SUMMARY There are many differences between business organisations, beginning with the purpose and goals of an organisation. Business organisations belong to various different categories including the private, public and non-profit sectors. This assignment will discuss a business organisation from each of those sectors, outlining the purpose, objectives, and stakeholders of each. It will also discuss the different ways that global factors and market structures can impact each of those companies. CONTENTS PAGE : L01 Understand the organisational purposes of business
Identify the purpose of different types of organisation Describe the extent to which an organisation meets the objectives of different stakeholders Explain the responsibilities of an organisation and strategies employed to meet them L02 Understand the nature of the national environment in which business operate 2-1 explain how economic system attempt to allocate recourses effectively 2-2 assesses the impact of fiscal and monetary policy on business organisation and their activities 2-3 evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organisation .
————————————————- Understand the behaviour of organisations in their market environment 3. 3-1 Explain how market structures determine the pricing and output decisions of business 3-2 Illustrates the way in which market forces shape organisational responses using a range of example 3-3 judge how the business and cultural environment shape the behaviour of a selected organisation L04 ————————————————- Be able to assess the significance of the global factors that shape national business activities -1 Discusses the significance of international trade to UK business organisation 4-2 Analyse the impact of global factors on UK business organizations 4-3Evaluate the impact of policies of the European Union on UK business organization L01 Understand the organisational purpose of businesses ________________________________________ 1-1 Identify the purpose of different types of organisation In this assignment I will discuss companies that belong to different categories; two private sector companies which are British Airways (BA) and John Lewis (JL) and one non-profit organisation which is World Vision International (WVI).
British airways (BA) was in the control of government for thirteen years and went into privatization, the main goal or objective of BA are being the airline for long haul premium customer at every touch point, increasing its presence in key cities. JOHN LEWIS (JL) is one of the leading employees owned organisation running different businesses, does business with utmost care and low cost but never leaves quality. World Vision International (WVI) is a global organization which provides humanitarian support to children and families and communities worldwide.
World vision provides emergency relief and long-term community development programs, including local leadership training (20 Audited financial statement). One of the main differences between organisations in terms of their purposes is the goal they aim to achieve. Charitable organisations aim to raise money for different causes, and are not profit-driven. On the other hand, some private and public organisations aim to make high profits. Governmental organisations aim to provide a service to the public, for example the NHS, the police force and Royal Mail.
The main ways in which business can communicate its direction are through vision statements, mission statement, aims & objective, and social responsibility policies (CSR). Vision statement set out the strategic intention of an organisation. Mission statements outline the role that a business aims to fulfil. Objectives are used for measuring the performance of their organisation, the key elements for the organisation success, it can be split into primary objective and secondary objective. For example, John Lewis’s long term objective would be based on finance and business expansion.
Their short term objectives would be increasing sales. The vision would centre around employee co-ownership with the happiness of partners as the ultimate purpose. The mission is the satisfaction of employees. Finally, the value would be to represent the best possible choice, as a result of providing the best quality, trust and customer service. As for BA, their vision is being ‘the world’s most responsible airline’, their value is centred on putting people first. The mission of WVI is to dedicate themselves to work with children, families and communities to overcome poverty and injustice -2 Describe the extent to which an organisation meets the objectives of different stakeholders Stakeholders have a significant influence on the aims of an organisation. They are the people who are affected by or interested in the business. In some organisations the shareholders are stakeholders, and at times have some of the decision power. In trade organisations, customers are also considered stakeholders; therefore their needs are part of the organisation’s overall objectives. The following table outlines the stakeholders for each of British Airways, John Lewis and World Vision International.
It also indicates the level of power each stakeholder represents and the organisations’ interest in them. British Airways: Stakeholders| Internal | External| Power| Interest| Head office and key people | *| | High| Medium| Employee| *| | High| Low| Shareholders| *| | High| High| Customers | | *| Low| Low| SUPPLIERS| | *| Low| Low| Competitor| | *| High| Low| Government| | *| Low| Low| Labour onion| | *| Medium| Low| John Lewis: Stakeholders | Internal| External| Power| Interest| Employees| *| | High| High| Government | | *| High| Low| Local authorities| | *| Low| Low|
Trade associations| | *| Low| High| Suppliers| | *| Low| High| Competitors| | *| Low| High| World Vision International: Stakeholders| Internal| External| Power| Interest| Partnership| *| | High| High| Staff| *| | High| High| Childrens| *| | Low| High| Families| *| | Low| High| Board member| | *| High| High| Donors| | *| Low| High| Communities| | *| Low| Low| Program leader| *| | Low| High| Volunteers| *| | High| High| 1-3 Explain the responsibilities of an organisation and strategies employed to meet them. The responsibilities of an organisation depend largely on what services or products they provide.
