Business Environment

Introduction:
Business environment may be distinct as the collection of external and internal factors which
affect the decision of business. We may break business environment into two pieces. The
Micro Environment of Business are forces which are extremely interrelated with company
and company can guide these types of environment by improving its capability and
effectiveness.

Suppliers are the party who supply raw material to corporation; consumers are the people who
buy goods from corporation; business intermediaries are those parties who encourage
company to sell its products; financial intermediaries are those organizations who provide
loan, credit and step forward to company. Macro environment of the business means all
various environment which influence corporation and its company and there is no directly of
company on these variables. In economic climate, we can contain government budget, import
and export policies, economic arrangement and economic situations.

In political and government setting, we may comprise legislature’s decisions, executive’s

decisions and judiciary decision which affect company’s dealings. Socio-cultural climate
involve morality, belief, schooling, health of peoples and family value. In natural
environment, we can take in season, place components, natural resources etc.

Task 1 :
a- The purpose of public and private sector organisations

Public sector organisations Private sector organisations

 Improve services and usability  Be successful.

 Reduce the expenses and the financial

 Consolidate its distinctive expertise
commitment of the Administration.

 Use private funds to speed up project execution.

 Purchasing exchangeable and exportable
 Strengthen the global competitiveness of skills
national companies.
 A public sector agency is owned by the
 The public sector is that portion of society
government (the public owns it through
 governed by central, state or provincial, and
local governments. In the United States, the
public sector includes compulsory, essential
services such as national defense, homeland
security, police enforcement, firefighting,
community planning, corrections, taxes, and
numerous other social programs.
our right to vote and the government’s
representation of us). A public sector
agency may make a profit but prefer not
to. For example, the police department is
a public sector agency that typically uses
tax payer money to provide a policing
service. They will however charge
football clubs to police activities and
make a small profit from this. This does
not alter the fact they are publicly
“owned”.

b- The main stakeholders of COCA COLA and their objectives

A stakeholder is that individual, group or organization who has direct or indirect stake in a
business or organization, and may influence or affected by the organization’s policies,
behavior or objectives. In a corporation or company there are two groups of stakeholders,
which are internal and external. Stakeholders of Coca-Cola:

Customers Employees

COCA COLA
Creditors
Suppliers

Owners
Government
(Shareholders
Customers/Consumers: Consumers or Customers come under external stakeholders. In
Coca-Cola Company, customers are of great importance because they have a great impact on
the strategy of the firm. Equally, customers still want to buy goods from the companies that
they trust. As such, customers are of great influence because every company is focused on the
customers that they have. In fact, if customers do not exist, then no business will ever take
place. Suppliers Business partners and suppliers are key to Coca-Cola Corporation’s growth.

For instance, they assist the company to refresh the globe, over 1.6 billion times per day, by
providing required services and products for their business. Having an ethical, safe and sound
supply base is important for the production of Coca-Cola Firm in local communities around
the world. As a Company, Coca-Cola has the duty of keeping its direct suppliers to values that
are required by the relevant legislation.

Creditors: Creditors of Coca-Cola Corporation come under the category of external lenders.
The Coca-Cola Company partakes in investor reviews as well as delivering briefings precisely
for the investment community that is socially responsible. Equally, the Organization
incorporates sustainability success in its annual financial statements and road shows for
investors. As such, creditors are of considerable impact on the Company’s corporate decisions
and strategies.

Civil Society and Government Agencies: Coca-Cola Company has made numerous industry
commitments to the action on wellness, nutrition, and physical activity. Equally, the
Organization is a member of numerous unions, for example, the Union of European
Beverages Associations (UEBA). Moreover, Coca-Cola works in collaboration with agencies
of the national government to introduce fitness and sports initiatives. Equally, the
Organization partners with ministries of the national environment to protect watersheds.
Similarly, Coca-Cola Business partners with government and industry organizations to create
sustainable wrapping management schemes and encourage recycling.

Owners (Shareholders): Coca-Cola Company has its owners who come under the category
of internal stakeholders; thus, they are considered to be the primary stakeholders. Equally,
owners of Coca-Cola Business have a direct interest in the firm because all the operations
revolve around their money that finances the company. For instance, if Coca-Cola firm makes
profits and their stocks gain value, eventually the owners will earn more money. Nonetheless,
if the Company has difficulties and it makes losses, the shareholders will eventually lose
money. As such, shareholders or owners of Coca-Cola Company control the decision-making
and business processes of the company.

