Lela Jones
Business Environment
Task 1
1.1 Identify the purposes of different types of organisations.
A business organisation is a collection of people, collaborating in a coordinated, structured and managed way to meet shared aims and goals. Organisations will come in all shapes and sizes, but will all have a common factor of goal orientation. “A system that coordinates people, jobs and technology and management practices to achieve a goal” Umstot (1998).
A business will always be owned by someone whether it’s an individual or hundreds, with different types of ownership and objectives. Although profit may not always be the main objective, as those of charities or government run enterprises, some profit will need to be made for them to continue in business long term. The majority of organisations will aim to make a profit however small or large. There are many types of business organisations, including sole traders, partnerships, public limited companies, private limited companies, franchises and those in the public sector e.g. local authority and N.H.S.
Sole Traders
This is a business owned by one person, and the most common according to BIS (Department for business innovation and skills statistical release 2013), its estimated 62.6% of UK businesses are sole traders, but as there is no central register for them it is hard to establish exact numbers, a sole trader will employ one or more people, and can easily be set up compared to other types of organisations, as it is cheap to do with minimal paperwork. There are many sole traders whose purpose is to provide a service i.e. window cleaners, hairdressers and plumbers. Some will be a small business that supplies a product like those of a newsagent or market trader selling fruit and veg. For example SAMS Plumbing ltd in hackney, north London is the trading name of Luther Sammy the owner, he provides a specialist service, repairing drains, drainage and pipework, also installation of showers and bathrooms, his purpose is to provide a good service in which he can be paid for, more customers equals more profit. These types of organisations tend to be closer to the customer, they can cater for the needs of the local people in the community, building a good rapport and reacting more quickly to complaints. Also beneficial is that a sole trader will have complete control over their business, and if any, all profit is kept. Whilst all the above is appealing, being a sole trader has its downfalls, often they will work long hours and find it difficult to take holidays, or cover periods of illness. No one to share responsibility with and will find it hard to raise finance and more importantly have unlimited liability, where the sole trader is responsibly to cover all business debts. (Business population, 2013) (Sam’s Plumbing, 2013)
Partnerships
This is a business owned by two or more people, normally no more than twenty, with the exception of some forms of partnerships, such as large accountancy firms as of the Partnerships Act of 1890, amended in 2002. Its estimated only 8.9% of businesses in the UK are partnerships. A partnership can be set up using a Deed of Partnership setting out the amount of capital each partner has invested, how profit and losses will be divided, how many votes each partner is entitled to, the rules on how new partners are accepted and how the partnership will be dissolved. The purpose of a partnership will be the same as that of a sole trader, to provide a service or product. Famously, Google started as a partnership in 1998, between Larry Page and Sergey Brin, whose purpose was to build a search engine to organise the world’s information and make it universally accessible and useful. As with partnerships, where one person is good with the business side of things, the accounting for example, the other person may have the skills such as an hairdresser, this coupling together provides the business with benefits of varied expertise and other resources, including more money, it’s easier to take holidays or someone to cover due to illnesses. Burden is also shared amongst the partners, from decision making, to debts, but all this can change when disputes over workload arise or disagreements over the direction of the business start, there’s less control in the business for each individual and profits will be shared.(Legislation,2013) (Business population, 2013)
Franchises
Franchising defined in the business dictionary as an “Arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade name as well as certain business systems and processes, to produce and market a good or service according to certain specifications “(Business Dictionary, 2013)
A franchisee is required to invest money, to acquire a franchise license and setting up business, once purchased a portion of their profit will be paid to the franchisor on a regular basis, in return the franchiser will provide training, management expertise and marketing campaigns and even supply raw materials and equipment. There are many advantages in becoming a franchisee, as an established brand/name there is a tried and tested market place, with a good customer base, banks also look favourably on franchises and are more willing to provide loans. Everything is normally in place, such as the right and appropriate equipment and job training. Disadvantages are that it is costly to buy a franchise, a percentage of profits go to the franchisor and limited flexibility, following franchise rules and procedures. For example McDonalds is a popular franchise, its “golden Arches” are recognised all over the world, with an established customer base, its purpose, is to make profit, they focus on the 5 ps. People, Products, Place, Price and Promotion. Happy customers, equals more custom equals more profit. (McDonalds, 2013)
Anglo American is a public limited company (PLC), this means they are a type of limited liability company who are allowed to offer its shares to the public, traded on the stock exchange, their purpose is that of a profit based organisation, whilst at the same time, working to use resources more efficiently in order to meet the growing demand of energy in a social responsible way, which means respecting the environment while using the resources. (Anglo American, 2013)