In relation to owners and stakeholders, organisations have both legal and moral obligations towards them, ensuring they receive adequate return on investment. They have obligation towards their customers, in that they remain reliable and present adequate offering in terms of their prices. Food and drink companies abide by strict health and safety rules governed by the FDA. More importantly, trade organisations must ensure that their products and services meet the demand. Most companies have marketing departments which give insight into the consumer wants and needs.
Business organisations also have a responsibility towards the communities in which they operate, for example through job creation. Organisations have a responsibility towards their employees ensuring they work in a suitable environment, and offering training programmes. The table below outlines other stakeholders and the responsibilities business organisations have towards them: Management | Adequate salary | Staff | Training programs, an adequate working environment, career prospect, abiding by terms stated in employment contracts| Government | They expect taxes from the companies |
Bank | To ensure the payment of invest and the principal amount it paid to them on their due date | Creditors | Supplied goods and service to them | Environment | Reduce contaminations, avoid being a cause of environment problems, such as noxious gases , noising , trafficking disturbance | Passengers| Meeting the customer expectations, delivering excellent service | It is vital for an organisation to allocate its resources effectively and efficiently in order for it to meet its strategic objectives. Nothing could be more detrimental to the strategic-management process than for management to fail to support approved goals by not allocating resources according to the priorities indicated by their goals. ” (Alkhafaji, page 201). L02 ————————————————- Understand the natural of the national environment in which businesses operate ————————————————- 2-1 explain how economic system attempt to allocate recourses effectively Economic systems can be defined as “the set of mechanisms and institutions that resolve the what, how and from whom questions. Some criteria used to determine among economic systems are. In order to understand how an economic system allocates its resources effectively, we must first begin to understand the what, how and whom questions previously mentioned. As William A. McEachern explains in his book ‘Economics: A Contemporary Introduction’, most consumers take for granted the “incredible number of choices that go into decided what gets produced-everything from which new kitchen appliances are introduced, which roads get built, to which of the 10,000 movie scripts purchased by U. S studios each year get to be among the 500 movies made. However, different economies answer these and millions of other questions each year using their own decision making processes, rules and mechanisms, they must all eventually resolve these questions. To answer this question of how goods and services are produced, many more questions must be answered in advance to determine how output will be produced, such as: * Which resources should be used? * How should resources be combined? * How much labour should be put in and to what skill level? * What machines should be used? * Is there a need for innovation or new technology to be used? * Where should the output be built or produced?
The question of “for whom are the goods and services to be produced? ” is often referred to as the distribution question. It aims to identify which category of the population will receive the goods and services produced. Categories can be identified by such factors such as age group, gender, religion, look, race, weight and wealth. Although these three economic questions are clearly separate, in order to answer one you must first answer the others. Laws concerning resource ownership and the role of government determine “the rules of the game” – “the set of conditions that shape individual incentives and constraints. “Along a spectrum ranging form the freest to the most regimented types of economic systems, Pure Capitalism would be at one end and the Pure Command system at the other. Economic recourses are divided into 4 categories: * Land: the natural physical recourse * Labour: the human input into the production process * Capital: to an economic, investment * Entrepreneurship: an individual who seeks to supply products We have 3 types of economy system: * Free market economy: Minimal governmental intervention in decision-making.
The allocation of resource and distribution of goods are based solely on the market * Command economy: the government controls what the produced, who produces, as well as consumption * Mixed economy: banks are unable to lend money due of the recession. There is a high rise in unemployment with the UK 2-2 Assess the impact of fiscal and monetary policy on business organisation and their activities Government use fiscal and monetary policy to balance the market and national economy, and reduce unemployment, correct budgetary problems and restore current stability.
