There are a lot of types of organizations in UK today, but most common are sole trader, private limited company, government, partnership, public and Public Limited Company.
The simplest structure is the sole trader. It is easy to start. You just register your business name and able to start trading. Such types of organizations are funded by only one person. All processes are managed by you and all profit is belongs to the sole trader (after paying tax) because it is funded by him/her. As result the owner has to accept a risk and be able to lose money. The profit depends on activity. Examples are: small shops, professional lawyers, service businesses, farms, doctors, etc.
The next way is a partnership. This means that company is funded by two or more people (but maximum is 20). Partner is an individual who has equal responsibilities and share profit and management. Each member has to pay tax. Sometimes doctors, accountants, lawyers unite and organize partnership company.
Private Limited Company is a non-government organization. Its shares are not listed in stocks and it is owned by small numbers of members. It is able to sale shares to customers but not the general public. As a result they tend to be small as to raise funds they need directors to act as guarantors for loans. The company is managed by two or more directors. Usually such type of company is used by families. The most famous and success private limited company in UK is Virgin.
Public limited Company is a type of company used in UK and the company provides limited liability to its management and owners. In contrast to the private limited company, public one is able to sell shares on public exchanges and stocks. There are several criteria to be PLC. The first one is the minimum share capital and the number of directors. It has not to be less than 50 000 pound and less 2 directors. Also every company should take PLC symbol in the end of the name.
Government organizations are owned by country usually they have more permission in inside and sometimes in international markets too. To be a government company state should have more than 51 % shares of company and company managed by state. Usually many railway and transport company are government companies.
Franchising is a more difficult form of incorporation. Usually in this type of organization involved two different companies. One gives permission to use their brand, other rents this brand. So the first company has a profit from selling brand. Examples are: McDonald’s and Subway.
1.2 Describe the extent to which an organization meets the
Objectives of different stakeholders.
Individuals, groups, government and all other members who are interested in an organization are called stakeholders. The power and interest of different stakeholders are different. Interest stakeholder is determined by his desire to influence the organization.
Therefore, the scheme of stakeholder:
The Influence of the stakeholder = Power X Interest.
Stakeholders dived into groups: C:UsersÐÐ°Ð²Ñ€ÑƒÐ·DownloadsQQæˆªå›¾æœªå‘½å.jpg
Internal stakeholders have a direct and immediate impact on the company.
External affect the business indirectly.
An interest and an influence of different stakeholders.
Shareholders people who have invested money in the firm, obviously they are waiting for financial return. They are interested in the growth of profits of the company and its annual dividend. If shares were purchased with speculative purposes, then shareholders may be interested in the growth of their prices to the further resale of shares to cash in on the difference in the costs of buying and selling.
Top managers and directors.
Managers as any employees who are interested in their salaries, bonuses and prizes. It is important for them and such a thing as a non-financial involvement. Occupying a high position, the Manager takes on weight in society and in their own eyes. In addition, any Manager care about his responsibility area.
Customer is the most important stakeholder. It is because they create demand in the market. Their interest is to get the right products at reasonable prices and in good quality. The consumer is interested to get the product as quickly as possible. Guarantees of security and health item also are important for them.
Those firms that supply raw materials or semi-finished products for companies, as well as provide some services, interested in what the firm ordered from them regularly, punctually paid in accordance with the terms of the contract. Also any provider interested in closer contact with the company, for example, entering into an exclusive contract.
Structures that provide the company loans, they are interested in timely refunds and interest. They can keep track of the company with a view to determining whether it is effective it is using funds received and whether their pay.
Authorities are interested in tax revenue resulting in the formation of the city budget. It also expects the firm’s employment, as well as the legality of its actions.
Corporate social responsibility policies are a duty to do best for good of society. First of all it aimed to customers by offering safe and healthy products at reasonable price. For example Barclays which always provided financial service has CSR policy which includes providing healthy transport such as bicycles to London even it not profitable. The company helps community by this way and increase number of its customers.
Explain the responsibilities of an organization and
Strategies employed to meet them.
The main response of the company is to provide good serve or product to it is clients. Consumers want to know if they buy safety and qualitative goods or serve. Companies surely should guarantee what they produce or serve. Marketing also have a place here because many organizations usually promise too much on ads but in reality goods are not as they were described. All this points are written in legislation and organizations must follow them.
If we talk about workforce, the company must provide them safety and good condition where they work. The Health and Safety at Work (HSW) is the law which provides and protects these points.
According to Health and Safety at Work Act 1974 (cited rospa.com, 2012 ) “All employers have a duty to ensure, so far as is reasonably practicable, the health, safety and welfare of their employees. They also have a duty to protect non-employees from risks arising out of their work activities”.
This means employer is liable to provide safe and healthy work environment.
In the recruitment process organizations have to provide equal opportunities for all applicants. These points are written in The Equality Act 210 (cited homeoffice.gov.uk, 2012). According to this Act organizations do not have write discriminate jobseekers by their age, sex, disability, religion or belief, sexual orientation and so on.
