Business Environment on Armani

Contents
Introduction……………………………………………………………………………………………………………………
Task 1……………………………………………………………………………………………………………………………. 1 1.1 Identify the purposes of different types of organization………………………………............ 1 1.2 Describe the extent to which an organization meets the objectives of different stakeholders………………………………………………………………………………………………………………………….. 3 1.3 Explain the responsibilities of an organization and strategies employed them……………….. 4
Task 2…………………………………………………………………………………………………………………………………….. 6 2.1 Explain how economic systems attempt to allocate resources effectively……………………. 6 2.2 Assess the impact of fiscal and monetary policy on business organizations and their activities………………………………………………………………………………………………………………………………….. 8 2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organization…………………………………………………………………………………… 9
Task 3………………………………………………………………………………………………………………………………… 10 3.1 Explain how market structures determine the pricing and output decisions in various organizations………………………………………………………………………………………………………………… 10 3.2 Illustrate the way in which market forces shape organizational responses using a range of examples……………………………………………………………………………………………………………………… 11 3.3 Judge how business and cultural environments shape the behavior of Armani…………. 12
Task 4……………………………………………………………………………………………………………………………… 13 4.1 Discuss the importance of international trade, and globalization to Armani or other organizations………………………………………………………………………………………………………………… 13 4.2 Impact of global factors on Armani or other organizations……………………………………. 14 4.3 Evaluate the impact of policies of the European Union on UK business organizations by using Armani or other organizations……………………………………………………………………………… 15
Conclusion…………………………………………………………………………………………………………………… 15
Reference…………………………………………………………………………………………………………………… 16

Introduction
Not a single business operates in vacuum; every business operates in an environment. It needs a living persons, places, natural resources and things to survive. The sum of all these factors and forces is known as Business environment. Aurthur M. Weimar defined business environment as below
‘’Business Environment encompasses the climate’ or set of conditions, economic, social, political or institutional in which business operations are Conducted.’’
There are some external and internal factors that affects the business environment. Its easy to control the internal factors but almost impossible to control the external factors. Sometimes these two types of factors work together. External factors that influence the business environment are political factors, social factors, microeconomic factor, macroeconomic factor, technological factors and some internal factors are organizational values, organizational cultures, the employees and the shareholders and so on.
In a globalized economy business environment plays a great role in every business. It helps to understand the internal environment, economic system, economic policy and market condition.
In this report we have discuss different aspects of business environment and try to apply those in practical life. We also apply those aspects for Giorgio Armani and explain how it works. Hope this will help us for further instance.

Task1
1.1 Identify the purposes of different types of organization
In the business world there are various types of organization and each organization has their own policies, strategy as well as different purpose. No single organization serves the same purpose. Whatever the organization is there must be some purposes for which the organization was established. There are mainly 3 types of organization: sole proprietorship, partnership and corporation. The purposes of these organizations have been discussed below.
Sole Trader: The purpose of sole trader is to provide service and charge for that service. A sole trader is a person who own the company entirely, has full authority to control that and provide service. The main purpose of a sole trader is to provide best service to satisfy its customers in order to maximize the profit.
Partnership: Partnership is a form of business where there are two or more owners of a company. The main purpose of forming partnership is to support each other. One person may bring skills and ideas to the business whereas other may bring money and resources.
Corporation: Corporation is a legal entity that is separate or distinct from its owners. The core purpose of corporation is to spread out the risk among the shareholders and its limited liability where the investors have to pay only their portion for any loss.
The case that has been given to us from there we can define that Giorgio Armani is a sole proprietorship business because he is the sole shareholder of the company, managing director and the chairman of the board. Even if we analysis the purpose we come to know that Giorgio Armani tries to maximize its profit by providing the best quality product to its customers.
Giorgio Armani S.p.A is one of the world’s leading fashion houses. Armani established his own company, Giorgio Armani on July 24, 1975 at the suggestion of his enthusiastic partner Sergio Galeotti. The company was successful from the very beginning and the first product that was introduced by the company was ready-to-wear clothes for men and women. Till now it is owned by its owner and it’s still a sole proprietorship business. Under this fashion house 5000 employees are working throughout the world. They have 13 factories and 500 exclusive retail outlets in 46 countries worldwide.
Mission: Under Mr. Armani’s direction the mission is to continually create clothes and accessories that aspire to a kind of perfection that transcends fashion.
Vision: Giorgio Armani is poised for the future with a vision that crystallizes his approach to fashion timeless and yet always timely.
Giorgio Armani is committed to the long-term view, reflected by his creation of new lines and divisions, and in his investment in new technology and infrastructures.
As a sole trader in the fashion designing sector Giorgio Armani S.p.A has to face some certain constraints which are discussed in the following: * Mr. Armani has the full liability which means he is fully responsible for any kind of taking risk * It was difficult to raise finance * As Giorgio Armani was the first to introduce the people to the pleasure of casual chic there was risk of acceptance of the people. * Maintaining a consistent brand personality.