1.2 Describe the extent to which an organisation meets the objectives of different stakeholders.
All organisations will have stakeholders, these are individuals or groups, with a vested interest in a company who are affected by how, what and where a company produces. Anglo American is no different with multiple stakeholders, such as employees, the community, the government, the environment and shareholders, to name but a few. Meeting the objectives of their employees, Anglo American ensure Health and Safety procedures are maintained with a long term aim of “zero harm” in their workplaces, fair wage and labour policies are implemented, equality in the work place and even housing. Anglo American also meets the objectives of the government by complying with laws, regulations and opposition to corruption in the countries they do business in. The environment benefits from Anglo American minimising waste and the consumption of natural resources, protection of biodiversity. For example Anglo American has two mine – gas powered stations in Australia. These capture methane gas from mines, which is then reused to produce energy, resulting in lower emissions and energy use and leads to them being more efficient and sustainable. Anglo American respects individual rights and dignity with courtesy, these principles apply across all the company’s stakeholders in particular the community, and they help improve local transport, communications, power, water, schools and clinics. Investing in the development of their employees, educational and health needs, will benefit all stakeholders in the long run.

1.3 Explain the responsibilities of an organisation and strategies employed to meet them.
Anglo American is one of the world’s largest mining companies and with this has many social and environmental responsibilities. Financially, looking at its financial performance more broadly than just traditional returns to shareholders. Naturally, striving to reduce energy use, minimising impacts on water and conserving biodiversity. Manufacturing, transforming natural capital into infrastructure, processed products and wastes. Socially, increasing the skills and life chances of people in the communities where it works and humanly developing employees and achieving world class performance in all areas of business with and through people. (Anglo American, 2013)

2.1 Explain how economic systems attempt to allocate resources effectively
Economic systems are an organised way in which a country or society distributes and allocates goods and services. When the government controls all major aspects of the economy and its production, it’s called a command or planned economy, they decide what’s to be produced, how its produced and how to distribute the goods and services, they can prevent abuse of monopoly power, mass unemployment, they produce goods which benefit society and ensure everyone has access to the basic necessities. These economies are bureaucratic, decisions are hard to make or long to implement by planning and the committees. The gap between the government and its people can be so large that information is poor about what to produce, often leading to goods that aren’t used. In an economy where everything is owned or operated by private individuals and businesses, is referred to a free market economy. This helps promote the freedom to innovate new ideas, develop new products and offer new services, they can study the supply and demand trends and meet consumer’s needs. Consumers make ultimate decisions on which products succeed or fail, and how much to pay for goods. There are many problems within a free market, it provides no social security net for those that are unemployed or on a low income, and monopolies can easily develop and can set high prices, exploiting consumers and workers. Adam Smith, in Wealth of Nations argued governments needed to prevent the exploitation of monopoly power. The mixed economic system involves both that of a planned economy and free market economy, with varying degrees of each, many of the world’s economies are mixed, and advantages are better equality, providing a safety net to prevent people living in absolute poverty, but also rewarding those that work hard and with entrepreneurial skills. Business and industry can be run by private companies giving incentive to make profit, thus cutting costs and to be innovative. In times of recession the government can implement policies to provide macro-economic stability, on the other hand it can be difficult to know how much intervention there should be by the government, creating other problems, such as government borrowing, influence from political and short term factors. (Economics, 2013)
Many problems face businesses in the UK, external problems including taxes, high cost of insurance, and the state of the economy, transport issues, employee skills and shortages, and also internal problems too like staff wages and the national wage policy, and lack of business capital. In the UK there is a mixed economy, the market is left to influence decisions, for example what people choose to spend their money on whilst shopping is recorded showing what there is a demand for. However the government are responsible for road building, school and hospital construction decisions. The market is allowed to make most of the decisions because of its high level of efficiency in responding to the supply and demand of consumers, but leaves decisions like military spending and public education to the government. (Business case studies, 2013)

