Understanding the Business Environment

This report analyzes the business environment of McDonald's, examining its legal structure, market structure, and stakeholder relationships. It explores the UK's free market economy and its impact on businesses, and discusses the roles of the IMF and World Bank in global economic development.

UNDERSTANDING THE
BUSINESS ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
Task .................................................................................................................................................1
Introduction of the organisation..................................................................................................1
Market structure of McDonald....................................................................................................4
TASK 1............................................................................................................................................4
Explain the stakeholder and the types of stakeholders................................................................4
Task 2...............................................................................................................................................7
National economic system of UK...............................................................................................7
TASK 3............................................................................................................................................9
Explain the IMF and World Bank...............................................................................................9
CONCLUSION .............................................................................................................................11
REFERENCE.................................................................................................................................12

INTRODUCTION
Business environment includes the external and internal factor which affect the business.
To run the efficient business and organisation has to depend upon the finance, labour, raw
material, government policy, customer, suppliers etc. these all factor are include in business
environment. The report highlights the business environment of McDonald that how McDonald
run their business, their objective, legal structure, mission and vision.
It also highlights the stakeholders of the McDonald and their importance to the organisation and
the effects of the decision of stakeholders on the organisation. It explain the economic structure
of the UK and their advantages and disadvantages to the different companies. It also explains the
role of IMF and world bank in globalisation.
Task
Introduction of the organisation
The study highlights the business operation of McDonald. McDonald is a fast food franchise
which was opened in 1940. It is a world wide company and open its first restaurant in California.
It is a primary, secondary and tertiary sector organisation. In primary sector they provide the raw
material such as farming animal. Secondary sector involve the process of manufacturing which
convert the raw material in finished goods (Prajogo, 2016). And in tertiary sector, they involve
the services which was provided by McDonald to their customer.
McDonald is a private limited company. They never invite the general public to subscribe their
share in the market but it register its account at company house. Its ownership is a franchise
business. It raise the capital and profit through franchise. Stakeholder of McDonald are
government, suppliers, customers, employees, communities and trade union.
The products of McDonald are beverages, breakfast, burgers, chicken and sandwiches, desserts
and shakes, extra value meal, happy meal, salads and snacks and sides etc.
The main objective of McDonald are to serve the good food in a fun and friendly environment.
They focus on the customer as well as the employees and re-evaluate the objective time to tome
to meet the customer demand and needs. They mainly focus on their tertiary sector. The mission
statement describe the current position, objective and the way to achieve the objective. The
mission of the McDonald is to provide the best food place to their customer. Vision statement
describe the future condition of the company that in future where we want to be. The vision of
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the McDonald is to serve the delicious food to the whole world and to drive the profitable growth
move with velocity.
A private limited company is own by private owners and the liability of the business was the
owners liability. In public limited company general public own the stocks of the company. They
offer their shares to the general public for subscription. McDonald is a private limited company.
It runs its business in various country. It has more then 300 restaurant in many countries.
Basis McDonald NHS
Legal structure Private limited company Public limited company
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Advantages The members of the company
are known to each other.
They can subscribe the share
from the general public.
They only need 2 directors They didn't need minimum
capital for subscription.
It can start its business after
getting the certificate of
incorporation (Hillary, 2017).
The liability of members are
limited. NHS shareholder does
not need to pay the liability to
their own pocket.
No need of statuary meeting. The growth opportunity is high
because they can invite the
general public for share
subscription.
Disadvantage Restrict to transfer their share High government control.
It cannot subscribe its share
through general public
NHS has to follow high legal
procedure which is time and
cost consuming.
The minimum capital
subscription is £ 50000.
The lot of rules and regulation
reduces the flexibility of the
company.
The effects of market structure on organisational behaviour
market size and Characteristics : size of the business affect the organisation behaviour. For
example online business have large scope of growth with easy accessibility. On the same side the
retail shop easily target on the walk in customer. McDonald can target the young youth and
office worker because it provides the fast food which mostly like by the young youth.
Regulatory and policy influence : regulatory framework of government affect the business of
the firm. If government change their policy regarding than the firm has to take the changes
according to the new regulation (McDonald, Wilson, 2016). For example when McDonald start
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its business in India, it has to change one of its ingredient of burger because it was not accepted
by the Indian customer.