1.2 Describe the extent to which an organization meets the objectives of different stakeholders
Everyone related to the organization is known as stakeholders. Stakeholders have some certain needs and expectation from the organizations and it is the core responsibility of a organization to meet all the demands and needs of every stakeholder. The major extents that Armani considers to meet the objective of the stakeholders are discussed below

* Customers: In any organizations customers are the key of success. It is very necessary to keep them satisfy in order have a good position in the market. They are the ones to whom organization will provide services. The customers always want the best quality product, reliable services , great customer service and fair and reasonable price. This demand of the customers has a great impact on the organization’s strategy. Armani always focuses on the satisfaction of the customers. They always provide the best quality to their customers and tries to meet their demands. They know that if they don’t give importance on their customers they will suffer in the long run.

* Employees: Giorgio Armani S.p.A has a huge number of employees working under them. This numerous numbers of employees always expect good opportunities and recommendation from the company which is highly meet by the Armani. Besides that employees are interested in free flow of information to assess the prospect of Armani considering some fact such as: opportunities , retirement benefits and remuneration.

* Government: Government provides specific procedures and guidelines regarding licensing, tax payment and protection of customer welfare which is strictly maintained by Giorgio Armani S.p.A. So here Giorgio Armani S.p.A meet the objectives of the government.

* Suppliers: Giorgio Armani has many diverse products for the customers as a result they have a variety of suppliers. These suppliers want good payment systems, flexible terms of credit and business agreement and the behavior of the organization.

1.3 explain the responsibilities of an organization and strategies employed them
Every organization has to meet the demands and needs of its stakeholders. Various responsibilities and strategies of Giorgio Armani is discussed below
Responsibilities to customers: Giorgio Armani always provides top priority on their customers. To provide greater customer service they purchased it based store system which can be deployed in a wireless environment throughout the stores. As a result they were able to get real time information regarding the inventory and they can manage their stock which helps them to improve customer service and increase customer satisfaction.
Each and every customer is unique. Customers differ from taste and preference. Giorgio Armani S.p.A also takes consideration regarding this. They launch Armani Prive couture collection which reflects the increasing demand for customization and personalization at the top end of the market.
Responsibilities to employees: Giorgio Armani has the responsibility of providing a good environment and opportunities for the employees. For these reasons, they have efficient HRM policies that work for the objectives of the employees. According to (French and Bell, 2005) customer service profit chain model implies that if employees are satisfied then it will have a good impact on the performance and profitability of the organization. So, they maintain a structured policy where all employees are cared to participate in decision making.
Responsibilities to society: The social responsibility of company like Giorgio Armani S.p.A is given below:

The first responsibility of the organization is the economic responsibility where the organization has to operate in the profit oriented basis considering the shareholders and other stakeholders’ objectives. These profit maximization should be under the legal framework or requirements so that society faces no negative externality impact. Besides following imposed law, Giorgio Armani has to maintain some ethical issues so that all the stakeholders and society’s purposes are given priority. To ensure the ethical issues, Armani makes the decisions with equity, fairness and impartiality respecting the rights of individuals (Martins and Terblanche, 2003).
Besides these mandatory responsibilities, Giorgio Armani S.p.A maintains some discretionary responsibilities for the social welfare though these activities contribute none in the profit making of the organization. But in the long run, discretionary responsibilities of the organization have an effect on the brand image. Such as In 2006, the Armani Group announces his support of the (Product) RED, the pioneering global business initiative launched by Bono and Bobby Shriver for The Global Fund in the fight against AIDS in Africa.

