Understanding the Business Environment

This assignment focuses on analyzing the various components that constitute the business environment. It examines internal and external factors such as political, economic, social, technological, legal, and environmental aspects (PESTLE) influencing business operations. Students are required to research and discuss how these factors can impact organizational success, drawing upon provided academic sources.

BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
Introduction......................................................................................................................................3
LO1..................................................................................................................................................3
Q1. Identification of the legal structure and the purposes of different types of organization.....3
Q2. Stakeholders of the organization...........................................................................................5
Q3. Responsibilities of a company..............................................................................................6
LO2..................................................................................................................................................6
Q4. Economic Systems of a country............................................................................................6
Q5. Impact of fiscal and monetary policy....................................................................................8
Q6. Impact of Competition Policy...............................................................................................9
Lo3.................................................................................................................................................11
Q7. Determination of pricing and output decisions in different market structures...................11
Q8.Market forces which shape short and long term organizational responses..........................13
Q9. Assessment of business and cultural environment .............................................................13
LO4................................................................................................................................................14
Q10. Significance of international trade....................................................................................14
Q11. Impact of Global factor.....................................................................................................15
Q12. Evaluation of the impact of European Union on UK business.........................................16
Conclusion.....................................................................................................................................17
References......................................................................................................................................18
2

INDEX OF TABLES
Table 1: Legal Structure...................................................................................................................4
Table 2: Purpose of the Organization..............................................................................................4
Table 3: Stakeholder's Objectives....................................................................................................6
Table 4: Allocation of Resources.....................................................................................................7
Table 5: Fiscal and Monetary Policy...............................................................................................9
Table 6: Impact of Competition Policy..........................................................................................11
Table 7: Market Structure..............................................................................................................12
Table 8: Significance of International Trade.................................................................................15
Table 9: Impact of Global Factor...................................................................................................16
Table 10: Impact of EU..................................................................................................................18
3

INTRODUCTION
Business environment refers to as the internal and external environment of a business
organization. Such environment has a greater impact on the business activities which are
conducted in the company. However, it is essentially required that business environment must be
assessed before making of any strategy (Allen and Raynor, 2011). This is done in order to avoid
the hindrance of any internal and external factor. This report is mainly emphasized on the
business environment and the working of several organizations. Further, this report has described
the organizational purposes and the nature of national environment in which firm is operating its
business.
LO1
Q1. Identification of the legal structure and the purposes of different types of organization
There are four types of organization which have different legal structures that are
explained as follows:
Table 1: Legal Structure
Name of the Organization Legal Structure
Cancer Research UK Charitable Organization
EasyJet Plc. Private Limited Company
Virgin group Limited Public Limited Company
John Lewis Partnership Partnership Firm
Table 2: Purpose of the Organization
EasyJet Plc. Addressing the
stakeholders
Cancer Research
UK
Addressing the
stakeholders
Vision and
Mission
Vision of this
company is quite
simple because it
is wanted to
become the
Wanted to
provide best
services to
customers at
lower prices
Vision of this
organization is
that it wants to
bring forward that
day on which all
This firm wants
to save the lives
of people by
curing all types of
cancers wastage
4

Europe's most
preferred short-
haul airline which
attempts to
deliver market-
leading returns
and making the
travel easy and
affordable for all.
Further, mission
of easyJet is to
provide its
customers with
safe, good value,
point-to-point
services. To
achieve this, they
will develop and
train their people
and also establish
lasting
relationships with
their suppliers.
(Arnold, 2004).
At the same time,
it wants to satisfy
their employees
by increasing
their pay.
types of cancers
will be cured.
Moreover,
mission statement
of this firm is that
every step they
take for beating
cancer relies on
every pound,
every hour and
every person.
They are the
collective force
who have doubled
survival rates in
the last 40 year
(Campbell and
Craig, 2007).
They want to save
more lives by
preventing,
controlling and
curing cancers.
so that it can
make the cancer
free environment.
Goals It wanted to
achieve the vision
of becoming the
Europe's most
preferred airline.
People who are
under 75 years of
age will be less
likely to get
cancer.
Objectives To provide 10% To cure the
5