Market structure of McDonald
Market structure defines the characteristics of the organisation. There are mainly four kinds of
market i.e. perfect competition market, oligopoly, monopoly and monopolistic market.
McDonald works in oligopoly market. Oligopoly market is a market in which there are few no.
of sellers and large no. of buyers. There is no restriction on entry and exit of the company in the
market.
Characteristics of oligopoly market
Interdependence : there are few no. of seller. They have to depend upon each other to make a
decision. McDonald use the large campaign or advertisement for increasing the sales and capture
the customer than other competitors do the same thing. For example McDonald start to gives
50% discount on pizza on Wednesday than the other companies like domino's, pizza hut start the
same strategy to capture the market share (Auer, Schoenle, 2016). An oligopoly firm actually can
have a large number of firms, approaching that of any monopolistically competitive industry.
However, the distinguishing feature is that a few of the firms are relatively large compared to the
overall market.
Group behaviour : there are few firms in the market. Each firm know the action and reaction of
the other firm. If McDonald adopt some strategy then other firm will know it immediately. So its
difficult to maximise the profit. Group behaviour highly influence the market. There can be a
shift in the group behaviour.
Competition : there is true competition in the market because each seller know the move of
other seller and also do the counter movement. The movement of McDonald in the market make
the immediate affect on the rivals like Pizza Hut, Burger King, Starbucks, Domino's etc.
Barriers to entry of firm : There is no entry barriers in entry and exit. Because of few firm in
the market they enjoy the economies of scale. McDonald are spread in different countries with
high production and low cost. Barriers to entry are the key characteristic that separates oligopoly
from monopolistic competition on the continuum of market structures.
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TASK 1
Explain the stakeholder and the types of stakeholders.
Stakeholders is an individual or group of persons who has an interest in the company and
that are having the interest in a company that may be direct or indirect. There are internal and
external stakeholder that may be known as primary and additional stakeholders. Primary
stakeholders are investors, employees, customers etc. and additional stakeholders are
community, government and trade association. Internal stakeholders are those holders who is
directly impacted by the outcome of organisation.
Such as firm of venture capital decides to invest $5million in the technology start-up in return for
10% equity and having the significant influence, in this the firm is considered as internal
stakeholders (Blanton and et.al., 2015). External stakeholders are those, that do not have the
direct interest in the organisation but they are affected by the operations of the company.
Concept of stakeholders In the recent years increased a lot. In these phase it is one of the
role which manager has to maximise the stakeholder value so that they can sustain. One of the
reason concept of stakeholder is very popular as the organisation manage the stakeholder
relationships they make the commitment to monitor the stakeholders and also develop the
strategies to deal effectively with stakeholders and their concern.
Types of stakeholders
Lenders and Investors
When an individual or any financial institutions lend the money and make the investment
in exchange by own the shares of the company than they become the stakeholders of the
company. Even the large and impersonal bank lends money from the organisation and having the
stake in survival because if the company did not pay back the bank will also loose out. In fact the
personal stakeholders have a greater impact as they take the more risk and they do the investment
because they believe in the company and its product.
Governance
There are people and group of people who have the complete interest in things managed
by the company in their projects. For example managing boards and steering groups are part of
this.
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Suppliers
As suppliers were always be regarded as a part as stakeholders even they plays an crucial
role in the company's preposition while offering the good amount of money. Suppliers are the
stakeholders who provides the raw material to the organisation.
Customers
Customers are the stakeholders who depends on the company for the product or service.
They support most to the company with every purchase they do and every product also helps the
company to analyse in which product and service they have to invest in further (Clemens and
Kremer, 2016). Now even the customers also share their opinion and experience with the
customer service department. They plays the crucial role in the growth of the company.
Power interest matrix and its importance
Business analyst wants to determine the impact of stakeholders on the particular projects,
than this can be analyse by the stakeholder power/interest analysis. It also supports in selecting
the approach of communication for each group of stakeholders (Fliaster and Kolloch, 2017). This
model divide the stakeholders which are based on the power and interest of stakeholders in the
projects. It categorised the shareholders in given categories.
High power / high interest
high power / low interest
low power / high interest
low power / low interest
it interprets that this model suggests the different ways to deal with the stakeholders.