Task2
2.1Explain how economic systems attempt to allocate resources effectively | |
There are different economic systems followed by the government. These economic systems are normally introduced to allocate the resources more efficiently that are shown in the following; Command or planned economy: In a command or planned economic system, government controls the full economy allocating the scarce resources like soil, capital, labor etc. Here, the planning body or the government has the full information and can take better decisions for the resource allocation but this economic system normally cannot allocate the resources efficiently. This is because the planning body does not have the full knowledge or efficiency to decide how much should be produced. In such kind of economic system there are always shortage or surplus of the inputs where a company like Giorgio Armani S.p.A faces difficulties to operate the business activities properly (Edgar, 1992).

Free enterprise economic system: In the free enterprise economic system all the organizations can operate the business activities with little government intervention. Here, the government has very small number of companies in the market and rules and regulations are flexible to operate the business activities. For this reasons there works a strong positive competition in the market that leads a strong efficient resource allocation. As government does not intervene in the market company like Giorgio Armani S.p.A can produce the products what they really want considering the demand of the market (John and James 1992).

Mixed Economic System: A mixed economic system is like the free enterprise economic system but here the government has a little bit intervention with different policies like monetary and fiscal policies. The mixed economic system is shown in the following figure;

Figure: Mixed economic system Source: Denison & Daniel, 1990.
Here, though the private sector has the freedom to operate the business activities freely government makes some regulations and policies to make the market stable. This economic system can efficiently allocate the resources as there remains both the free trade and some restrictions through which the market players can operate effectively. So, in tis economic system resources are efficiently allocated with little wastage. In this economic system, private companies can apply their own policies managing the government policies and regulations (John & James 1992)

2.2 Assess the impact of fiscal and monetary policy on business organizations and their activities

Government makes different monetary and fiscal policies to control the economy and the business organizations. These policies are taken by the government bodies considering the economic positions that also have a god impact on the business activities of a company that are given below:

* Changes in the interest rate: When government changes the interest rate through the monetary policy then it has an impact on the business activities. If interest rates rise then Giorgio Armani S.p.A will face difficulties on financing as the cost of capital will increase while the customers will reduce their consumption level that will reduce the sales volume. On the other hand, If Interest rate reduces then Giorgio Armani S.p.A will be able to get more financing at lower cost. This will help them operate the business activities.

* Changes in the reserve requirements: if monetary policy changes the reserve requirement then it will also have an impact on the overall business activities. High reserve requirement will push the interest rate high that will influence the consumers to deposit more rather than consumption. So Giorgio Armani S.p.A has to change the business activities as its sales volume will reduce (Stoudmann, et al., 2006).

* Changes in the exchange rates: If exchange rate changes then it will also affect the activities of Giorgio Armani S.p.A. If pound appreciates then the business sector of Giorgio Armani S.p.A that is operating in other countries will face problems while home country sales will increase more value for Giorgio Armani s.p.A.

* Changes in the tax rate: If government changes the tax rate through the fiscal policy then it will affect the business activities from different perspective (Edgar, 1992). If tax rate is reduced then Giorgio Armani S.p.A will be benefited and company may increase the quality of the products without considering the changes in the price. Or they can increase more expenses on the advertisement or other sector as reduction in the tax rate has made the company more profitable.

* Changes in the government spending: If government increases the government spending in different sector than a business organization will face reduction in the sales volume. On the other hand, reduction in the government spending will increase the demand for the private sector so it is for Giorgio Armani S.p.A.

