Business Environment Report: Primark, External Factors, and Strategies

This report provides a detailed analysis of Primark's business environment, examining its organizational type, purpose, and stakeholder objectives. It explores Primark's responsibilities, strategies, and the impact of various economic systems, including those of China and the UK. The report also delves into market structures, demand and supply dynamics, and the influence of cultural and business environments on organizational responses. Furthermore, it assesses the significance of international trade, global factors, and EU policies on UK businesses. The report covers topics like fiscal and monetary policies, competition policy, and regulatory mechanisms affecting businesses, offering a comprehensive overview of the external and internal factors shaping Primark's operations and strategic decisions.

Business Environment
S t u d e n t N a m e : C a t a l i n P r e d e s c u
S t u d e n t I D : 1 3 1 4 8 - R B
L e c t u r e r N a m e : A d e b o y e A d e n i y i
N o v e m b e r 2 0 1 6

TABLE OF CONTENT
Introduction................................................................................................................................3
Task 1.........................................................................................................................................3
Introduction...........................................................................................................................................3
1.1 Identify the type of organisation Primark is and discuss its purpose. Also discuss the purpose of
one of these types of organisation with an example: public sector, charity, cooperative ....................3
1.2 Describe the extent to which Primark meets the objectives of its stakeholders.............................5
1.3 Explain the responsibilities of Primark as an organisation and the strategies employed to meet
them......................................................................................................................................................6
2.1 Different countries have different economic systems. Identify and comment on the economic
systems of the following countries........................................................................................................7
2.2 The impact of fiscal and monetary policies on the following type of businesses.............................8
2.3 Identify the competition policy and other regulatory mechanism that affect business organisation
...............................................................................................................................................................9
3.1 Explain how market structures determine output decisions and pricing strategy of business in
different economic systems.................................................................................................................11
3.2 Discuss the ways in which market forces of demand and supply shape organisational responses.
.............................................................................................................................................................13
3.3 Judge how cultural and business environment shape the organisational responses.....................14
4.1 Discuss the significance of international trade to UK business organisations................................15
4.2 Discuss the impact of global factors on UK business organisations...............................................16
4.3 How do EU policies affect UK companies...................................................................................18
Conclusion...........................................................................................................................................19
References...........................................................................................................................................20
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Introduction
In this report the external and internal factors in the business environment would be
investigated in detail against the economic conditions surroundings inside the country and
also internationally influences for any business company which is carrying out business
operations. The different responsibilities of the organisations and the strategies employed to
meet them would also be studied in detail. Aspects of global trade and commerce and their
significance would also be looked into in detail.
Task 1
1.1 Identify the type of organisation Primark is and discuss its purpose. Also discuss the
purpose of one of these types of organisation with an example: public sector,
charity, cooperative
Primark is part of Associated British Foods and it was first open in 1969 in Ireland
city of Dublin, it was established by Arthur Ryan. Back then Primark was a small business
and it has only few shops in Ireland under the name of Penny’s. After the initial success in
Ireland the firm first opened its retail outlet in the United Kingdom in 1971. Primark has then
collaborated with Selfridges departmental stores in Manchester. In 1973 it first opened its
English store in Derby and it could not use the name Penney’s as it coincided with J C Penny,
so the name Primark was given. Now Primark is a big chance of shops across the Ireland, UK
and Europe.
Primark is a for profit organization, it has limited liability; the decision making is
divided between more people. As a limited liability organisation protection is granted to its
owners in case the business fails and they do not have full liability of the losses. As a result if
the business is sued the plaintiff cannot attach the assets of its owners.
Primark is a private sector commercial company that is in the retail business selling a
wide range of products from foods, to clothes, footwear and also electronic goods of daily
use. It does not manufacture these goods but retails them to customers worldwide especially
Ireland, UK and Europe. As private sector organisation the company aims to achieve high
rate of growth and profitability over a period of time and being able to grab a larger
significant portion of the market in the retail industry than its immediate competitors at home
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and abroad (Cherunilam, 2010). It undertakes all its business activities keeping in mind this
mission and vision. Primark has the aims and objectives for a company to provide high
quality goods and services to the customer at affordable prices to ensure a high degree of
customer satisfaction. It streamlines its operation in such a way that costs benefits are duly
achieved which could be passed onto customers in the form of cheaper prices than its
competitors in the same business.
