Business of every success depends on if it’s adapting the changing environment. For example when government policies are changed for a particular industry or there has some techno logical innovation are used by another company then business has to make the necessary changes to adapt the new policies. So it is necessary that all the business units must adopt these changes so they can survive and succeed in business. External forces, factors and institutions that are beyond the control of business and affects the functioning of business enterprise refers as business environment. Customers, competitors, suppliers, distributors, industry trends, substitutes, regulations, government activities, the economy, demographics, and social and cultural factors all are included in Forces or surroundings. Innovations and technological developments are also included in other type of forces (Adrian and Shin, 2008).
Some of these forces directly affect the business while some affects indirectly. Business environment can also be defined as the factors such as economic, social, political and legal, demographic factors which are uncontrollable in nature and affects the business decision of firm. Between business and its environment there has a close interaction. Strengthening the business firm and using its resources more effectively this interaction helps. Business environment has a far reaching impact on the survival of business. It is dynamic in nature, complex and versatile. The present report will talk about many aspect of business environment such as stakeholders, internal and external environment and their affects on business. It also explains about how global factor of business affect the business activities (Anderson, 1998) Instant Essay Writing.
Business is normally categorized into two types one is private sector and another is public sector. Public sectors organizations are run by government, main aim of these companies are development of people. Public welfare and security is main aim of these organizations. While private sector organization are run by individual or group, aim of these companies are different. Aim of these companies are profit making, growth, increase market share and maximizing the sales. In UK there are many types of organizations are run such as companies, partnership, sole trader, franchisee (Astley and Smith. 2009). These are describing as below:
Those Individuals, organizations and groups that have direct or indirect interest in organization refer as stakeholders. Stakeholders can be categorized into two groups: Internal and External. In internal stakeholders people include are employees, manager and owner. In external stakeholders people include are government, suppliers, society, creditors, stakeholders and customers, employs.
Figure 1 Stakeholders Group
(Source: Meeting stakeholder needs through community involvement. 2013)
Every stakeholder of an organization has their needs and expectation from the organization. For example shareholders of an organization wants maximum return, Customer of an organization want good quality product at low rate, society want better jobs and other benefits from organization, government want revenue through taxes from an organization (Burstein, Eichenbaum and Rebelo, 2007). Every stakeholder is hoping some advantage from organization and that’s they take interest in organization. Every stakeholder of business ahs there significant importance in business process and that’s the main reason that purpose of an organizations is vastly influenced by expectation of shareholders. According to expectation of shareholder purpose and the direction of the organization is decided. In order to meet stakeholder expectation companies take the help of its clear and well defined strategies. On annual basis companies conduct a research and according to research these strategies are made. To satisfy its stakeholders expectations with the help of the research organizations identifies the needs of its different stakeholders and plan its future activities.
To satisfy consumer needs organization with the help of research and development department they produce goods at low cost and sell to consumer (Campbell and Craig, 2008). To involve local community with companies, firms organize local events, publish magazines and give other benefits to the society. Company performs excellent to give good return to Investor. Government has a expectations from company to work accordingly regulatory mechanisms and reporting its financial statements correctly.
Government also wants timely taxes from company so revenue for government can generate. Supplier of company expects timely money for those goods which they supply to firm. To maintain those relation businesses should pay timely and fair prices to suppliers. Employs wants a good working environment and timely appraisal. So maintain relation with them and increase their productivity company should provide timely wages, salaries and appraisal. Society expects from business that they should carry out its operations in a sustainable manner and should follow its corporate social responsibility. Therefore, all the stakeholders in one way or other influence the organizational mission and goals (Chamberlin, 2008).
Every organization has their responsibility for their employees, government. They have to full fill these responsibilities and they have to make strategies to full fill them. Every business has to complete these below responsibility:
1. Social Responsibility: Obligations that the organizations have towards the people and the environment in which the company operates is refer as social responsibility. Social responsibility is concerned with the way in which the business interacts with the environment. In social responsibility company is responsible for governments, university and colleges and charities (Christine, 1998).
2. Environmental Responsibility: Every organization which is running it should concern for the Environment. They should not do these types of activities which harm the environment or affect the environment. Firm should follow all rules and laws regarding environment. Company should try to minimize the waste or recycle the waste. Green issues also have various impacts on the different sector of the industry.
3. Ethics and Business Responsibility: Code of moral principal that people follow with respect to what is right or wrong is refers as Ethics. Issues of social responsibility and issues of business practice are related to business practice. Ethics are exists at three levels:
4. Management Responsibility : Management of companies is not only responsible for organization but also responsible for :
5. Public Relation and Corporate Image: Company also responsible for their public relation and corporate image. Companies have to work in this so their relation with public can maintain. Corporate image of company describes the image of the company in the mind of the general public or public attitude towards a company. Company can maintain this image through a combination of public relations, advertising and the experience and attitudes built up by customers over the years (Paul and Barbara, 2009).
