. The culture of the UK where the

Tesco is based is inherited from ancestors and the customer preferences define the

behaviour of any organization. Different regions of the UK market differ in their business

and cultural environment. The retailers in the UK have to deal with different cultures and

the beliefs and encapsulate that in the business. The UK has a diverse culture and the

businesses like Tesco behave accordingly. In Tesco, the competitor strategies are

formulated very carefully taking account the different market environment and different

culture in different regions of UK. The regulation and competitive laws of the UK are

responsible for making the firms compete with the competitors fairly.

LO4: Be able to assess the significance of the global factors that shape national

business activities

P4.1: Discuss the significance of international trade to Tesco plc UKIn the recent times globalization has become very popular and the companies have

realized the importance of going global. They have realized the benefits from expanding

business to different geographies. There are a lot of forces which motivate the companies

to go global. These are the cheap labour present in certain parts of the world. There are

also many geographical locations which are technologically very advanced so opening

business in those geographies will help the business to take the advantage of those

advanced technologies and use it all over. There are places where the cost of production

is very low; the cost of raw materials is very low, so opening business in those locations

will be very profitable for the businesses. Same is the case of Tesco plc. This company

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has also realized that doing business in more than 1 nation makes the organization use its

resources optimally that are present in different locations. It makes the utilization of

resources present with the company in a more optimal way. On the other hand expanding

business to foreign locations can also take the advantage of international trade policies.

These days for being successful and make huge profits it has become a necessity for

many organizations to expand globally. It gives the organizations like Tesco plc the

opportunity to make use of the diverse workforce. These will bring better profits to Tesco

plc.

P4.2 Analyse the impact of global factors on Tesco plcThere a various global factors which are present in the market which have a huge impact

on the organizatio0ns which are operating in the global space. Tesco plc is one such

organization which had to face many such global issues. One of the most common are the

political system and its regulations imposed on Tesco in expanding its business in

different geographies. The UK-based businesses which are operating at global scale face

two major challenges in coping with the dissimilar business environment. Any sort of

hostile transformation in government policies or structure in any of the major economy

will have a far reaching impact on the UK business. Political factors including the policy

changes by European Union plays a major role in reshaping the UK business. The

political changes affect fundamental economic drivers of the countries, and hence the tax

rates, interest rates, etc. get affected. Tesco have to deal with all these factors while doing

business and expanding worldwide. The political factors in the EU have a huge impact on

the working of the company Tesco plc.

P4.3 Evaluate the impact of policies of the European Union on Tesco plc The policies of the European Union have a great impact on the Tesco plc. As discussed in

the above segment, changes by European Union plays a major role in reshaping the UK

business. The European Union had a great impact in influencing the political regulations

and policies. UK is one of the most important members of the European Union and the

policies set by the European Union have to be obeyed by the UK industry also. So Tesco

has to follow the policies set by the European Union. There are many factors and policies

set by the European Union which affects the Tesco plc. Some of these are the taxation

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policy, interest rate policy, process of business operation, etc. Higher the tax rate, higher

is the amount paid by Tesco plc which in turn decreased the profit margin and

demotivates the company to expand its business in new geographical areas. The treaties

being signed by the European Union is not factorable for the Tesco plc to expand its

business in Europe. The most common example is the Common Fisheries policy. This is

one of the most controversial policies till date set by the European Union. This policy had

a great impact in the fishing industry and prevented the fishing companies to expand.

Conclusion

Here we can conclude this paper by stating that the market structure, policies set by the

government, market forces, etc. plays a very key role in shaping up a business and in

deciding its future. In the current scenario, it has become very necessary for companies to

go global and expand enormously but the global factors sometimes acts as roadblocks to

them. Hence the government should keep this in mind and should formulate such policies

which should prove to be a win- win situation for both the government and the

organizations like Tesco plc. These policies can have the form of monetary and fiscal

policies and should favour the businesses and motivate them to expand in new

geographical regions. These policies should not affect the profit margins of companies

and should prove to be beneficial for the companies to expand.

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