Business Environment - Essay Example

? Business Environment Introduction The word Business Environment is made up of two phrases ‘Business’ and ‘Environment’. Business means human activities which consist of production, extraction, purchase or sales of goods that are in turn meant to earn profits. Environment on the other hand means the surroundings in which these activities are taking place. Therefore Business Environment could be defined as the set of conditions, socially, politically, legally and economically, which are naturally uncontrollable and affects the operations of any organization. There are two distinct types of Business Environment (Kew and Stredwick 2005). a) Internal environment b) External environment The internal environment includes money, machinery, man, material and management, which are usually based under business control and the changes upon the performance of the enterprise or organizations. The external environment consists of factors that are beyond the manipulation of the enterprise and entails the governmental and legal factors, political factors, socio-cultural factors among other factors. External environment could be micro or operating environment or macro or general environment. Scenario 1 Working for Stepping Stones education publishing LTD involves the need to expound on the economic chapter of the Business Environment. Task 1; Book Chapter: Any ultimate decision that is made by a manager must always involve price and output. The price –output decisions are surrounded by three factors. These factors include cost, demand and market structure (Henry 2008). Market structure refers to competitive environment whereby any enterprise manages and dictates on how cost and demand should be featured in decision making. Although various firms operate within different market structures, there are five basic market structures namely: monopoly, duopoly, oligopoly, monopolistic and perfect competition. A market operates under perfect competition if it persuades numerous firms, freedom of entry and exit, homogenous output and perfect information. A market economy has competition between huge numbers of buyers and sellers who search for a chance to buy and sell goods and services (Kapstein 1996). Competition among sellers dictates that prices will always be on the lower side and that of the buyers dictates that prices will never be very low hence making a major impact on the market equilibrium. The element price is very essential in the market. Its prime purpose is to ensure that there is a clarification in the economic market. In addition, price contributes to market analysis with regard to the demand curve (Krugman 1996). A demand curve is the relationship between the price of the good and the amount or quantity the consumer is able or willing to part with in regard to its purchase in a specified period of time with consideration to income, tastes and prices of similar goods. The graph above explains the Supply /Demand curve in relation to production of Oil in Libya. In essence, the demand for crude oil increases when the price is low causing the supply for the product to decrease. According to Kew and Stredwick 2005 argues that pure monopoly ensures that there is the only one supplier in the market, there is no close replacement to the output good plus no threat of competition. Monopoly means that there is only one firm that is ruling the market. This kind of domination is not competitive because it is the only supplier in the market hence it as a downward sloping demand curve as it has the freedom to choose its prices and quality in the market. Duopoly is a market dominated by two firms, which are large enough to influence prices in the market. In addition, oligopoly is dominated by a small number of firms, which are large enough to manipulate prices in the market. A market structure that is monopolistic constitutes of several producers with various real or perceived difference in products. A perfect competition constitutes of several producers and matching products. According to Henry 2008, there are several factors, which are said to shape the market forces in any kind of economy. They include price movements, demands and supply shifts, complement substitute goods and elasticity. Price movements in a market are determined by the demand and supply of the goods within the market. The market must be dictated by the demand curve that is dependent on the prices of related goods in relation to both substitutes and complements (Kerr and Gaisford 2007). For instance, when there is increase in income, the demand curve for common goods shifts outwardly as more will be demanded at all prices. In relation to this, the demand curve for inferior goods shifts inward due to increased attainability of superior substitutes. This is generally caused by the change in the number of customers, the allotment of tastes amount those customers and income allotment among consumers with different tastes. Cultural environment dictated the behaviour that is present in any organization. These behaviours tend to represent the general operating norms in a business environment especially through the guidance of those that are at the top of the organization. Culture could be learned through interactions between the employees and the employer in cases like interview and meetings. Every business must work with the help of a cultural environment. For instance some cultural aspects within a given society may be contributors in holding back or backing up a business performance (Kew and Stredwick 2005). Additionally, PESTEL analysis is also used as a framework to scrutinize the environmental pressures in an organization. PESTEL stands for Political, Economic, Social, Technical, Environment and Legislative. The Political element of PESTEL dictates what degree a government intervenes in the economy in areas such as tax, tariffs trade restrictions among others. The economic element entails growth economically, interest rates, exchange rates plus inflation rate. The social factor involves cultural factors, growth in population, and emphasis on safety among others. The technological factor includes the ecological and environmental aspect in relation to business. The environmental element entails weather, climate and related changes in regard to a particular business. The legal part of the analysis includes all types of laws that affect a company’s or business operations (Turner et al 2010) It is particularly used by groups who have become inward looking as they might be at risk of forgetting the power and effects of external pressures in terms of change because they are focused on internal pressures. This analysis provides a strong framework that ought to be