2.2 Assess the impact of fiscal and monetary policy on business organisations and their activities
A fiscal policy is the use of the government revenue, such as taxations and expenditure (spending) to influence the economy, either an increase in the government purchasing of goods and services or a decrease in taxes to stimulate the economy. The Monetary policy involves as in the UK, the Bank of England looking at a number of variables such as, exchange rate, unemployment, house prices, economic growth and consumer confidence and studying trends in the economy, if they expect higher growth and inflation, they normally increase interest rates. And if lower growth and a fall in inflation rate are expected, they will normally cut interest rates. In the UK the target of monetary policy is to keep inflation within a target of CPI 2% +/-1. They also consider other macroeconomic variables such as growth and unemployment. If its predicted that inflation will rise above the inflation target set then they will increase interest rates, this means less demand and prevent the economy expanding too fast, if the economy is slow moving, then interest rates can be cut, boosting the economy and help reduce inflation. The fiscal policy can be used to prevent recessions and prevent inflation, but is not used so much in modern economies. (Bank of England, 2013)
3.1 Evaluate the impact of competition policy and other regulatory mechanisms of the UK government on Anglo Americans activities.
The competition policy of the UK government has a major impact on dominant companies like Anglo American, its aims are to help the markets work better for economic welfare and be economically efficient, and the competition authorities promote communication, ensuring wider consumer choices, effective pricing between suppliers and investigating anti competition behaviour, which can have a negative impact on consumer welfare. There are four pillars of the competition policy, antitrust & cartels, market liberalisation, state aid control and merger control. Anglo American is one of the top mining companies in the UK, antitrust & cartels look to restrict competition through barriers of entry, like price fixing and cartels that may reduce power of market giants. Market liberalisation, introduces new competition in an otherwise monopolistic or less competitive market, helping to reduce barriers to entry for the new, as Anglo American are a well-established organisation, this may not affect them greatly, as they operate at a high level capital industry, which have a more powerful barrier to entry. For Anglo American rules to control mergers will reduce the chance of growth other than that of a natural one. There are many Health & Safety legislations, that affect Anglo American as a mining company, and necessary precautions need to be taken, Health & Safety at work (Act 1974), and The Mines & Quarries (Act 1969), to name a few, and to meet these requirements Anglo American need to spend vast amounts of money, to ensure safety of employees and the public. As there are a large number of mining companies listed in the UK but operate in less regulated and potentially corrupt nations, like Anglo American, the UK Bribery Act (2010) brings in force, bribing a foreign public official and failing to prevent such actions associated with the organisation, means that Anglo American are liable for prosecution no matter where the bribe was paid. These regulations will add burden to Anglo American operating outside of the UK.

3.2 Define the various types of markets such as perfect competition, monopoly, monopolistic competition, oligopoly and duopoly and explain how two of these types of markets would determine the pricing and output decisions of a UK based organisation.
Perfect competition is a market structure in which all companies sell an identical product, they have no control over the price of their product and all have a small equal share of the market, consumers are well informed of prices, quality and availability and can enter or leave the market freely. In great contrast to perfect competition a monopoly is where a single company owns all or very nearly all of the market with its product or service, with the prevention of entries from new producers, resulting in high prices and control of quantity sold. Monopolistic competition is a situation in the free market combining the ideals of a perfect competition and a monopoly, giving companies entry into a highly competitive market, where a number of competitors offering products not exactly the same but similar can compete, pricing is averaged and consumers have a choice, valuing a product and purchasing even when the price increases, giving the producer a small amount of market power. An oligopoly is a situation in the market where it is controlled by a small number of companies, much like that of a monopoly but with at least two controlling companies, where the product is differentiated by some, companies will consider the likely actions of other companies when making decisions, being reluctant to increase price in case their competitors do not, instead looking at other ways to sell more of their product like heavier advertising, brand and promotions. A duopoly is a situation in the market where only two companies will dominate the market, they will have the same impact as that of a monopoly, especially if they collude on their prices and output of their given product or service, resulting in consumers paying high prices compared to that in a competitive market. (Business study guide, 2011)

3.3 Using a range of examples both from within and outside the context of a UK based company illustrate how market forces influence and dictate the responses of organisations. Incorporate examples that illustrate the issues of supply and demand, elasticity, customer perceptions, pricing decisions, labour markets and business environment etc.
Market forces refer to the forces of demand and supply, showing sellers and buyers interest to sell and buy goods at a particular price, the quantity of goods and services that are offered on the market. In all economic markets there exists demand and the corresponding supply of goods and services. The demand and supply of a product will come together to a point where a price will be created to which the product will be sold to consumers (Sullivan and Sherrin, 2003). An organisational response is a reaction of a company or business towards an economic situation. Their response is important as it determines their profits and reputation. A successful company will do market research and know how to supply products which are in demand, improving their profits and reputation. Judging margins to supply and sell the correct amount of products without increasing costs or producing much more than is necessary and over stocking, for example a company like Walls, that produces many products but is renowned for ice lollies and ice cream, market research would suggest that in summer months demand will be much higher than that in winter, so a good supply is needed during summer for consumers to buy, supply should meet demand to be able to respond to the forces of the market. Elasticity of demand is another influence that can dictate a response from an organisation, Elasticity is the sensitivity of a variable to adjust in another variable. Income elasticity – is a percentage change in the quantity demanded compared to a percentage change in income, Price elasticity of demand or supply – is a percentage change in the quantity demanded or being supplied compared to a percentage in its price, Cross-elasticity is a percentage change in the amount of a commodity substituted for another by the consumer in response to a change in their prices. (Business study guide, 2011)