Employees: Employees of Coca-Cola Firm may be grouped as both internal and external
stakeholders. For example, when an employee buys a product from the same Company in
which he/she is working they immediately become external shareholders. Additionally, the
workers are important because they assist Coca-Cola to determine themselves whether they
the right employers. Similarly, workers allow the Organization to perform surveys about the
impacts of the Company’s working conditions and standards.

c. A table showing the impact of fiscal policies and monetary policies on businesses

d-How resources are allocated in a Capitalist, a Mixed and a Socialist economy?

Features Capitalism Socialism Mixedism

1. Ownership of Property Private Ownership Public Ownership Private and Public

and Means of Ownership
Production

2. Economic Motive Profit Social Welfare Social Welfare and

Profit Motive
3. Solution of Central Free Market System Central planning Central planning and
Problems system Free market system
4. Government Role Interanal Regulation Complete Limited Role
only Involvement
5. Income Distribution Unequal Equal Less unequal
6. Nature of Business Private Business Government Both Private and
Business State Business
7. Economic Equality Complete Equality Lack of Equality Limited Equality

8. Major Problem Inequality Inefficiency Inequality and

Inefficiency

e. A diagram showing the impact of supply and demand on the market

f. A diagram explaining Michael Porter’s forces

Presentation OF PORTER’S FIVE FORCES:

Force 1: The threats of new entrants

Each and every company there is a rivalry between the companies. To grow the business and
want to remain in the higher place (among the rival company) nature of the business man
creates a rivalry between the companies. The new entrants introduce extra power into an
industry. It is a hazard as the current company will lose the market share. The new entrants
can trigger major change into the market environment. Every business person should attract
for the profitable business in the market. If there is a high profit in the one sector, all the
people want to invest some money to joining the company or make a place in the business. It
produces several new entrants, which directly impact the other firms in the industry. There are
always the risks of the new entrants that when one business is running smoothly and earning
the benefit in that time if another company will create in front of the old one and similarly
provide the same goods or services in lower price towards the consumer. Customer will
probably change their mind and choose the latest ones. So, in the industry there are the risks
of new entrants.

The risks of new entrants will depend on the degree to which there are obstacles to ente.
These are typically:

 Economies of scale (minimum size criteria for profitable operations) (minimum size
requirements for profitable operations)
 High initial expenditures and fixed costs
 Cost advantages of existing players due to experience curve effects of service with
completely depreciated properties
 Loyalty of consumers
 Protected intellectual property like trademarks. licences etc
 Scarcity of essential resources, e.g. Skilled
 Access to raw materials is dominated by existing players,
 Distribution networks are dominated by existing players,
 Existing players have strong customer ties, e.g. from long-term service contracts,
 High switching costs for customers
 Legislation and government policy

Force2: Threats of Substitutes

The goods or services that are manufactured in one industry are likely to have replacements
produced in another. They pose a challenge as they restrict the ability to charge of a firm to
charge high price. If there are alternative products with lower prices of better value than the
high prices products for the same reason, people prefer for the low-price products. By this the
high price commodity probability of occurs from the market. So, there are the risks of
substitutes in the market for the business. Threats of substitutes are depending on differences
of the price. Because if the people are getting the product which is for same reason and there
are price variations between the goods. Then the customers prefer for the low-price product
rather than the high price products.

Similarly, to the threat of new entrants, the threat of replacements is determined by factors
like:

 Loyalty of consumers,
 Key customer relationships,
 Switching prices for consumers,
 The relative price for success of replacements,
 Current patterns.

Force 3: Bargaining power of Supplier

Bargaining power is the right to control the setting of rates. It assesses how easy it is for the
suppliers to push up costs. Supplier can affect the profitability of a firm by exerting pressure
for higher prices or by reducing the quality. If there are lots of supplier in the market, the
business person prefer for the best quality material for same reason which cost the low. They
can choose the supplier who provides the most profit margins for the company. And every
company became success when they increase their profit.

