Impact of Business Environment on Burberry: Analysis of Purpose, Stakeholders, Policies, and Culture

This report analyzes the impact of business environment on Burberry, a leading fashion house headquartered in London. It covers topics such as the difference between private and public sector organizations, stakeholders and their objectives, fiscal and monetary policies, resource allocation in different economies, demand and supply impact, Michael Porter's five forces, market decisions, and cultural elements. The report also includes a graph showing the value of the international market to UK business over the last 70 years.

Business Environment

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Difference between purpose of private and public sector organizations.................................3
2. Mind map showing stakeholders of company and its objectives............................................4
3. Impact of fiscal and monetary policies on the businesses.......................................................4
4. How resources are allocated in the capitalist, socialist and mixed economy..........................5
5. Diagram showing Impact of demand and supply on business.................................................6
6. Diagram explaining Michael Porter’s five forces....................................................................9
7. Effect of market decision on the business policies................................................................10
8. Impact of various elements of the culture on business..........................................................11
9. A graph showing value of the international market to UK business over last 70 years........12
10. Diagram showing global factors on the UK business..........................................................12
11. Diagram showing impact of EU policies on UK Business..................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
The business is the entity which is entrusted with the role to provide such offering to the
people so that they can fulfil their aim to maximise their profitability and revenue generation.
Every enterprise operates in the business environment which is a sum totals of every factors that
is external to business firm and which influence greatly their functioning. It mainly covers the
forces and factors such as competitors, customers, government, suppliers and other conditions
such as technological, social, political, legal and many others (Uluskan and Godfrey, 2018). The
company chosen for this report is Burberry, a leading fashion house which is headquartered in
London. It was established in the year 1856. This report will cover purposes of private and public
sector companies, main stakeholders of organizations, monetary and fiscal policies, Porters five
forces and elements of culture. Further it will include effect of the market decision, value of
international market to UK businesses, impact of EU policies and global factors on the UK
business.
MAIN BODY
1. Difference between purpose of private and public sector organizations.
Basis Private sector organization Public sector organization
Purpose These types of companies pursue a
primary aim of the profit
maximization. Although there are
many secondary objectives such as
protecting environment, creating
value for the people, etc.
The main aim of the public sector
companies is other than profit
maximization. Also, the objective of
these organizations can also relate to
wide range of the areas like
providing education, policing, etc.
Funds They are mainly funded by their
own resources of the directors and
founders
The money of taxpayer’s is a source
of funds for these organizations
Public scrutiny They are subject to more public
scrutiny in media and from
government due to source of their
funds (Kirchmayer, Remišová and
Lašáková, 2019).
They are subject to less extent of
public scrutiny.

2. Mind map showing stakeholders of company and its objectives.
Burberry is a large organization which comprises of various stakeholders. These are
categorized into different groups such as people, shareholders, customers, partners, communities
and government. In the category of people includes the human resource of organization such as
employees who are the greatest asset of company. The board of directors of the keeps regular
interaction with people on the global scale so that there is employee engagement. Then are
customers who continuously look for the quality products which can reflect their personal style.
The board is continuously engaged with customers by taking insight of it. Then are shareholders
who are interested in the financial growth and performance of company. The board provides
regular updates of the company’s financial health, market sentiments, share price, etc. to
shareholders. Then is communities whose support is required by company and the company
support them by various initiatives and programs so that positive change can be brought. Fifth is
partners which includes civil society groups, NGOs, suppliers and the retail third parties and last
but not the least government which have high influence on the company so it engages with the
government in such countries wherein it operates so that an understanding is gained of their
concerns (Xu and et. al., 2021).

3. Impact of fiscal and monetary policies on the businesses.
Policies Impact on businesses
Fiscal The fiscal policies include the governmental spending and taxation in
order to steer up the economy by enhancing or decreasing the
demand as well as availability of the goods and services in right
direction. These encourage the investment, creation of jobs and also
pave the way for the long term economic growth. For the businesses,
it affects the demand of consumer, cost of undertaking the business,
ability to compete and also the investment decisions. For example,
the consumer demand is affected by fiscal policy as there is change in
the amount of the disposal income. Higher the tax, less the income of
consumer which can affect demand in market (How fiscal policies
affect Businesses, 2021).