2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organization
In Italy supermarket and retail shops face a severe competition among them as there are different super shops with equal capital and business policies. The major competitors are Giorgio Armani, Gianni Versace SPA, Dolce & Gabbana SRL that are dominating the super market. Though there are different companies but Giorgio Armani holds the major portion of the market. But changes in the policy of the competitors will change the activities of Armani as an organization has to adjust its policies with the existing market to cope with the competition (Buzzle, 2013). So, when other organization changes the policy to stay in the competitive position then Giorgio Armani SPA has to change the business policy.
Italy government makes different regulatory policies that have a direct impact on the activities of Giorgio Armani SPA and these impacts may be both positive and negative considering the type of the mechanism. As operating in the EU zone, they also have to follow some regulations made by the EU while operating in EU countries. So, any changes in the regulations will affect the activities of Giorgio Armani SPA in different ways. For Example; if government imposes a standard quality that the company has to maintain, then to produce within that guideline the cost of Armani may rise. SO, in this case Giorgio Armani SPA has to change the policy like to increase the price or reduce the cost.

Task 3
3.1 Explain how market structures determine the pricing and output decisions in various organizations:
Organizations can follow different market structures. Market structure determines an organization’s influence and its profit. Market structure determines the competition in a market. Structures are classified in terms of presence and absence of competition. In organizations market structure determines the pricing and output decisions. There are different market structures such as Perfect Competition, Monopoly, Duopoly and Oligopoly determine the pricing and output decisions are discussed below: * Perfect competition: A perfectly competitive market is a market where competition is at its best. It is a market structure where there are sellers of the same product then the firm’s price determination and the output decision depends on the demand of the product. In this market buyers actually decide the price and firms try to give lowest price because of the competition and to increase market share. * Monopoly: In a monopoly market a firm plays the monopoly and is the sole provider. In a monopoly market the firm determines the pricing and can demand their own price rather than focusing on the customers. Customers are bound to buy at the firm’s price because they have no option to buy at a lower price from somewhere else. Mostly the firm produces at its full capacity to meet the demand. * Oligopoly: A market structures where there are several large sellers of the same products. Sellers normally set an ongoing price for their product. Sellers offer the same price and it depends on the customer from whom they will buy. Sellers may offer the same price but their strategy to attract customers is different. Firms’ output decision depends on the demand of customers toward their product. * Duopoly: When two companies own the entire market share for a given product and service it is duopoly. Duopoly forces each company to consider its rival's ability to certain business decisions. When members in a duopoly compete on price, they tend to drive the product's price down to the cost of production and it lowers the profit for both company in a duopoly.

3.2 Illustrate the way in which market forces shape organizational responses using a range of examples:
Organization has to consider different market forces to make decisions and other purposes. Major forces are supply and demand, customers’ action, economic scale, output and cost decisions. The way Armani responses to the forces are discussed below: * Supply and demand: Armani makes supply decisions depending on the demand of the market. So if the demand is high Armani has to produce goods to meet customer demand. Armani has to always keep the supply of product available to meet the demand position of the market. * Customers’ action: Armani considers what action customers take before buying a product which means what is their perception of a product before buying. If customers exert more importance on the price quality and price level Armani tries to provide good quality within a low price because Armani is for all class of customers. * Economic of scale: When a company decides to produce high volume of product it must consider economic of scale. Economic of scale has direct impact on the production of goods. Armani has a very good economic of scale and it can produce high volume of goods when demand is high. Armani can produce large amount when needed. * Output and cost: Armani is a company which first considers cost means if the production is profitable then Armani goes for the production. But when the cost is very high and large production isn’t profitable Armani doesn’t go for it. * Other forces: There are many others forces that shape organizational responses. Some forces are like political, environmental, cultural etc. Armani doesn’t produce same kind of product for every country because in different culture people have different interests.