An economic system is a combination of various process like organizing and motivating labour, production, distribution, circulation of the fruits of human labour, including product and services. This system also includes inputs like consumer goods, machines, tools and other technology and the infrastructure within and through which production, distribution and circulation occurs. Basically there are 3 types of economic system adopted by the countries: They are as follows:
In managing the national economy government plays an important role. In order to achieve full employment, growth and price stability government manages the national economy. In order to easily avail the goods and services provision of subsidies is provided to people. Government is played an important role to manage taxation. Government should changes frequently in legal policies so that business doesn’t affected by the taxation.
Levels of spending in order to monitor and influence a nation's economy by government refer as fiscal policy. This strategy is same as monetary policy with which a central bank influences a nation's money supply. Various combinations in an effort to direct a country's economic goals have been made by with the help of this policy.
Theories of British economist John Maynard Keynes are base of fiscal policy. According to this theory by increasing or decreasing tax levels and public spending governments can influence macroeconomic productivity levels. This policy helps in increases employment and maintains a healthy value of money. The level of taxation faced by business is often affected by fiscal policy. If government increases taxes then businesses have less money for hiring and investment and consumer have to see the affects in form of higher prices (External environment theory. 2013).
Process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability is known as monetary policy. Goals of monetary policy include relatively stable prices and low unemployment. How to craft optimal monetary policy deep insight is provided by monetary theory. Long term interest rate has been influenced by changes in short-term interest rates such as mortgage rates. If business is paying low interest rate means business has lower interest expense for businesses and higher disposable income for consumers. Combination of both these gives higher profit to the business. If mortgage rate is lower than it may encourage more home-buying activity. If interest rate is high then it gives opposite impact for businesses, because if interest expenses are higher than businesses have lower sales and lower profits
The functioning of businesses is directly affected by the fiscal and monetary policies of government. Government regulates the price and supply of money through monetary policy. If the customers of any business will increase or there will be high demand of products of those company then price level will also be increased. On the other hand, fiscal policies adopted by government will lead to increase in unemployment in particular business. Main aims of these policies are changing the taxation and budget policies. Through budgets fiscal policy decides the spending on a specific sector. When productivity of business will increase, the price level will also increase and if the value of Pound increases then the price at which business has borrowed money will increase and it will have to repay more money (Internal and External Analysis. n.d.)
In the efficient working of markets competition is an essential element. It gives many important benefits to the consumer by:
To encourage and improve the competitive process competition policy try to find many ways and ensure consumers to feel the benefits of that process. Through competition law these aims are achieved in practice.
Main aim of competition policies is enlarging the business at a global level. Competition policies in UK were introduced in order to deliver goods of high quality to customers in a competitive market. This policy was introduced to achieve the higher level of efficiency and for the benefit of employees. Competition policies generate more competition in the market and are criticized. In the present report impact of competition policy and other regulatory mechanisms on Sainsbury will discussed. UK competition policies are criticized as it defined single markets ineffectively and Sainsbury argued that two markets are different (The purpose of competition policy, 2013).
Rules and regulations are made and regulated by the government. Sainsbury is highly affected by the regulatory policies as the market has limited place to grow. Regulatory measures involve areas like health and safety of employees, fair remuneration, etc. Sainsbury should adopt the changes in the policies and procedures.
The regulatory mechanisms in UK aim to remove the poverty and increasing the living standard of people. In addition, with changes in political, economic and social environment government rules also change. Competition Act 1998 and the Enterprise Act 2002 is the current major source of competition law in UK. This act provides an updated framework in order to identifying and dealing with restrictive business practices like abuse of a dominant market position. These act provided framework to restrict abuse and other business related practices which provide a sound business environment for organizations to operate their business activities. Making a sound competitive environment in market these act provide vast market. The Office of Fair Trade (OFT) in the UK is the suspected abuses of monopoly power and engaging in prohibited practices are investigated by. This investigation which is done by them it is based on abuse of market power and collusive behaviour (Forces analysis of Sainsbury, 2013).
Organizational and other characteristics of a market is refer as market structure. Market structure is focus on those characteristics of market which affect the nature of competition and pricing. It is not important that it has a place but it’s simply highlighting on the market share of the existing firms in an industry (Types of Market Structures., 2011). Features of market structure are:
There are three types of market structure exist in an economy which affects the pricing and production decisions of a business (Market Structure: Monopoly, Oligopoly, Monopolistic and Perfect Competition, 2011). They are:
There are 4 forces that give shape to market forces. They are as follows :
Different forces or surroundings that affect business operations refer to business operations. Customers, competitors, suppliers, distributors, industry trends, substitutes, regulations, government activities, the economy, demographics, and social and cultural factors are those forces which affect the business environment (Cockayne and Mears, 2011). Others forces which can include are innovations and technological developments. Business environment includes six major factors that are political, economic, social, technological, legal and environmental which impacted shape of environment. These are 6 major factors which affected the Sainsbury business environment. These factors how affected Sainsbury business environment are described as follows:
Exchange of capital, goods, and services across international borders or territories is referring as international trade. Significant share of gross domestic product (GDP) is represented by international trade in many countries. History of a country has been present through international trade like its economic, social, and political importance has been on the rise in recent centuries (Samuelson, 2005). Nations would be limited to the goods and services produced within their own borders without international trade. For the continuance of globalization it is crucial to increasing international trade.