Monetary These polices impacts money supply in the economy that influences
the inflation and interest rates, it also affects the expansion of
business, employment, net exports. Relative cost of the consumption
versus saving, cost of the debt and includes everything which directly
or may be indirectly impact the aggregate demand. The monetary
policies affect the working of Burberry as it directly controls the
inflation and the interest rates. For instance, when there is increase in
the inflation rate, the purchasing power of the people tend to decline
which affects the profitability and sales of business (Jawadi, Mallick
and Sousa, 2016).
4. How resources are allocated in the capitalist, socialist and mixed economy.
Types of economy Resource allocation
Capitalist It is the economic system which focuses on the free market in order
to determine most of the efficient allocation of the resources and it
sets the price is based on the demand and supply. It is also known as
free market economy. It is run by the corporations or individuals that
operate and own the companies and make such decisions as to use of
resources. But there is division of labour in this which allows for the
specialization that occurs typically by training and education. In this,
the price of the commodities is affected by supply and demand which
generates open competition in market that leads to the optimum
utilization and allocation of resources. It uses price to allocate
resources as price instrument plays important role in this economy.
Socialist This type of economy involves that the government is charged with
the redistribution of the wealth and also narrows down the gap
between the rich and poor. In the socialist pattern of the economy, the
allocation of the resource is mainly addressed by administrative price
mechanism. It is because market forces are not given the importance
in order to determine the price of the products, the government does
planning about these matters, the resources are being allocated and

also distributed by government to every section of the society in a fair
manner. there is state ownership of the resources (Krouse and
McPherson, 2021).
Mixed It is defined by co-existence of private and public sector. It falls in
between the free markets and the command economies and the free
market is closely mainly with the pure capitalism. Both government
decision and market forces determine as to which goods and services
are being produced and how it is distributed. In general, the market
forces mainly prevail in the mixed economy. The government do not
direct private sector in order to produce the goods and services in
particular quantities. However, the influence of government in the
economy is mainly stemmed from money which it spends by many
forms of welfare, redistributes.
5. Diagram showing Impact of demand and supply on business.
The supply and demand influences profit margin of organizations which have inventory.
The law of demand provides that all other factors are equal and when there is increase in the
price, the demand of the product reduces. On other side, law of supply provides as to how much
the business owner can supply the product and at what price (Barclay, 2017).

Figure 1 Demand curve, 2021
As per the above graph, when there is increase in the price, there is low demand for the
product as people do not want to make the purchase of such product which has high price and
vice versa. There is a direct relationship between demand and price as when prices increases
quantity demanded decreases and vice versa.

Figure 2 Supply curve, 2021
As per the above shown graph, the law of supply provides that when the price of the
goods or services are increase, the quantity of it which suppliers offer also increases and vice
versa. In simple words, when the price of goods increases, the suppliers makes and attempt to
maximise the profit by increasing its quantity offered for the sale.

6. Diagram explaining Michael Porter’s five forces.
Figure 3 Porter's five forces, 2021
It is a framework which is used to make the strategic decision for the purpose of
analysing current competition. It has five forces which helps in making decision so that industry
or competitive analysis can be done. For Burberry, it is discussed below-
 Threat of new entrant: There are many common barriers which may be faced by the new
entrant that includes cost of entering the industry in which Burberry operates. The power
of this force is low as the cost advantage may act as barrier to entry and therefore the
company must external and internal strength in order to compete with the new entrants
more effectively and efficiently.
 Bargaining power of supplier: Burberry has many suppliers so the power of this force is
low for the company as in case one of the supplier fails to make deliver of the raw
material, it can contact another supplier.
 Bargaining power of customers: The power of this force is moderate in fashion industry
wherein Burberry operates as there are many number of players which are increasingly
making the buyers to switch to the other companies. But the new entrants do not have the
differentiated products. This gives competitive advantage to company due to brand
loyalty of customers (AYDIN, 2017).
 Threat of substitutes: This force has relatively low power for Burberry but this threat
may get impacted by various factors like high switching cost. The fashion clothes