3.3 Judge how business and cultural environments shape the behavior of Armani:
Business and cultural environments have direct impact on an organization’s decision making and an organization must consider these. Armani is a company which considers these environments very strongly. We can analyze the business environment of Armani through PEST analysis: * Political factors: In Italy political situation is more stable for organizations and the government makes many contributions for business organizations. A supportive political environment is very helpful for organizations. Armani can make policy considering this inductive political situation. * Economic factors: Interest rate, GDP, employment rate and inflation rate are the economic factors that influence a business. When these factors are on the side of a business it can function very easily. All these factors are good position in Italy which made Armani activities easy. * Social factors: How customers behave, their perception toward the products, their expectations and their consideration are the social factors that have impact on a business. Armani must consider these social factors for their business activities because the success of a business depends on these social factors. * Technological factors: Technology is changing everyday and an organization must keep up with the updated technology to run the business successfully. Armani must adjust its operational activities with the fast changing technology to increase its product quality and reduce production cost.

Task 4
4.1 Discuss the importance of international trade, and globalization to Armani or other organizations:
International trade has flourished recent years because of modern production technologies, advanced transnational corporations and better transportation system. Any company like Armani or other organizations can operate in other countries with no or very little barriers through the international trade system.
So international trade is very important for Armani and for other organizations. Armani has become already global operating in 46 countries worldwide and because of international trade it can operate activities with no barriers. If there were no international trade then the economics of scale of Armani would be useless and the company would not be able to make more revenues. On the other hand because of international trade Armani can outsource some of its business activities in other countries to reduce cost and improve quality. So a company will always be benefited under international trade.
In modern context, globalization is usually the result of closer ties in international trade, also known as bilateral trade agreements. Cross country investment increases with such agreement. Globalization is very important for organization as globalization facilitates organizations. Here different globalization factors are considered that are important to Armani: * Expanded market: From business perspective globalization provides expanded markets. This means a business that had operated in its domestic country now can operate worldwide. Armani used to operate only in its home country Italy primarily but now Armani has business worldwide and it has become possible because of globalization. Now Armani can sell its products in other countries market without any barrier. This in term increased Armani’s profit potential. * Cheaper resource: Another benefit of globalization is cheaper resource. Before globalization businesses had to use domestic resources but because of globalization now businesses can use cheaper resources that are available in other countries. Armani used domestic resources at the initial stage but it has businesses in many countries like china, Japan where resources are cheaper. * Reduced communication gap: Before globalization it was tough for the organizations to maintain proper communication globally. But globalization has made the world a small village where businesses can communicate with each other very easily. Armani had their business only in Italy but their business expanded and they can communicate easily because of globalization. * Competitive advantage: Globalization gives competitive advantage to the businesses. Armani or other organizations can easily compete with their contender because of globalization.

4.2 Impact of global factors on Armani or other organizations:
While an organization is operating globally global factors are very important issue for the organization. Here different global factors are considered that have an impact on Armani or other organization: * International competitiveness: While Armani is operating in other countries or even in home country then the company has to consider other international competitors. If this competition is high then it is tough to compete in international market. * International business environment: International business environment is consists of political, economy, social, technological, environmental and legal factors that have a direct impact on organizations. So, Armani has to consider these factors while operation in international market. * Tariff and tax: If tax and tariff rate is high in global market then Armani faces difficulties to compete with that country’s company though in EU this is not applicable. * Exchanger rates: A company’s revenue is affected because of exchange rate. So, sudden change in exchange rates is a great threat for Armani.

4.3 Evaluate the impact of policies of the European Union on UK business organizations by using Armani or other organizations:
EUROPIAN UNION has some rules and regulations and member countries have to follow these rules and regulations while operating business. Major policies taken by EU are: * Employment policy * Regional policy * Inflation policy * Education and training policy * Taxation policy * International policy * Establishing ‘the Rules of the game’ policy
Member countries must follow all of the policies when operating their business. Here, Armani has to consider whether there is any policy that may limit its activities. So, while doing business Armani must be careful that all the policies are followed properly otherwise it will face the common law of violating the agreement of EU member countries. When operating in different EU countries Armani has to follow these policies and it will get benefits as a member of EU.

Conclusion:
From the report and its analysis we found out that there are different internal and external factors that have direct and indirect impact on the business. Armani is a privately owned company operating the business activities meeting all the objectives more effectively through different strategies like better customer services, employment policies and making the information available to all the parties.

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