Bargaining power of suppliers is likely to be strong when:

 The market has been dominated by a few major suppliers rather than a decentralized
source of supply,
 There are no replacements for the specific input,
 The supplier’s clients are divided, so their bargaining power is limited,
 The transaction costs through one supply to another are high,
 There is the probability of the retailer combining forwards in order to achieve higher
costs and margins. This threat is particularly high when,
  The purchasing industry has a higher profitability than the supplying industry,
 Forward integration provides economies of scale for the retailer,
 The purchasing industry hinders the supplying industry in their growth (e.g. inability
to embrace new releases of products) (e.g. reluctance to accept new releases of
products),

In such cases, the purchasing industry also faces a high pressure on margins from their
suppliers. The relationship to influential suppliers will potentially limit strategic choices for
the company.

Force 4: Bargaining power of buyer or customer

Bargaining power depends on the degree of differentiation between the products of industry.
It depends on the expense of the consumer switching from one supplier to another. If the
customer gets the more profits margin from one supplier it creates another exists. If a
customer’s purchases from industry constitute a significant or small proportion of customer’s
overall purchases.

Clients bargaining power is likely to be more successful when,

 They purchase huge quantities, there is a concentration of customers,

 The supplying industry comprises a significant number of small operators
 The supply economy functions with high fixed costs,
 The substance is undifferentiated and can be replaces by substitutes,
 Switching to an alternative product is relatively easy and is not linked to high prices,
 Customers have low margins and are price-sensitive,
 Customers could manufacture the product themselves,
 The commodity is not of strategically significance for the consumer,
 The consumer knows about the manufacturing costs of the commodity
 There is the potential for the consumer integrating backwards.

Force 5: The rivalry among current competitors

The level of competitive competition within tan industry would influence the profitability of
the industry as a whole. In the market there is the rivalry between the firms. A rising their
revenue, another business would try to down their sales. For this they spend more cost-on
 product marketing promotions. Advertising and new product creation. They also want create
the goods better than the rivals.

Rivalry between existing players is likely to increase once:

 There are several competitors of around the same size,

 Players have common tactics,
 There is not much distinction between players and their goods, hence, there is much
market rivalry,
 Low business growth rates (growth of a specific company is feasible only at the
expense of a competitor) (growth of a particular company is possible only at the
expense of a competitor),
 Barriers for exit are large (e.g. costly and highly advanced equipment) (e.g. expensive
and highly specialized equipment)

g- A table explaining the effect of market decision on business policies

Good/service Cost Distribution Promotion

Product is a good (such as The next part of the This is about the delivery Promotion refers to the
media players, shoes etc.) marketing mix is the price center of the commodity and strategies a company uses
or service (such as hotels, your consumer is willing to the processes used in to attract the attention of
airlines, etc.) that is sold as pay for your product. This delivering it to the the consumers to their
a solution to meet the helps decide the benefit you consumer. product. These includes
needs of your consumer. will be able to make. Wherever this is, it should promotional promotions,
When designing the When setting a price for be conveniently available to customer support, public
product, you need to your product, remember the consumer. For example, relations, ads etc.
understand its life cycle how much you have spent if you have a physical store,
and prepare for various on manufacturing it, the it should be placed in a
problems that may occur price ranges of your rivals, position that can be easily
during the stages of it. and the perceived product discovered by the consumer.
When the product hits its value. If you own a website to sell
final stage (decline in the your product, make sure it is
value mode), it’s time to easily navigable.
invent the item to regain
the demand of the
customers again.

h. the impact of various element of culture on business

The essential aspects of culture are language, faith, beliefs and attitudes, education, social
organization, technology and material culture, law and politics, and aesthetics. (Carter, 2002)

Language: Language can indeed be verbal and non-verbal. Verbal means how the words are
spoken (tone of voice) and non-verbal involves gestures, body posture and eye contact. It is
necessary to really understand how language is used by the people in your target market.

Religion: Many foreign corporations disregard the power of religion. Most cultures see in
faith a justification for being. It is necessary to recognize the difference between the shared
beliefs, for example, in Islam, Buddhism, or Christianity. An example of the influence of
religious views on foreign marketing is the prohibition of pork products and alcoholic drinks
in the Middle East. The foreign market manager must be mindful of religious division in the
countries of operation.

