Business Environment

Section 1
In the UK there are many different types of business organisations. They broadly fall into the
category of public and private sector organisations. The National Health Services for instance is a
public sector organisation (Kerin and Hartley, 2012). The private sector consists of sole traders,
partnerships, private limited liability companies, franchises and joint ventures (Kerin and Hartley,
2012). There are also public limited liability companies, cooperatives and charitable organisations
(Kerin and Hartley, 2012).
The main purpose of the public sector organisations is to provide, access to quality service at an
affordable price to citizens (Armstrong and Kotler, 2014). Providing equal opportunities or equity is
also one of the purposes of the public sector organisations (Kerin and Hartley, 2012). The main
purpose of the private sector however is to be profitable, grow its market share, and to survive by
satisfying customer needs (Kerin and Hartley, 2012).
All organisations have several stakeholder groups such as customers, managers, employees,
owners, the local community, suppliers and creditors (Kerin and Hartley, 2012). Organisations fulfil
the needs of these stakeholders by returning a profit to shareholders, providing employees with fair
wages and benefits, satisfying customer needs, making prompt payments to suppliers and
creditors, maintaining and protecting the environment and providing jobs in local communities and
maintaining satisfactory relations with trade unions (Kerin and Hartley, 2012).
The organisation fulfils the above by converting factors of production such as land, labour and
capital to finished products and services and providing it in a safe manner with the highest level of
quality (Kerin and Hartley, 2012). It also ensures that there are safe working systems and a safe
environment is maintained at all times. The organisation also abides by company, local and
national laws, donates to charitable causes as a means of being socially responsible (Kerin and
Hartley, 2012).

Section 2
There are several different economic systems, however they can be broadly categorised into three
groups, which include the free market economy, the mixed economy and the planned economic
system (Sloman et al, 2012). The difference between the different economic systems is
distinguished by the manner in which they allocate resources (Sloman et al, 2012). In a free market
economy all resources are owned by private individuals or organisations, while in a planned
economy all resources are owned by the state (Sloman et al, 2012). In such an economy, decision
on the use of the resources are made by the state through collection of statistical information and
the setting of overall objective of the state (Sloman et al, 2012). In a mixed economic system, most
of the resources are owned by the state and most economic decisions are made by the state
(Sloman et al, 2012). However, some free enterprise is allowed and the state plays a role in
providing welfare (Sloman et al, 2012).

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The monetary policy affects organisations because of the impact of interest rates. A rise in interest
rates could make borrowing more costly, it could also result in a drop in consumer spending and
thus a drop in demand for the products of the company (Sloman et al, 2012). Changes to the fiscal
policy such as taxation could impact the organisation because decreased taxation could increase
consumer spending power and with it increase demand for the organisations products and
services (Sloman et al, 2012). In Canada for instance the competition policy would not allow the
merger of the big telecom companies like Bell and Rogers because it would create a monopoly in
the market, and result in anti-competitive activities (Sloman et al, 2012).

Section 3
There are several different market structures such as monopolies, oligoplies and duopolies
(Sloman et al, 2012). Each of these market structures affects pricing and distribution in a different
manner. In a perfectly competitive market structure there is a large number of buyers and sellers
and therefore, pricing is set by the market and the sellers are price takers (Sloman et al, 2012). In
a monopoly the firm sets the price and consumer choice is limited (Sloman et al, 2012). In a
collusive oligopoly and duopoly the same features of a monopoly are present. However, in a noncollusive oligopoly the firms are sometimes the price takers (Sloman et al, 2012).
Recession, increased competition and changes in consumer demographics often have an impact
on the organisation. In recessionary conditions, supermarkets compete on price and attempt to
provide a range of cheaper goods or unbranded goods in order to keep prices low and maintain
their customer base (Barrow and Neely, 2011). Increased competition also sometimes results in
companies distinguishing themselves through high levels of customer service standards or quality
standards (Barney and Hesterely, 2011; Capon, 2008)
The political, economical, social, technological, legal and environmental factors could have a
positive or negative impact on the organisation. For instance, political instability in Nigeria due to
attacks by the terror group Boko Haram could increase the risk of investment for a company like
Shell. Furthermore, recessions could result in a lower demand for oil and gas. Likewise changes in
demographics could create niche markets for the organisation and advances in technology could
lower labour costs for the organisation.
Section 4
International trade enables citizens and organisations in the UK to source their products and
services from a wider array of countries. It also provides companies in the UK access to foreign
markets that are not saturated with competitors (Sloman et al, 2012). This allows UK exporters to
increase production of their products and services and sell to bigger markets, achieve economies
of scale, earn foreign income and generate jobs domestically (Sloman et al, 2012).
Global factors such the global financial crisis created a deep and negative effect on the economy
of the UK, this is because with increased globalisation organisations and economies are
interdependent (Kerin and Hartley, 2012). Another factor to consider is the drawbacks of the
reduction of trade barriers. While economic interdependence due to the reduction of trade barriers

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opens new markets and many poor countries develop faster, it could also have many negative
effects such as over-consumption (Kerin and Hartley, 2012).
EU policies such as the reduction of obstacles to cross border trade, make it easier for companies
in the UK to sell their products and services across the European region, thus opening up vast
markets in the region. However, on the negative side, it also creates more competition in the UK as
competitors from the EU region enter the UK. The removal of legal obstacles also make it easier
and cheaper to trade and sell products through the EU, which then makes the products of UK
companies cheaper. The freedom of labour movement and the reduction of tariffs are some of the
ways in which costs are lowered and products of UK companies become cheaper.

References
Armstrong, G. and Kotler, P. (2014) Marketing: An Introduction (12th Edition). New York: Financial
Times/Prentice Hall.
Barney, J and Hesterly, W. (2011) Strategic Management and Competitive Advantage: Concepts
and Cases (4th edn), Harlow: Prentice Hall.
Barrow, E. and Neely, A. (2011) Managing Performance in Turbulent Times: Analytics and Insight.
London: John Wiley and Sons.
Capon, C. (2008) Understanding Strategic Management (1st Edition). Toronto: Pearson Education.
Kerin, R. and Hartley, S (2012). Marketing (11th Edition). London: McGraw Hill/Irwin.

Sloman, J, Wride, A and Garrett, D. (2012) Economics (8th Ed). London: Pearson.

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