Development of the United Kingdom's economy is totally dependent on foreign trade. UK international trade is champion and the government of UK also supports free and unrestricted trade such as the World Trade Organization and the EU. The British have few restrictions on foreign trade and investment because of its dependency on trade. Among the 500 corporation of UK, 60 are American. EU is the main trade partner of United Kingdom's. From the total export 58 percent is exported to EU nations. United Kingdom had made become an attractive investment area for foreign investors because of the strength of the British pound and the state of the economy. It is the world's second-largest destination for investment (Svendsen, 2008).
The British government has adopted a variety of programs in order to attract foreign businesses and foreign investment. For instance, to establish enterprise zones the Parliament allows local and regional governments. These are the reasons of significance of international trade
UK gives equal importance to world economy as much it gives importance to its economy. It helps in optimum utilization of resources of UK economy. When a company wants to operate internationally it highly affects a company (Global Factors and Strategy, 2013). To grow its business in foreign market companies are required to understand the international policies and procedures. Moreover, to establish business in foreign market different foreign theories can apply. Company should understand the different competitive advantage theories so it occurs low operating cost. This will help the companies to understand what should be exported to international markets. Sainsbury’s business till now has been limited to Britain only but the company is trying to expand its business by crossing the national boundaries (Wrigley, 1997).
UK business is affected by large numbers of global factors and these factors differ from area to area that affects the business in different ways. External factors such as political factors, legal factors, etc. affect Sainsbury as these factors are not in control of business. All these factors are taken into consideration by Sainsbury in order to achieve the growth of the business. Global factors highly influence the growth of the business and if these factors are not resolved at the right time then they can affect the profitability of the company or the business (The Impact of Global Factors on Organisational Performance, 2013).
A single market has been developed by European Union through a scandalized system of law so that free movement of goods and services as well as human resource and capital can be ensured. The major aim behind developing this market was to decrease the governmental and political barriers form these movements within the member countries. The policies and laws defined by EU are equally applied on its all member countries. UK has rejected to obey some policies of EU but on the other hand it has to comply with some of the policies as being one if the member countries. In current business settings European Union and national government plays a significant role in business activities. There are four major ways by which EU can effect business operations that are taxation and spending; regulations, laws and directives; subsidies and support and providing advice and support for business. There are several business policies of EU that are affecting the business operations of organizations like Sainsbury. Some of the major EU policies affecting business operations if Sainsbury are employment policy, regional policy, inflation policy, education and training policy, taxation policy, international policy and establishing the rules of the game (Encouraging businesses to manage their impact on the environment, 2013).
Investment by foreign British firms into Europe‘s new states will provide a flow of interest profits and dividends. It helps in boosting GNP and supporting the current account of the balance of payments. Investment by foreign countries in Europe‘s new countries will also help to speed up the economic transformation and european labour market British business has now greater opportunities for expanding its business because of import lower-cost skilled labour in areas where there are labour shortages .The migration of labour from consent countries may help in the slow growth of the population of working age.
From the above report it is concluded that the operating situation of an organization is vastly influenced by factors of external and internal environment. Factors which affect the business performance included internal as well as external participants. Management of company can control internal factors but external factors of company cannot be control by company. External factors vastly affect the business operations and performance (Cane, P. and Kritzer, 2010). These factors also occur in survival of company. These external factors are political, legal, social, technological, economic and environmental.
These all factors give significant effect on business operations. On the basis of above discussion it can be concluded that in order to operate business operations effectively it is must for an organization to identify these factors. Along with this organization should also work towards its social and corporate responsibilities and stakeholders interest. Every stakeholder is hoping some advantage from organization and that’s they take interest in organization. Every stakeholder of business ahs there significant importance in business process and that’s the main reason that purpose of an organizations is vastly influenced by expectation of shareholders (Weale, 2009). Goals of monetary policy include relatively stable prices and low unemployment. How to craft optimal monetary policy deep insight is provided by monetary theory.
From the above report it is also concluded that international trade helps in development of UK economy. UK business is affected by large numbers of global factors and these factors differ from area to area that affects the business in different ways. In managing the national economy government plays an important role. In order to achieve full employment, growth and price stability government manages the national economy (Four Global Forces that will Shape Organizational Culture for the Next 50 Years, 2013). Competition policy also helps in development of economy. Main aim of competition policies is enlarging the business at a global level. Competition policies in UK were introduced in order to deliver goods of high quality to customers in a competitive market. The policies and laws defined by EU are equally applied on its all member countries. UK has rejected to obey some policies of EU but on the other hand it has to comply with some of the policies as being one if the member countries.