produced by Burberry may have high cost of switching which will make the customers
unable to substitute, thereby making the power of this force low.
 Threat of competitive rivalry: There are huge number of competitors of Burberry such as
Gucci Coach, Polo, etc.so the power of this force for Burberry is moderate as there are
these competitors have competitive advantage in different sections wherein Burberry
deals. For example, Gucci has advantage on accessories while Polo has competitive
advantage in apparel. So this makes the power of this force moderate as its brand value
supports the company to retain its loyal customer base.
7. Effect of market decision on the business policies.
Market decisions Effect on business policies
Goods or services Burberry is a multinational fashion house which deals in product
segments such as accessories, beauty, children, women and men. It
makes such policies which are aligned with the product segment of
the company so that customers are given what they need. For
instance, the policies relating to maintaining quality, etc.
Cost Burberry uses hybrid strategy for the pricing in order to obtain the
maximum value for its offering. Generally, it makes use of premium
pricing as it caters to the high class elites due to its luxury products
and innovative designs. The company make its organizational
policy, keeping in mind its pricing strategy so that it can maintain its
profitability. At times, it become difficult to bring such policies
which can be aligned with the premium pricing. For instance, it has
to set its price, keeping in mind the cost of product.
Distribution As Burberry is a multinational organization, it operates in many
states. It has approximately 21 stores all around the world so it is
essential for it to frame such policies which are as per the
background and culture of the country wherein it operates so that
there is peace maintained and no chaos is made (Abedi and Abedini,
2017).
Promotion Burberry makes use of consistent promotional activities such as
modern and traditional methods so that it can promote its offering

and brand. It frames its business policy in such manner that it can
promote its offering in effective manner. for instance, nowadays, it
focuses on digital mediums so that new events and campaigns are
introduced so its policies are such which does not affect its creative
campaigns.
8. Impact of various elements of the culture on business.
There are many elements of the culture which affect the companies and its working. In
relation to Burberry, the impact of culture elements on business is illustrated below-
Element of culture Impact on business
Core values It is essential for the company to have understanding of the values of
company and they must make regular review of it at certain
intervals. It is important for organization to review the values and
ensure that each is on the board. These values help the company to
keep the employees motivated and ensure that they look forward to
each day to come to work.
Communication Random chats are not essential rather communication in positive
manner encourages healthy culture so that supportive relationship is
built which will help companies to work as a team so that the talent
and skills of employees is excelled.
Good leadership Having adequate leadership in the company is very important so that
proper direction and guidance is provided to all the employees so
that the productivity of workforce is enhanced by proper direction
(Mohammed and et. al., 2021).
9. A graph showing value of the international market to UK business over last 70 years.
UK is considered as the major international trading power with fifth largest economy of
world as per World Bank Group. It has the diversified, developed and sophisticated market and
UK market is largest in whole Europe as well as fifth largest in whole world. With the excellent
logistics as well as very few trade barriers except in the agriculture trade as UK serves as entry

market in Europe, Africa and Middle East (Czinkota, Ronkainen and Gupta, 2021). There is high
value of the international market to the UK business as there has been increase of trade activities
in UK from past 70 years. the international trading helps in raising the living standard of the
people, generates employment as well as enable the consumers to have enjoyment of the wide
range of products.
Figure 4 International Trade, UK, 2018
10. Diagram showing global factors on the UK business.
There are many global factors which affect the businesses in UK. Some of them are
discussed below-

 Technology: It is one of the most essential global factor which affects the business in
UK. It provides the chance to companies to adopt new technologies and do invention and
come up with innovation so that competitive edge is taken.
 Improved transport: As UK is the advanced economy which has adequate infrastructure
and transportation facilities. This helps in smooth global trade across the world as it
becomes easy to export and import the goods and services (Ogruk-Maz and Wright,
2021).
11. Diagram showing impact of EU policies on UK Business.
There are many EU policies which may affect the UK business. for instance, European
Agriculture policies which possess threat on UK business post Brexit as the farmers are not sure
if the amount of subsidiaries will be same or will decrease or increase. Second is European
Cohesion Policy for which UK has to frame its own regional policy so that it can work on it. The
businesses in UK are likely to suffer due to the EU policies as there has been exit of UK from
EU which makes changes in its national policies as it is no longer bound to comply with EU
policies.

CONCLUSION
It is concluded from this report that the organizations operate in the business environment
wherein the enterprises do not have control over it. There are mainly types of sectors, public and
private sector organization whose aim differ from each. The former is aimed to bring welfare for
society while latter is aimed to maximise profitability. Every organization consist of various
stakeholders which are the part of company. There are mainly three types of economy, capitalist,
socialist and mixed which have varied resource allocation.

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How fiscal policies affect Businesses, 2021 [Online] Available Through
https://smallbusiness.chron.com/fiscal-policies-impact-retail-business-73966.html