Apart from that, Primark purpose in not only related to profit, but with a responsibility
to all its stakeholders which is called corporate responsibility. This greater than economic
aspect of the business because it’s taking care of the people life’s, it’s about offering to the
people something in return for their effort in every day job. For example, Primark has
developed a project in Bangladesh called HER Project, through which is offering training and
guidance, knowledge in many aspects of life like health or family life.
Public Sector: The UK Postal Service is a good example of public sector
organisation. A public sector organisation is one which is partially funded and operated by
the central or regional government and in such organisation the government is usually the
single largest body of shareholder. The main aim and objective of a public sector organisation
is to render an essential service that is of day to day use of the public (Björklund, 2011).
Hence public sector organisations are sometimes called public utility services like oil and gas
and electricity. The salaries of the staff members are paid by the government and their
position is permanent irrespective of the market conditions. The salary structure of the
employees is predetermined by the government and approved by the cabinet ministers. The
heads of such organisations are selected with the approval of the government and they are
accountable to the public for the service that they give them.
Charity: The UNICEF is the children’s charity arm of the United Nations. It sells
items like cards and gifts to support the care of underprivileged children. The proceeds from
the sale of the goods and services are used for the education and uplift of poor children across
the world. It is a non profit organisation and does not consider profit making as its mission.
The employees of such organisation are mainly volunteers apart from some paid officers in
its rolls (Cherunilam, 2010). The main goal of such organisation is to provide humanitarian
and social service to the poor and the needy.
Cooperative: A cooperative is an organisation that has been established by a group of
people having some common interest which may be a consortium of sporting enthusiasts or a
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house owners association that serve the common interest and the purpose of its members. For
example, the Liverpool Old Age Home is an example of a cooperative (Klapper et al.2007). It
is run by its members with the help of paid officials who are entrusted to do their service to
the organisation.
1.2 Describe the extent to which Primark meets the objectives of its stakeholders
The stakeholders of Primark are those individuals or group of individuals who have
some sort of interest or connection with the organisation. There are two types of stakeholders:
internal and external.
The internal stakeholders are the employees and the suppliers while the external
stakeholders are the customers, the banks and other financial institutions, the government and
the shareholders. To run the company in a satisfactory manner Primark has to meet the
objectives and mission of its various stakeholders and to keep them satisfied so that they do
not disrupt the operations of businesses (Lall & Mengistae, 2005). The stakeholders are
managed according to their power and the level of interest they hold in the company. For
example the employees have low power and high interest simply because their livelihood is
dependent on the salaries given by the company and the lower level employees do not wield
too much power since they are not a part of the decision making body and are not privy to the
secret information that only the top level executives and the managers know of. For this
reason the company keeps them informed about the various events happening within the
company.
The government on the other hand has low interest and high powers simply because
the companies have to follow the law and the rules and regulations of the land if they were to
operate (Craig & Campbell, 2012). Thus the company keeps them happy by following its
injunctions. The shareholders have high interest and high powers as the company runs on
their money and hence they are monitored more closely.
In terms of stakeholders it is very necessary for the business such as Primark to fulfil
their objectives and expectations towards the firm. Various types of stakeholders are such as
customers, government, employees, investors, shareholders, local community etc. The
customers are always tends towards the organisation that it provide high quality of goods and
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services. Further, investors expect that it gives higher return of potential investment etc.
Hence, the company provides better products as well as return to them which lead to meet
with various objectives of potential stakeholders of the firm.
1.3 Explain the responsibilities of Primark as an organisation and the strategies
employed to meet them.
As an organisation the company has its responsibilities towards each of its
stakeholders and the society and the community at large. For example the company is
responsible to the community where it operates and towards the citizens of that
neighbourhood. It is their duty to keep the area clean and safe and see to it that the business
process do not harm the environment in any manner whatsoever like over consumption of
energy and cutting down of trees and natural habitats of wild animals (Welford, 2013).