3.4 Judge how the business and cultural environments shape the behaviour of UK business.

A businesses cultural environment can help shape and affect how they operate. Culture can be defined as a way of living through the ages, generation after generation. Formerly the UK was a homogenous society, but over the years and especially since the 2nd world war the UK has become increasingly diverse as it accommodated vast numbers of immigrant populations. In the UK there are some unique identifiable characteristics, the British are renowned for their politeness and courteous ways, this is a key element that affects the behaviour of UK businesses, it affects how organisations communicate with their customers, the rarity of displays of emotions are evident and formality in business is seen. The UK has a strong and colourful history of tradition, which is supported by an established system of economic and government stability over time. UK businesses have a positive and attractive base for overseas operations in terms of technology, research skills and infrastructure, which provide an environment with a competitive edge over others internationally.

4.1 Discuss the significance of international trade to UK based mining companies.

The exchange of goods, services and capital between different countries of the world, is better known as International Trade. To be able to buy Spanish olives, Indian tea or Brazilian coffee from a supermarket in the UK are all signs of international trade. Selling products globally allows consumers to buy products not available in their own country, and without this trading would limit countries to the services and goods produced within its borders, and would also lose out on valuable revenue that it could bring. International trade is one of the main features for a mining company based in the UK, as developed countries will require imports, if natural resources are limited and developing countries with an expanding construction industry will require more and consistently in order to grow and develop. In most recent years large economies like the UK have experienced great recession, therefore international trading enables organisations like mining companies to expand to emerging low risk economies in Africa and Asia. International Trade increases sales and profit by allowing these companies to develop their market, enhances the potential for expansion, enables mining companies to gain global market share, by increasing their customer base and reduce dependence of one market.

4.2 Analyse how a range of global factors have affected mining companies of the UK.

PESTEL factors can be used to analyse the business environment of Anglo American, Political environment, the government are responsible for building a stable economic system, in particular maintaining and improving social, physical and market infrastructure, there may be a political risk of development if Anglo American engage in corruption with government regulators in Africa. Economic environment, the activity of the economy in both the UK and the countries in which Anglo American operate, higher rates of inflation, interest rates and exchange rates could increase operational costs in the future if there are no concurrent depreciation of the local currency against the GBP or US dollar, impacting on profit margins. Social and cultural environment features long term trends and beliefs bringing changes to the pattern of demand, location and recruitment policies. Technological environment, changing technologies will have an influence on product and process development, helping Anglo American provide different ways in which they meet needs of the customer. Physical environment shapes Anglo American as a primary sector organisation and earth is its main resource, increasing regulations enforce sustainability and changing shape of the environment. Legal environment, Anglo American is shaped by laws in all countries of operation, as well as those of the UK, competition and tax laws, regulations will all define how Anglo American is run.

4.3 Evaluate the impact of policies of the European Union on UK business organisations.

As a member of the European Union established in 1958, the UK joined in 1972, the aim of the European Union was to create a ‘common market’ to encourage members to trade freely, bringing their economies together. There are many policies and all have an impact on UK business organisations, to make it easier for UK businesses to trade across the 27 states of the European Union, there is Free Trade, the EU is a trade bloc meaning there are no quotas or tariffs for companies wishing to export goods or services within the EU. Unlike the rest of the EU the UK still have border controls. Common Agricultural Policy, these are a set of rules relating to domestic and imports of foreign agricultural products, this is a positive impact upon agricultural community in the UK, increasing productivity, ensuring a fair standard living, a stabilised market, securing availability of food suppliers and proving food at best possible price for consumers. The Common Fisheries Policy means all EU states must abide by the rules on fishing set by Europe, the impact for fishermen in the UK means they are only allowed to fish for specific types of fish in certain periods of the year to conserve stocks. The EU competition law means that companies in the UK have an opportunity to do business across the EU. It stops large companies abusing their power by setting up monopolies or cartels. Trans-European networks, this policy has a great impact on businesses and many countries have benefited from this policy, with transport networks and roads being built and designed to make it easier for the transport of goods across the EU. (Business study guide, 2011)

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