lower rates airline
seats by July
2016.
To provide off-
the-job training to
50% staff till May
2016.
cancer up to 25%
by June 2017.
Q2. Stakeholders of the organization
easyJet Plc.
Table 3: Stakeholder's Objectives
Stakeholder Internal/External Expectation Objectives Meeting the
Objectives
Government External Government
wants to increase
the tax revenue as
well as
employment
opportunities for
the citizens
(Didonet, 2012).
To increase tax
rate by 7%. Also,
it wants license to
the expansion of
this firm in more
countries.
Firm pays fair
taxes on time. It
has started
appointing more
and more people
in order to reduce
the
unemployment.
Customers External Customers want
the best services
at lower prices.
To increase 20%
traveling by
flights.
EasyJet aims to
provide excellent
quality services to
their customers at
relatively lower
prices.
Shareholders Internal Increase in
shareholder's
To raise the
growth of
Company has
increased the
6

value. company by 18%
till June 2017.
prices of airline
seats by 10% so
that more profit
can be generated
(Ho, Wang and
Vitell, 2012).
Q3. Responsibilities of a company
EasyJet Plc. and Cancer Research UK have a range of responsibilities towards the
society, environment and other human being. These two firms perform their duty accordingly so
that business activities can be performed in a smooth manner. Companies have been formed for
the fulfillment of their purposes. These purposes are listed as follows:
1. Purposes: EasyJet have been formed to provide employment opportunities to the citizens
of the country and to develop the economy of country. Whereas, Cancer Research firm
has been formed for the social work and to cure the vulnerable disease that is cancer
(Kandil, 2006). Both the firm aim to satisfy their service users and to do well for the
country.
2. Responsibilities: These firms have to fulfill the responsibilities as per the Carroll's
Pyramid rule. Company should aim to become ethical, good corporate citizen, obey all
the laws and then contribute to the economics. This will help in getting success to the
company by fulfilling all the responsibilities.
3. Strategies to meet responsibilities: Enterprises should make policies in such a manner
that none of the laws get violated. Eco-friendly products should be manufactured so that
environment does not get harm (Ortiz-fournier, Rivera-Vazquez and Flores, 2009).
LO2
Q4. Economic Systems of a country
Table 4: Allocation of Resources
Scarce
Resources
Free Economy (Hong Kong) Command Economy
(Iran)
Mixed Economy
(United Kingdom)
7

Land Control over land is fully in
hand of private individuals or
companies, so that usage of
land was made as per their
guidance as well as
infrastructure can be erected in
their accordance (Raynor and
Allen, 2005).
Government sector fully
exercises the control over
land in Iran. Misuse of
monopoly powers is
prevented as economy is
fully commanded by the
government.
Privatization and
government rule go
hand in hand in UK. It
is done in order to use
land in an optimum
manner. But, along with
it, chances of conflicts
between private and
public sector will
increase as both will try
to overrule each other.
Water Private sector enjoys full
control over water resources in
Hong Kong. Private sector
excellently supplies and
manages these resources and
customer preferences are easily
responded by these sectors.
These resources are not very
cost effective as private sector
tends to charge very high to
increase their profits.
Control over these
resources is in the hand
of government. These
resources are very cost
effective as control is in
the hand of government
but management of these
resources is very difficult
for the public sector
(Snyman, Kourie And
Botha, 2014).
Private sector and
public sector both have
control over these
resources in United
Kingdom. Water is
supplied after cost-
benefit analysis by
government, while
proper management of
the services is
controlled by private
sector.
Natural Gas Control on natural gas
resources is exercised by
private sectors with a very little
or no control of government.
Customer driven decisions are
formed by private sector with
Government has full
control over these
resources in Iran.
Government works for
the growth of economy,
thus employment
Government and
private sector both
exercise the control
over natural gas
resources. Private
sector produces these
8

the innovation techniques but
environment prevention factors
are ignored by private sector in
the production of natural gas.
opportunities are
increased but it also
creates a threat to
autonomy and
sovereignty.
resources by creating
their monopolies but
production is carried
out under a close
supervision of
government thus
economy benefit factors
are also considered
along with their
individual profitability
(Stackelberg and et.al,
2010).
Q5. Impact of fiscal and monetary policy
Table 5: Fiscal and Monetary Policy
Policy Type of Policy Advantages Disadvantages Conclusion
Taxation Fiscal Lower tax rate will
lead customers to
buy more because
they have more
amount to spend.
Due to more
purchase, demand
will increase and
organization needs
to increase
production. This
will also contribute
towards the
Higher amount
can be charged
by organization
for its products
and services in
order to
increase its
profits.
Lower tax
policies are
favorable to
organizations
as with
increase in
demand, they
can increase
their
profitability.
9