Towards the employees it has the responsibility of providing a safe and healthy working
environment granted to them as per the labour laws of UK and to ensure that they are paid
their salary on time and along with all the benefits like medical leave, travel allowance and
pension fund. The strategy used to meet these objectives differs depending on the type of the
objective. For example to ensure a clean environment the company must employ the latest
technology machines and work flows which produce the least amount of pollution and
prevents the wastage of energy resources like electricity and heat.
It also has responsibilities towards the shareholders who must be paid dividends
according to the profits of the company as they have invested their money in the organisation.
It is also responsible towards the government in that it follows its rules and regulations. The
strategies employed to meet these responsibilities includes compliance to the rules and
regulations of the government and ensuring that its products are safe to use by the public. It
must also set aside a portion of its profits to pay dividends to its shareholders.
The Primark Plc has different responsibilities in the organisation in order to meet with
requirements of stakeholders as well as achieve its goals and objectives. In terms of this very
main responsibility of the management is to allocate adequate resources to production process
as well as allocate duties and responsibilities to every organisational member. Apart from this
to establish effective employee relation also requires at the workplace which lead to provide
better services to the customers. Hence, it can be said that when the management takes
different responsibilities then it will lead to meet with objectives of the Primark Plc.
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Task 2
2.1 Different countries have different economic systems. Identify and comment on the
economic systems of the following countries.
An economic system is a system of decision making and allocation of resources that is
in place in a particular country. The resources could either be managed or allocated fully by
the government as in a command economy or by private entities in a free market or a mixture
of both.
China: the country follows a socialistic economy with government owning most of
the production resources and also taking major decisions as to what to produce and for whom
to produce and in what quantity. The country has a state run economy with the government
offering subsidized housing, food and education at all levels. The subsidies are compensated
by offering low wages to the workers most of whose daily needs and requirements had been
taken care of by the government (Romalis, 2004). But of late Chinese president has
introduced many economic reforms aiming to reduce government controls over the factors of
production. This is mainly because the socialistic programs have burdened the state coffers
with huge debts and workers productivity has gone down considerably. Thus the shift is
towards a capitalistic type of economy like that of all other major countries of the West.
Unnecessary government workers had been laid off to make room for the new generation of
the work force (Babiker, 2005). Thus it has adopted a mixed and parallel economic system
with government ownership in crucial sectors like mining, education and healthcare and
private ownership in sectors like travel and tourism. It’s a restricted market in China and all
the major production decisions are taken by the government.
Cuba: this country has a purely capitalistic type of economy with the least
government controls on the factors of production like the major decisions related to the
volume of output and for whom to produce. It offers a free market economy where the
government intervenes rarely between the buyers and the sellers (Björklund, 2011). The
major sectors like transportation, hospitality, banks, oil and gas , energy has been left in the
hands of private players who are free to determine and set prices on the basis of the demand
and supply forces operating in the market. The Cuba government owns very few industries
like some portion of public healthcare and production based as well as another services based
companies. This has been done for the sake of benefit of the public and fair dealings and
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prices in these sectors which form the backbone of the economy. All other industries are
privately owned including rail and air transportation industries. It’s a free market in the Cuba
and the major production decisions are taken by private individuals as long as they comply
with the rules of fair trade.
United Kingdom: Another country is UK which is a developed economy in the world
and adopted mixed economy in order to make UK firms more productive (Martin and Rey,
2004). As per the mixed economy in the country individuals as well as government both
plays a vital role in order to make various kinds of decisions. It is combination of capitalist as
well as socialistic economy in which on the private companies any type of rules are not
imposed by the regulatory body. Further, there are some rules which are must follow by the
firms whether it operates in private sector or public sector. It helps to the economy in order to
take better and effective business decisions and due to this reason UK follows mixed
economy.
2.2 The impact of fiscal and monetary policies on the following type of businesses.
Fiscal policies are the various taxation measures of the country that is imposed by the
government and the monetary policies relate to the interest rates of the central bank which
have a bearing on all other banks lending rates and deposit rates.