utilized by multinational and global corporations (Kew and Stredwick 2005). For instance, in Zimbabwe alcoholic and non-alcoholic beverages are not packed in cans for both environmental and economic reasons. In essence, the economy of Zimbabwe does not give allowance for production of cans while environmentally; Zimbabwe had a litter problem with the neighbouring country Botswana. Scenario 2 Working in association with Economics Unit of the H.M treasury in the U.K government, I have the mandate to help one of the junior ministers on a keynote speech to gives talks and presentations to the business groups’ on the U.K global trade to the National conference of the chambers of commerce in the United Kingdom. Task 2: Fact Sheet U.K and International trade International trade is the exchange of goods and services between countries which grants rise to a world economy in terms of prices, supply, and demand affecting or been affected by the events in the globe (Kerr and Gaisford 2007). For instance, the political change in England is likely to lead to increase in labour cost thereby increasing the manufacturing cost for vehicles based company in London among other economic changes in U.K. There are numerous significances of international trade in the United Kingdom business. A prime significance of the international trade is to broaden horizons and markets in that, if a company based in the U.K had targeted the domestic market for the trading of its goods and services then the company should make an effort of growing much by expanding its market internationally through the engagement in the international trade (Krugman 1996). The cost of production for any company purely depends on its market. Through trading with other countries a company get to know where it could balance its production. For instance, a company may discover that some of its products could be created or assembled for substantial amount by another country that is in the international market hence working out the production cost is essential for any company that is willing to grow economically. Accessibility of materials of business is another significance that should be put into consideration. Any business that wants to remain in a substantial market must be in a position to access the materials that it requires for its production of goods and services. The merging of countries in the international trade ensures that various countries are able to get materials that they need to make products. For instance, colder countries like the U.K must rely on hotter countries to supply fruits to them, while the hotter countries rely on U.K to supply staple foods such as potatoes to them (Kapstein 1996). Trading globally provides countries and consumers with a chance to be exposed to goods and services that are not available in their own countries because most products can be found on the international market. Without the international trade, most of the countries would not flourish in the global business. Due to this, there is evidence of global factors having affected the U.K business because it is part of the world economy. These factors include technology, labour migration, capital, environmental degradation and the policies within governments (Kerr and Gaisford 2007). Technology is the world economy denotes the transport advances and information technology that has facilitated the speeding of goods and services around the globe. The age of internet has greatly contributed to access of products from one country to another by use of computer and internet connection. Notable increase in global trade has facilitated mobility of products and production factors. The rates on transport have also gone down making it easier for people to migrate to other countries in search of green pastures and further education. Multinational firms have also grown new markets in terms of branches and production facilities in the global trade. Degradation of the environment has been a major challenge that has faced the global economy. Pollution which is a by product of increased economic production and growth plus the major climate changes including the recent global warming, calls for cooperation among business leaders and governments all over the world. With this regard, there are policies of the European Union that have been placed on the U.K business organization. (Kapstein 1996). These policies are basically put to ensure global trade works at the interest of its partners, consumers and the trade affairs as a whole. Policies that have more crucial in the market includes the social responsibility policy which dictates that every business organization should be environmental friendly, should offer full employment, enhance productivity level that is national, conform to tax regulation without causing default, deception or dealings. In addition, the business organization should ensure that it gives back to the society through participation in various activities based on social services. Another policy is the economic policy that is divided into two parts: the fiscal policy and monetary policy. Fiscal policy entails the use of government expenditure, duty and getting loans to be able to manipulate the economic activity patterns and the over all growth. Monetary policy entails utilization of interest rates to control the level and rate of overall growth. Appendix Degradation: It is the act of declining from the original state to a lesser condition, quality or level. International trade: Is the exchange of goods and services between countries which grants rise to a world economy in terms of prices, supply, and demand affecting or been affected by the events in the globe. Policy: A suggested or approved course or principle of action. Pollution: The existence into the environment of a substance or thing that has harmful or poisonous effect. Technology: The submission of scientific knowledge for practical purposes especially in industry. Bibliography: Henry, A.2008.Understanding Strategic Management. Oxford; New York: Oxford University Press. Kapstein, B.E.1996. Governing the Global Economy: International Finance And the State. Cambridge, Mass.: Harvard University Press. Kerr, A.W and Gaisford, D.J.2007. Handbook on International Trade Policy. Cheltenham (GB; Northampton (Mass.): E. Elgar: In association with the Estey Centre for Law and Economics in International Trade, cop. Kew, J and Stredwick, J.2005. Business Environment: Managing In a Strategic Context. London: Chartered Inst. of Personnel and Development. Krugman, R.P.1996.Rethinking International Trade. Cambridge, Mass. [u.a.]: MIT Press. Turner et al.2010. Business Analysis Techniques: 72 Essential Tools For Success. London British Computer Society. Read More