Stakeholders who has high power and low interest will be satisfied. Holders which have low
interest and low power are have to be monitored with minimum efforts. Those who have low
power and high interest are being considered to keep informed them regarding the project and in
last high power and high interest are to be closely monitored and keep informed. This will be
important in discovering where the real power of the projects is located so the better project
decision can be made (Amra and et.al., 2015). Also helps in to find out the better way of
communication with stakeholders.
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Areas of conflict
It is important to maintain balance between the interest of various stakeholder as different
stakeholders have different priorities and have expectations due to this the conflicts can be arise
in between them. Main reason behind the stakeholder conflicts is when the needs of the
stakeholders is being compromise and their expectations were high. Even the business has to
make many decision and the stakeholders don't like that decision. For example if the company
choose the supplier who offers the raw material at low prices that can keep the prices low for the
customers which may not be in the ethical code of conduct and the stakeholders objects on them
that it will impact the reputation and financial loss to the company but still company follows the
same [practice than the conflict may arise in between the stakeholders.
Potential solution of conflict
Many times businesses or governments appoint the individual to investigate the reason
behind the conflicts and disputes arise between the stakeholders and make the report with
potential solution and also offers the conciliation services in order to eliminate the dispute
between the stakeholders (Baston and et.al., 2017). Even the appoint the arbitrators to find out
the solution and accept the judgement of independent body. They use many ways to resolve the
disputes like involving more stakeholders in the decision making, improve the channel of
communication. Public relation etc.
TASK 2
National economic system of UK
There is free in UK that means that buyers and sellers are free to make the decision in the
market and government not restrict them to do any business in the country. According to the
GDP UK has the 5th largest economy in world and 2nd largest economy of EU. It includes the
Scotland, Wales, and Northern Ireland. They practice free economy of market. In 2015 nominal
GDP was $2.849 trillion and per capita GDP was $43770. free market economy helps to promote
the sale and production of goods and services in the market with little involvement of
government.
advantages of free market economy
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easy to start business : there is free market economy in UK so the traders easily start their
business in UK it helps the McDonald to open the new franchise or restaurant in UK. McDonald
can easily capture the market of UK because people are more interested in fast food and easily
attracted.
Export and import : there is easy rules and regulation policy in UK for the traders so they can
easily export their goods and import the raw material (Holtz-Eakin, Lovel, 2017).
Absence of red tap : the main advantage of free economy is the absence of red tap in the nation.
It helps to reduce the administrative cost, and the money which an organisation put in research
and development.
Free to innovate : UK allow the businesses to do the new research and take innovation in the
product and services of their business. For example McDonald innovate new ideas in their
products like introduce the same food with new ingredient or with some new promotional
technique.
Customer drive choice : free economy provide their customer to freely choose the product
according to their choice and decide that which product is succeed in the market and which
product fail.
Disadvantages of free economy
Dangers of profit motive : the primary motive of any business is to earn the profit in the market
which ultimately compromise with the workers safety, ethical behaviour and environmental
standard. For example many companies increase their production and dumb their waste in ocean
or not properly treat the waste which increase the pollution in the environment.
Limited product range : Free market economy promote different businesses to produce the
goods and services to their choices, and ultimately they produce those products which help them
to earn the profit. These limit the range of the products and services and ignore the needs and
demand of the customer.
Firm power : free economy provides opportunity to do the business in the nation and most of
the advantage was taken by the large corporate organisation. They dominate the small scale
business. The large firm reduces their price to decrease the competition in the market or charge
higher selling price to increase their profit.
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Effect of fiscal policy on the organisation
fiscal policy reflects the government spending and taxation practice. It influence the spending
amount of consumer, tax rate and cost of borrowing.
Fiscal policy affects the business of McDonald at micro level also. The increasing interest rate
and tax rate make an adverse impact on the business. It increase the cost of capital and the
product cost which ultimately reduces the profit of the business. Increasing tax rates on the
product force the manufacturer or organisation to increase the price of the product. Consumer
are not ready to buy the product at higher cost. For example if McDonald raise the prise of
Burger than consumer shift to other product and the productivity of McDonald will decrease.
TASK 3
Explain the IMF and World Bank.