Fiscal policy has an impact in terms of taxation and other sources of income, governmental spending, as well as repaying of debts when income is higher than expenses. Whereas monetary policy involves the change in interest rate to control the level and rate of growth. It involves the effects of changes in the exchange rate. Competition policy refers to all laws, policies and regulations aimed at establishing competition. It aims to ensure a competition market condition by the removal of control. The competition policy is comprised of four main issues: antitrust and cartels, market liberalisation, state of control and merger control.
For example, BA is a low cost airline. The global economic crises and the hike in oil prices resulted in stiff competition. 2-3 evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organisation Government have policies to control the economy such as industry policy, social welfare and competitive policy. The industry policy aims to play encouraging a faster rate of business growth. In the past BA used to monopole in industry. A few years ago BA invested in a low cost no frills airline GO (free foam 2011) aimed at driving out the competition but the decision went bad for BA.
BA is largest UK airline followed by Easy jet and Virgin Atlantic. BA and Iberia airline were merged under the new company IAB that would be the world’s top six airline and the third largest carrier in Europe by market value after Lufthansa and Air France KLM L03 ————————————————- Understand the behaviour of organisations in their market environment 3-1 Explain how market structures determine the pricing and output decisions of business Types of market stricter The different types of market structures include perfect competition, monopoly, monopolistic competition and oligopoly.
As outlined on the graph below, the level of competition ranges depending on the market structure, with monopoly being the least competitive. Below are some of the characteristics of market structure: * Number and size distribution of sellers * Number and size distribution of buyer * Condition of entry and exit The principle of supply and demand states that when a particular goods or service has limited supply and increased demand the price of the goods or service increase and vice versa. John Lewis thrives on the promise that the price will be low as long as the price of the neighbourhood store is low.
BA’s the pricing on the seats is based on many different factors including what competition are offering , what season you are flying and what route you are flying. BA have a system called BA Value Calculate this compares the price of two of their competitors Ryan Air and Easy Jet. 3-2 Illustrates the way in which market forces shape organisational responses using a range of example Market research is key in order to determine market forces and an organisation can respond correctly to the market they are operating in, and to ensure that an organisation can respond to any change in market condition.
Supply and demand is one of the most fundamental concepts of economics, which plays a key role in the performance of business organisations. It has the potential to impact business organisations dramatically. The graph below demonstrates an equilibrium; which is when supply is equal to demand. At this point, the allocation of goods is at its most efficient, because the amount of goods being supplied is equal to the amount of goods being demanded.
In the real market place, ‘equilibrium can only ever be reached in theory, so the prices of goods and services are constantly changing in relation to fluctuations in demand and supply’. For example, if there was a new pair of hair straighteners which are on high demand, and John Lewis was to purchase a shipment. Another department store, such as Debenhams, could buy a larger shipment, which would mean they would benefit from economise of scale, which would mean they can sell the hair straighteners for a cheaper price than John Lewis and as a result gain more customers.
Therefore John Lewis may have to reduce the price, in order to meet the demand. This is sometimes referred to as ‘cost pressure’. Another important market force affecting business organisations is when a price of a product or service is set too high. This would mean that excess supply will remain. The following graph demonstrates this: At price P1 ‘the quantity of goods that the producers wish to supply is indicated by Q2. At P1, however, the quantity that the consumers want to consume is at Q1, a quantity much less than Q2.
Because Q2 is greater than Q1, too much is being produced and too little is being consumed’. BA was affected dramatically by the recession. The heavy investment during the time of recession is one of the biggest mistakes which led to ? 531 million loss before tax. 3-3 judge how the business and cultural environment shape the behaviour of a selected organisation PEST analysis is a helpful tool to take a closer look at the macro-environment factors such as political, economic and social-technological. The table below outlines examples of each: Political| Social| Economical| Technological|
Legislation change| Population growth rate| Global climate| Online shopping| Oil pricese| Age distribution| Recyclable| advertising| Globalization| Global climate problems| Rising in food retailing sector| Airline distribution and sales| Government taxation policy| Health consciousness| Available of credit| | Protection law| Buying habits| Bank policies| E-commerce| Employment law| Pollution control| Interest rate| New products| Trade restrictions| | Minimum wages| Self-service check-in| Recession| Life style| Staff’s strikes| | Heavy investment| Consumer activities| | | Cut down on using flying| | | In relation to political factors, the airline industry is a highly regulated industry, and is governed by a tight governmental control as well as the European Union and the International Aviation Organisation (ICAO). Safety Standards ‘are strictly implemented in Europe by the European Union. The ICAO is one of the governing bodies concerned with safety standards’. A list of airline companies that failed to meet the ICAO’s safety standards was published by the European Union, and as a result, those companies are legally banned from operating.