Values and attitudes: Values and attitudes may impact reaction to a brand or to its heritage.
For example, a company using white flowers on its symbol or on the packaging of a product
was well received in the United States but was a tragedy in Mexico, where a white flower
symbolizes death or disregard. (Kotler and Armstrong, 1999) A foreign company needs to
understand the differences in actions and ethics within the country.

Education: It is important for foreign firms are to know about the educational system of a
country. The degree and quality of education can have a significant effect on how open
customers are to international marketing activities.

Law and politics: Some problems in the political climate are important. Some countries, such
as Russia, have relatively weak governments, whose policies can change drastically if new
leaders come to power through democratic or other means. Some countries have no history of
democracy, and therefore it may be difficult to introduce. When a company is moving into an
international market it is also necessary to look at the ownership laws, the employment law,
health & security framework, financial law and patent rights.

Social organisation: The social structures are different in each country, for example the
family ties, the social stratifications, the interest groups and the status in a community group.
Social organization also defines the positions of superiors and subordinates and how they
relate to one another

i. A graph showing the value of international market to UK business over the last
70 years

j. the global factors on UK business

The numerous factors that have an impact on the operations of multi-national organizations
like Mc Donald’s not only globally but also in its home country are called the global factors.
Many of the companies operating at UK conduct business internationally where the labor cost
is low and through foreign trade aid in improving the UK economy (Paul et al, 2013). Due to
strong reputation of UK in the world due to its use of technology and manufacture of
computers, vehicles, etc., the UK based companies get an opportunity to grow business
elsewhere in the world. World Trade Organization (WTO) has pressing issue in issues relating
to trade and exchange between different countries and ensuring global actions of
organizations properly.

UK government has significant contribution in liberalization of trade and exchange by

formulation of laws and policies while concentrating on the global growth of UK based
organizations. However, Protectionism policy of UK government limits the import of
particular products in order to ensure proper competition between the production of goods and
services within UK. Thus, the UK government by implementation of tariffs and taxes limit
import in some regions. BRIC (Brazil Russia India China) are by far the most fast-growing
economies in the world and therefore risks arise to the economies and organizations at UK.
Thus, the important products is important factor for large companies functioning at UK and
helps in increasing the contribution to the UK economy through promoting of foreign and
global trade.

K. The impact of EU policies on business organizations at UK

EU has several laws and policies that must be implemented by all the organizational factors
business operations at UK and membership countries. As Mc Donald’s functions in several
countries which are member of EU therefore it must abide by their regulations and one of the
main policies of EU involves doing all the transactions between the companies or subsidiaries
located at member nations in the European union through the European Money Transfer
Union thus improving the European currency (Palmer et al, 2011). The various policies of EU
have effect on business activities of organizations at UK affecting in the various areas as Jobs,
recruitment, Training and growth of workers, expenditure, taxes imposed, foreign trade,
subsidies, etc. all the member states at EU are authorized for free trade between member
countries while government has position of controlling the business operations as per the EU
policies. Thus, all the UK based companies like Mc Donald’s must obey the laws and
regulations as per EU in order to prevent any civil suits for breaches. The EU policies
encourage trade and exchanges with member nations while enforcing certain limits on trading
with the outside states.

Conclusion:

The economic environment of any company has important effect on its policies and
performance and the business must adapt to changes outside the environment which consist of
micro environment or shareholders in the business like competitor, suppliers, customers,
employees , shareholders, etc. and macro environment comprised of business environment
involving economic policies like fiscal policy, monetary policy, competition policy, etc. and
the non-economic environment consisting of political, natural, cultural , demographic,
technical and legal system affecting the business activities. Different organizations such EU
and government control and track the business operations locally and internationally hence
any company must abide by laws, regulations, practices and processes accordingly. Thus,
various organizations running at UK are affected by the policies of EU in terms of training,
money exchanges, training and growth, inflation, etc. the position of the state governments is
restricted as EU provides for free trade and exchanges between the member nations. As coca
cola operates globally in various countries therefore it must abide by the legal structure and
policies of the respective countries and establish goods and services as per the cultural, social
and other aspects of the environment such as the needs and interests of customers.

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