economic growth
as employment
opportunities are
increased (Trehan
R., Trehan and
Jain, 2013).
Interest rates Monetary Low interest rate
will be in the favor
of company as cost
of borrowing will
reduce and
company can
borrow more
readily. It will also
increase
company’s
profitability as
finance cost will
be reduced.
More of
earnings are
used to pay
interest on
borrowings due
to high interest
rate. This will
affect
company’s
growth.
Low interest
rate is more
beneficial to
the
organization as
with the
reduction in
finance
charges, they
can invest
more in new
projects
(Venter and
et.al., 2009).
Exchange rates Monetary Companies
importing
resources from
other countries are
benefited when
exchange rate is
low, as cost on
importation is
reduced.
Global
economy
suffers due to
high exchange
rate as demand
reduces with
the increase in
exchange rate
that results in
the reduction of
Exchange rate
are less pliable
as rise in
exchange rate
is beneficial
for exporters
and
disadvantageo
us for
importers and
10

prices for the
products and
services.
vice versa.
Q6. Impact of Competition Policy
Table 6: Impact of Competition Policy
Proposition Positive Impact Negative Impact Conclusion
Fair Trading Act
1973
This act includes
regulations regarding
the adoption of fair
practices by traders in
course of trading their
goods or services. This
act protects customers
against the misleading
actions or unfair
practices adopted by
traders.
Even with the involvement
of a single person in unfair
trade practices, whole
business is affected
(Worthington and Britton,
2009).
Customers are
protected against
unfair trade
practices.
Competition Act
1980
This act was introduced
in order to prevent the
misuse of monopoly
powers. Due to increase
in competition,
companies came out
with various isolated
products leading to the
growth of economy.
This led to ferocious
competition and firms
started to adopt unhealthy
practices against their
competitors leading a
negative impact on the
economy.
This led
companies to
think in an
innovative
manner so as to
make their
products unique,
and increasing
company’s
efficiency.
Enterprise Act This act provides These policies act as a This act puts
11

2002 policies to be adopted
by enterprises so that
they fairly carry out
their trading activities
(What is Business
Environment? Explain
its types, 2015).
burdensome for the
companies as they require
to comply with every single
policy given under this act,
even sometimes it act as a
hindrance on company’s
working.
positive impact on
company’s
working as
companies
activities are
carried out in a
fairly manner by
complying with
these policies.
LO3
Q7. Determination of pricing and output decisions in different market structures
Table 7: Market Structure
Market
structure
Key
characteristic
s
No of
players
Example Output
Decision
Price
Determination
Monopoly One seller and
many buyers.
No substitute
of goods or
services are
available.
One firm. Tapping
water,
electricity
transmission.
Seller can
sell more of
products
when he set
low prices
for its
products and
vice versa
(Trehan
Trehan and
Jain, 2013).
Only single
seller or firm is
present, thus
they decide the
prices of
products and
industry is
bound to accept
it.
Monopolist
ic
Many buyers
and many
sellers.
Many firms. Novels and
films.
Output level
is decided at
a point where
Different sellers
set different
prices for their
12

Differentiated
products are
sold in the
monopolistic
market.
marginal
revenue and
marginal cost
are equal to
each other
(Snyman,
Kourie and
Botha,
2014).
products as they
had individual
control over
their products.
Oligopoly Many buyers
but few
sellers.
Products can
be
homogeneous
or identical.
More than
three firms
Tennis balls
and crude oil.
Outputs are
decided by
considering
competitor’s
prices
because if
prices are
reduced by
other firms
then
customers
will shift to
their
products.
Market leader
sets price when
there are
differentiated
products and
collusion is
made by all
sellers in case
of identical
products.
Perfect
competitio
n
Many buyers
and many
sellers sell
identical
products.
Many firms. Selling
wheat, milk
There are
many buyers
present in the
market, thus
firm can sell
whatever it
will be
Prices are
determined by
the industry as
many sellers are
engaged in
production as
well as sales
13