In relation to technological factors, BA was the first airway to introduce carbon offset scheme to its passengers. It has also been successful in acknowledging trends in technological change, as demonstrated in the introduction of different systems such as DAC it combustion on Boeing 777-23 GE90. L04 ————————————————- Be able to assess the significance of the global factors that shape national business activities 4-1 Discusses the significance of international trade to UK business organisation International trade can be defined as being concerned with the allocation of resources among countries.
It is one of the main components of the UK’s economy. The importance of international trade in different countries depends on a number of factors, including ‘history, culture, trade policy, the structure of the economy, re-exports, and the presence of multinational firms’. (OECD iLibrary). If a country is self-efficient and produces only for its own need, international trade would be limited. The share international trade comprises in a country’s GDP, represents its importance to the country and the effect it has on its economy.
Exports represent 30. 01% of the UK’s GDP (UK Government Statstics), whereas imports of goods and services represent 34%. (World Bank). International trade has a significantly positive impact on the UK economy, and UK businesses, as it broadens the market’s horizons and provides a range of production costs and materials. An example of this is British Airways (BA). British Airways has contributed to the UK’s economy in many ways, such as providing it with vital opportunities in trade and investment.
It is the biggest international airline in the UK. 4-2 Analyse the impact of global factors on UK business organizations One of the major global factors that had an impact on all UK business organisations is the recent recession. The recession is a stage during which buying, selling and production decline sharply. There was a massive loss in jobs. Housebuilder Persimmon revealed it had cut 2000 jobs. The building firm said that completion of house sales in the first six months of the year were down 30%.
Banks’ approval for mortgages became scarce. From May 2007 to 2008, there was 64% lower approval rate. Another global factor is international trade. International trade gives UK business organisations access to wider markets, and gives consumers access to a greater variety of goods and services. As a result, the UK economy has increased opportunities as well as level of competition. Globalization can be a challenge as well as an opportunity for John Lewis. Challenge in the sense that there was higher competition within the retail industry.
Opportunity in the sense that it allowed John Lewis to establish themselves anywhere around the global. BA had to become global in order to stay competitive. The advantage of this is acquiring new knowledge, experience and enhanced domestic competitiveness. As a result of which, increasing sales and high profit. 4-3Evaluate the impact of policies of the European Union on UK business organization When the UK joined the European Union, it meant there was free trade between UK and European businesses, which introduced UK businesses to a new market.
The creation of ‘a single European market and the removal of barriers to trade, have, in effect, given UK businesses access to a much wider domestic market’. (Chappell page 21) EU regional policy is ‘an investment policy, it supports job creation, competitiveness, economic growth, improved quality of life and sustainable development. ’ (EC. EUROPA. EU/regional_policy). Since 2008 regional policy has adapted to changing needs, and harsher financial conditions.
Below are some of the solutions the EU regional policy has put forward during the recession: * Quicker delivery of funding * Increased co-financing rates * Simplification of procedures * Modification of programmes * Priority projects in Greece * Access to finance for small business * Tackling youth unemployment * Technical assistance The impact of policies of the European union on BA: * Single European sky * Consumer protection * Route and airport Slots References Electronic sources: www. memorystory. org. uk www. greenbee. com www. johnlewispatrnership. o. uk www. CityWiremoney. com www. briyishairways. com www. economicsonline. co. uk Business and the European Union www. businessdictionary. com www. businessball. com http://www. investopedia. com OECD iLibrary, http://www. oecd-ilibrary. org/, OECD Factbook 2011-2012: Economic, Environmental and Social Statistics UK Government Statistics. http://www. statistics. gov. uk/hub/economy/prices-output-and-productivity/output www. WorldBank. com Books: Chappell Khafaj, Abbas F. Strategic Management: Formulation, Implementation, and Control
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