Farming: in the farming sector changes in the fiscal policies results in the changes in
the production and output decisions of the individual farms. Fiscal policy is related to the
taxing schemes of the government and this affects the produce of the farms as the output of
the farms is taxed before they are sold in the market. For example if the government raises
the service tax then the prices of the goods sold rises and there is fewer demand for the goods
produced by the farm. If the government increases its spending on the agricultural sectors
then the farms get a boost in their production and they can step up their farming activities to a
large scale that might raise the volume of output and hence the level of growth and
profitability. As regards the fiscal policies if the government announces cuts in the taxes ,
then it puts more money in the pockets of the people and hence they can spend more in the
buying the goods produced by the farms like milk, butter and bread etc. The level of
consumption of the households would go on increasing (Björklund, 2011). As regards the
monetary policies of the government if the interest rates are raised then the farms would have
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to spend more money and interest on the purchased machinery as the cost of borrowing rises.
Thus farms have to cut down on the facilities of production and lower its output.
Apart from the fiscal policy the monetary policies are also highly affects to the
farming industry in terms of negative as well as positive manner. Those rules and policies
which are handled and regulated by the central bank are known as monetary policies. It
considers different terms such as taxation policies, interest and exchange rates etc. When the
farming company is going to take loan then monetary polices are affects to it. As per the
respective policy if interest rate is high then the farming organisation has to pay high cost of
loan which lead to reduce net profit at the end of financial year. On the other side exchange
rate is also influence to the profit and revenue of the farming business entities.
Housing: if the government raises the tax rates then the house owners and builders
would have to pay more property taxes and thus the demand for housing would go down.
There will be a general slowdown in the real estate market and households would defer their
decisions to purchase houses. Also if the income tax level is raised people would not be able
to buy new houses and thus the housing market would suffer. Also if the interest rates are
raised the equated monthly instalments of the housing loans would rise putting a strain on the
households to service their loans and this would result in the increase of stressed assets of the
banks (Martin & Rey, 2004). Thus the entire economy as well as the housing market would
experience a slowdown. On the other hand if the interest rate is lowered by the central bank
the housing loans would become cheaper and more and more people would be looking
forward to avail of these loans to buy new houses. Thus the housing market would be
witnessing a boom as households would go forward to buy new houses. The level of capital
expenditure would go up and thus the households would buy more houses. The demand for
construction workers would rise thereby raising the level of employment in the country
(Babiker, 2005). Thus the overall economy would be growing in a fast pace and this will
ensure that more and more people are encouraged to buy new houses or start construction of
new houses.
2.3 Identify the competition policy and other regulatory mechanism that affect business
organisation
Competition is the rivalry between two or more companies to decide who sells the
maximum or more amounts of goods and services in the market and its efforts to achieve
these goals using various elements of marketing mix. It is the way a company is putting the
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right product, at the right price, at the right place and promoting it to become competitive
advantage.
Competition policies are meant to prevent the abuse of monopoly power by certain
firms that take control of the prices and the supply of goods and services in the market that
undermines the interest of the general consumer and create discrimination in the market place
by manipulating the forces of demand and supply in a negative way for their own selfish
interest. Thus the regulatory mechanisms are used to restrain the power of firms to prevent
the rise of monopoly power and protect the interest of the consumer (Romalis, 2004).
Therefore in this regard competition policies are government regulatory mechanisms to
ensure free and fair trade practices within the country and abroad by the firms.
According to the 1998 Competition act of UK firms cannot engage in collusive
behaviour in which a few select firms enter into agreement to manipulate prices and output to
fleece the customers by taking advantage of their weakness and helpless of position (Babiker,
2005). The firms want to bring the customers at their own mercy so that they can profit from
higher demand and prices charged for the goods and services. Another form of collusive
behaviour occurs during tendering of government contracts. A few of the firms fixes the bids
for the contracts and they take their turns in securing the lucrative contracts. This prevents the
entry of new firms to make a bid which may be better equipped to handle and execute
projects. Another aspect of competition policy is the abuse of market power. Any company
having market share of over 40% is said to have power over the markets to affect the forces
of demand and supply. Such firms may be involved in unfair trade practices like predatory
pricing in which they sell the goods below the costs to force competitors to go out of
business. Such practices have been banned by the competition act of 1998 by the UK
(Björklund, 2011). For example in our chosen organisation Tesco the government has fixed a
price ceiling for most of the consumer goods sold by the retail company so as not to
inconvenience the general consumers in any way as these super markets sell goods and
services of daily use like soap, toothpaste and groceries. If the price of these goods rise
arbitrarily then the poor people would not be able procure goods of daily use and this would
affect their lives in a negative manner. Also Tesco operations are restricted by vertical
restraints as they offer lower prices to suppliers, especially the farmers whose goods they sell
at a very high price in their own super markets. Thus these kinds of unfair trade practices are
prohibited by the UK government in the best interest of the consumers and unfair gains to the
big companies (Martin & Rey, 2004). Thus competition policies and other regulatory
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mechanisms are required to exert control of the market in special situations even in a
capitalistic economy where the government rarely intervenes on such matters.