produced
(Allen and
Raynor,
2011).
Therefore,
firm can
produce 'n'
number of
outputs.
and firm adopts
the prices set by
industry.
Q8.Market forces which shape short and long term organizational responses
Various market forces are present in the market like demand, supply, customers
perception, elasticity of demand and supply, etc. which play an important role while shaping
long term and short term responses of Easy Jet. Company charges high price for the seats when
demand for airline seats is high so that company can earn extra profits in short period
(Stackelberg and et.al, 2010). In the same way, when customer's perception changes and they
look out for seats with the lower price, so company tries to form strategies in order to lower
down its cost as well as price. For example, company can control its cost and lower down the
airline seats prices by planning to merge with a food organization.
Q9. Assessment of business and cultural environment
 Business Environment: Business operations are affected by both the internal as well as
external environment. For instance, financial changes substantially affect profitability of
Easy Jet as company had huge borrowing funds and with any change in policies of
financial institutions like increase in interest rates, companies had to incur huge costs that
result in the reduction of profit (Raynor and Allen, 2005).
 Cultural Environment: Customers are demanding more unique products due to
diversified culture and change in lifestyle. Thus, organization had to come up with
various innovations in their products so as to meet customer’s preferences.
 Business Behavior: Competition is increasing day by day between organizations that is
affecting companies both in a positive as well as negative manner. With the increase in
competition, company’s working efficiency has increased as they think for the more
14

innovation. On the other hand, inter rivalry had increased and companies might adopt
unfair practices to beat their competitors (Venter and et. al., 2009).
 Organizational Responses: Companies cannot succeed and work efficiently without
their employees and in order to keep its employees morale high, companies provide
rewards and various incentives to them so as to create a dynamic environment for
working.
 Consumer Behavior: Company will be able to grow more and create more demand for
its products when perception of consumers towards company will be good. Thus,
company must respond towards customer preferences and fulfill its societal duty properly
(Worthington and Britton, 2009).
LO4
Q10. Significance of international trade
International trade mainly refers to as the global trade in which good and services are
exchanged between several countries. This trade leads to rise in the world economy which
impacts on the exchange rate, supply and demand. International trade has several benefits as well
as limitations which are described below as:
Table 8: Significance of International Trade
Terms Merits Demerits
Competitiveness It is the ability and
performance of one country in
supplying good and services in
a given market in relation to
the ability and performance of
other country. UK will get
competitiveness if they will
sell goods that is export the
goods in an effective manner
by acquiring resources form
other countries.
Transportation cost will
outweigh the competitiveness
and importing resources from
other countries will lower
down the GDP of country
(Venter and et.al., 2009).
15

Economic Growth UK economy will grow if
there is a significant increase
in the international trade
because high international
business will eventually add to
the GDP and this will increase
the national income of country
(Kandil, 2006).
Business activities may get
impacted because trade
between two nation leads to
conflicts and political issues.
Moreover, currency exchange
also hampers the working and
profitability.
Optimum Utilization of
Resources
Companies which are involved
in international trade than all
the resources of society will be
utilized at optimal level.
Wastage of resources and
through this company can
offer wide range of variety to
the consumers.
Importing goods from other
country will lead to incur the
extra cost which will
eventually rise the prices of the
product. Due to economic
crisis, purchasing power of UK
people is already low and high-
priced product will remain
unsold and thus leads to the
wastage of resources (Didonet,
2012).
Q11. Impact of Global factor
Table 9: Impact of Global Factor
Factors Easy Jet Cancer Research UK
Political Political issues of different
countries act as a hindrance in
company’s business as Easy
Jet flight takes off and lends
every day and night in many
countries (Casile and Blake,
Various rules and regulations
are provided by government
for these organizations. Thus,
operations should be carried
out in accordance with the
rules and regulations that are
16