IMF stands for International Monetary Funds is an international organisation that aim is to
promote the global economic growth and financial stability also aims to encourage the trade
and reduce the poverty all over the world. IMF is specialised agency of United Nation and
founded at Bretton woods conference in the year 1994. this is to secure the international
monetary corporation and stabilise the currency currency exchange rates. It stabilise the global
economy in three ways that is to monitor global condition and risk identification. Secondly it
gives advice to its member that how to improve their economies and last it provides the short
term loans and financial assistance at the time of crisis to prevent it.
Objective of International monetary fund are
To promote the international monetary corporation through the permanent institution that gives
the machinery to resolve the international monetary problems through the consolation and
collaboration. It promotes the exchange stability in order to exchange the arrangement in
between the members and avoid the depreciation in competitive exchange. It also gives the
confidence to its members by making the resources available as temporary to available them
under the safeguard measures as they provide the funds so there is a need to secure it and also
provides the opportunity to correct the maladjustments in balance of payments, without having
damage to national and international prosperity. It is a greater and sustained effort to integrate
with the developing countries through the system of global trading that lower the trade cost and
barriers between the countries that also eliminates the poverty (Baston and et.al., 2017) . Trade
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plays the important role in ending the poverty as the trade enables the growth in countries and
IMF also decrease the trade barriers. Supporting growth and development in the world has
proved the essential tool in handling the poverty.
World Bank
World Bank is an international organisation affiliated to the United nation that helps the
countries to reduce the poverty and their foremost aim is to eliminate the extreme poverty. And
their second goal is to promote and shared prosperity. World bank has funded more than 12,000
projects. Purpose and function of the World Bank is to provides the loans at low cost, gives
interest free credit and grants (The World Bank, Its Purpose, History, and Statistics, 2019). Their
focus is to enhance the level of education, health and infrastructure. They utilise the funds to
modernise the countries financial sector, agriculture and the management of natural resources.
Main areas focus by the bank to achieve the goals are To overcome the poverty by increasing the
growth specially in some countries like Africa. Helps in reconstructing countries to emerge from
war as it is one of the biggest cause of war. Gives the customised solutions to help the middle
income countries so that they will remain out of the poverty. Spur the government for the change
in climate so it helps them in to control the communicable disease like HIV/AIDS and malaria.
Wants to improve education in Arab league so they build infrastructure and provides the micro
loans to small business. They publicize the knowledge via reports and interactive online
database.
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CONCLUSION
From the above report it has been summarised the legal structure of the public, private
and voluntary organisation and define the market structure and how it affects the organisation.
This report also explains the characteristics of competition in the market. This report elaborate
the definition of stakeholders and the stakeholder theory concept at the same it contains the type
of stakeholder and their importance in the industry. This report explains the national economic
system of the country and their advantages and disadvantages. This report briefly explains about
the IMF and world bank and their role in eliminating the poverty and promotes the trade.
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REFERENCE
Books and Journal
Prajogo, D.I., 2016. The strategic fit between innovation strategies and business environment in
delivering business performance. International Journal of Production Economics, 171.
pp.241-249.
Hillary, R. ed., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
McDonald, M. and Wilson, H., 2016. Marketing Plans: How to prepare them, how to profit
from them. John Wiley & Sons
Auer, R.A. and Schoenle, R.S., 2016. Market structure and exchange rate pass-
through. Journal of International Economics, 98. pp.60-77.
Holtz-Eakin, D. and Lovel, M.E., 2017. Technological linkages, market structure, and
production policies. In International Economic Integration and Domestic
Performance (pp. 59-72).
Blanton and et.al., 2015. The impact of IMF and World Bank programs on labor
rights. Political Research Quarterly, 68(2). pp.324-336.
Clemens, M.A. and Kremer, M., 2016. The new role for the World Bank. Journal of
Economic Perspectives, 30(1). pp.53-76.
Fliaster, A. and Kolloch, M., 2017. Implementation of green innovations–The impact of
stakeholders and their network relations. R&D Management, 47(5). pp.689-700.
Amra and et.al.,2015. The impact of business strategies on online sustainability
disclosures. Business Strategy and the Environment, 24(6), pp.551-564.
Baston and et.al., 2017. Pro-stakeholders motivation: Uncovering a new source of motivation
for business companies. Journal of Management & Organization, 23(5). pp.621-632.
Online
The World Bank, Its Purpose, History, and Statistics.2019.[online]available
through<https://www.thebalance.com/the-purpose-of-the-world-bank-3306119>
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