Another kind of competition law is the anti-trust and cartels which prevent collusive
behaviour among the key market players over price fixing and affecting the supply of goods
and services of the market. Market liberalisation is another facet of the competition law
which aims to introduce more players in monopolistic sectors like railways, postal service
and retail banking etc.
All the various types of laws and policies regulated by different regulators and
mechanism in the business environment. In the UK key regulator which helps to the firm in
order to make better and effective competition and business policies is European Union (EU).
Further, another regulators are such as world trade organisation (WTO), competition
commissions, European commissions, Civil Aviation Authority etc. by which all the
competition policies are framed and followed by UK business entities. Apart from this in
order to formulate competition polices and rules Competition Act, 1998 is plays an important
role for the different UK companies.
Task 3
3.1 Explain how market structures determine output decisions and pricing strategy of
business in different economic systems
Perfect competition: The market having perfect competition is characterised by the
presence of many buyers and sellers as also a wide base of customer groups, firms and labour
force. The firms sell goods according to the tastes and preferences of the consumers at a price
that is dictated by the forces of demand and supply (Björklund, 2011). When the prices are
high the demand for a good falls and when the prices are low the demand rises. Similarly the
supply curve shows the quantity of goods that the sellers are willing to sell at a given market
price. Also the consumers are looking for high quality goods at reasonable prices. There is
equilibrium between demand and supply when the market clears out. Above the equilibrium
price there is a surplus in the market which brings down the prices as marketers always want
to clear out their stock of goods and inventories. Sometimes the government introduces price
ceiling when the prices skyrockets so as to bring the consumer goods within the reach of most
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of the customers. Examples of this market are the retail sector of UK as Tesco, Sainsbury’s,
Asda, Mark & Spencer etc.
Monopoly: In a monopoly market there is a single seller which sells a particular good
or service at a premium price. The market is marked by the absence of other sellers and hence
the sole company can charge whatever prices they fancy. In a monopoly market there is a
single seller and many buyers. The buyers are at the mercy of the sellers as the prices fixed
by them are often very high and not within the reach of the average customer. In addition to
this there is a great barrier to the entry of the market so that other sellers cannot enter the
market (Martin & Rey, 2004). The sole seller in a monopoly market aims to maximize the
profits by taking full control of the market. Example of this system is the postal service of
UK: Post Office.
Oligopoly: this type of market structure is determined and dominated by a few firms
that produce the goods and services. This is better than a monopoly as a single seller has no
control of the prices. This is the most common type of market in a mixed economy or in a
capitalist economy. The most important feature of an oligopoly is the interdependence of
firms as the pricing and output and productions decisions of one of the firms will have a
direct impact on the fortunes of a rival firm which is then forced to alter its own pricing and
production strategy to stay afloat in the competition. Example of this is the energy sector of
UK: British Gas, EDF, E-on, First Utility etc.
Duopoly: it is the restricted version of oligopoly with only two players in the market
and a lot of consumers. If the products they sell are well differentiated then each one of them
enjoys the patronage of a loyal band of customers. But if the characteristics of the products
they sell overlap then prices are bound to rise or fall depending on the choices and
preferences of the consumers (Babiker, 2005). There will be much interdependency between
the two firms and also as the market is dominated by the two firms there is great rivalry
between the two. Also there are high barriers to the entry of new sellers in this type of market
structure since the two firms usually provide a niche product or service that could not be
matched by new entrants in terms of price and product features.
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