2002). developed by the government
of different countries. .
Economical Profitability of Easy Jet was
affected by various economic
reasons like demand of airline
seats was reduced due to
reduction in purchasing power
of people and also exchange
rate variations had impacted
the profitability of company.
This research organization
receives funds from
government and different
associations for the purpose of
carrying out research on cancer
cure. Thus, they should be very
careful while using funds for
the purposes that they are
formed.
Social Different countries carry
different values, culture and
community panorama, thus
company should carry
operations after keeping in
mind all these aspects.
This organization does not
work to earn profit. It works
for the welfare of society.
Thus, this objective should
always be fulfilled (Campbell
and Craig, 2007).
Technological Today is the era of
technological advancement.
Thus, company should adopt
updated technologies in order
to grow and increase
profitability. Company faces
difficulties to meet the above
objectives in under developed
countries as they do not have
advanced technologies.
Better research analysis can be
done with the help of advanced
technology. Thus, research
work can be carried out
effectively in countries which
possess advanced technology.
Legal Different countries have
17

different legal framework.
Thus, company should be very
careful while complying with
laws and regulations of
different countries so that
none of the law will be got
contravened (Arnold, 2004).
Q12. Evaluation of the impact of European Union on UK business
Table 10: Impact of EU
Proposition Positive Impact Negative Impact Conclusion
Exchange Rates Euro is the only
currency which is
being used for the
trading purpose among
the EU member
countries. Thus,
fluctuations in
exchange rate is
exempted and due to
which trading can be
done in a smooth
manner (Topics of the
European Union,
2015).
If there is no currency
exchange than UK will
not get currency of
other countries and
thus, economic
development cannot be
done.
Lesser exchange leads
to the downturn of
economy.
EU business
regulations and their
incorporation in to UK
law
There are several
business regulations
which are given by EU
policies and these
The incorporation
create chaos because
corporations have to
obey the laws of UK
There is an ambiguity
of laws by the UK
firms and this hinders
the performance of
18

regulations are
incorporated by the
UK laws. This reduces
the level of conflicts
among the countries.
as well as of EU and
due to this, company
resists the changes
(Allen and Raynor,
2011).
company.
CONCLUSION
After preparing this report, it can be concluded that company has to assess its business
environment so that new changes can be forecasted and company can cope up with these
changes. Along with this, environment of country in which company is operating should be
analyzed in order to conduct business in a smooth manner. International trade lets company to
gain opportunity of becoming global and gaining competitive advantage.
19

REFERENCES
Journals and Books
Allen, D. and Raynor, E. M., 2011. Preparing for a new global business environment: divided
and disorderly or integrated and harmonious?.Journal of Business Strategy. 25(5).pp.16 –
25.
Arnold, M., 2004. The mirage of global markets: how globalizing companies can succeed as
markets localize. 2nd ed. FT Prentice Hall.
Campbell, C. and Craig, T. 2007. Organisation and the Business Environment. UK:
Butterworth-Heinemann.
Casile, M. and Blake, D. A., 2002. When Accreditation Standards Change: Factors Affecting
Differential Responsiveness of Public and Private Organizations. The Academy of
Management Journal. 45(1). pp. 180-195.
Didonet, S., 2012. The relationship between small business market orientation and
environmental uncertainty. Marketing Intelligence & Planning. 30(7). pp.757 – 779.
Ho, N. F., Wang, D. M. H. and Vitell, J. S., 2012. A Global Analysis of Corporate Social
Performance: The Effects of Cultural and Geographic Environments. Journal of Business
Ethics. 107(4). pp. 423-433.
Kandil, M., 2006. The growth of government spending and the money supply: Evidence and
implications within and across industrial countries. Journal of Economic Studies. 33(6).
pp.406 – 436.
Ortiz-fournier, V.L., Rivera-Vazquez, C.J., and Flores, R.F., 2009. Overcoming cultural barriers
for innovation and knowledge sharing. Journal of Knowledge Management. 13(5). 257-
270.
Raynor, E. M and Allen, D. 2005. Preparing for a new global business environment: divided and
disorderly or integrated and harmonious?.Journal of Business Strategy. 25(5).pp.16 – 25.
Snyman, R., Kourie, D. And Botha, A., 2014. Coping with Continuous Change in the Business
Environment: Knowledge Management and Knowledge Management Technology.
Elsevier.
Stackelberg, V.H. and et.al, 2010. Market Structure and Equilibrium. Springer.
Trehan R., Trehan, M. And Jain, T. R., 2013. Business Environment: for B.Com-I Semester-II.
VK Global Publications.
20