Companies must provide honest financial report every year or quarterly to their shareholders. It is a statement in which financial performance and other operations are written. For example Enron’s (USA company) top managers over stated their profits in the financial report which lead to scandal among stakeholder. As a result company became bankrupt.
Another aspect is environment. Organizations are responsible to provide safety goods not only for consumers but it have to be no dangerous for environment too. Today there are a lot of talks about global warming and pollutions. The company’s goal is to reduce them within the law. For examples they must buy environment friendly equipment’s. Such companies like Gazprom care about it. The company tries to minimize the effect from their activity by using new technologies moreover they invest money in environmental programs. According official website Gazprom in 2010 58% of their investment took a place in water protection, 26% – land protection.
2.1 Explain how economic systems attempt to allocate resources effectively.
The economic system is a complex of socio-economic and institutional relations between producers and consumers of goods and services in country. Since the appearance of human there were a variety of economic systems. However most important are:
Every system has own benefits and problems, but the common one in any economic system is scarcity problem. This question made us to answer how to produce, how to satisfy all people, how to consume. All types of economy system solve this problem differently.
In planned economy system government tries to satisfy all demand in inside economy. Every companies, organizations, factories are belonged to government. Mostly all planned economies are closed for foreign. Benefit of planned economy is stability. Government can easily supply all demand. Disadvantages of this economy is that planners ignore the environmental impact and they do not care about scarcity they just produce to cover demand how much is not important.
However in free market goods and serve are produced for personal reasons – to take profit from them and companies are owned by people. In free market the main rule is demand and supply. The most difference between planned and free market economy that price of goods or serve in planned economy put by government nevertheless in free market by demand and supply. The scarcity problem in free market is also common but there raw materials are used smartly. When resources are in shortage the price is increasing and the demand gradually goes down in this way resources are used effectively.
2.2 Assess the impact of fiscal and monetary policy on business organizations and their activities
The impact of fiscal and monetary policy on business is significant. The aim of these policies is the same but the ways of reach are different. The main purposes are stable economic growth, the stability of the price level(inflation),the balance of payments, low unemployment.
Fiscal policy is a stabilization policy of the federal government aimed to control the economic cycles. That’s means that government tries to stabilize economy by changing incomes and outcomes of the state budget. The main tools of this policy are net of taxes and government purchases of goods and services. If in the country the recession, the government can either increase purchases or reduce taxes. If the rise or overheating of the economy, that, on the contrary, reduce purchases or increase taxes. C:UsersÐÐ°Ð²Ñ€ÑƒÐ·DownloadsGovernment-Policy.jpg
Monetary policy is stabilization mechanism aimed to control supply of money in the state by Central banks. The central banks of the countries try do it by changing interest rates or Reserve requirements, by open market operations. Also they have other instruments but most common three ones.
Changing interest rate has enormous impact to the supply market. When there is a crisis or recession the rates goes down. It happens cause low rates is stimulating people to spent money more as results the demand is increasing and economy recovers. For example now the average rates in the World are the lowest cause it recession period. Another method of controlling supply of money is buying or selling government bonds in an open market. When there is a rise Central bank sells bonds to commercial Banks by that they reduce the amount of money in the market and when there is a recession Central Bank buy bonds from bonds holders(cause not only banks can buy them) as result the amount of money increase and rates are going down.
2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organisation.
Competition policy is a policy aimed to control competition between companies. They control if there are not monopoly in the market, if the merger of companies does not damage market structure and if there are enough supplies. Also the policy tries to promote competition in local market.
The policy always controls if there are enough energy companies in the market and are they able to cover all demand. It is really important policy without it prices can grow sharply especially gas, electricity.
For example According to Russian political newspaper “Kommersant”(cited kommersant.ru) The European Commission (EC) has launched a formal investigation into the actions of “Gazprom”, which, according to officials, may impede competition in the gas market in Central and Eastern Europe. “Gazprom” supplies about 30% of the gas imported by the EU. “The opening of the investigation does not prejudge the outcome of the proceedings, but only means that the Commission will consider this case as a priority” – to be confirmed in a statement by the EC. In particular, they suspect that “Gazprom” could violate Art. 102 of the Treaty on the functioning of the EU.
This document regulates the monopolies that restrict competition in the private sector. In Art. 102 contract states that should be prohibited “any abuse by which involved one or more dominant position in the domestic market or in part” because this may affect trade between Member States.
OJSC «Gazprom» is Russian public gas and the gas distribution company, the largest company in Russia (according to the magazine «Expert»), the world’s largest gas company, owns the largest gas transportation system (more than 160 000 km).
3.1 Explain how market structures determine the pricing and output decisions of businesses.
Market structure is a set of factors, which determine the nature of the interaction between companies. Mainly market structure is a general factor of pricing. Further I will describe it.
Market structure can be determined by number of factors:
Number of firms in the industry and their size;
Type of products produced by the company (a sister or differentiated);
Opportunity for new companies to enter to the market.
Number of customers.
The ability of firms to influence demand through advertising.
And so on.
However, the main ones are 3 factors:
Number of firms in the industry and their size;
Type of products produced by the company (a sister or differentiated);
Opportunity to enter the industry and exit of other firms.
Considering these factors there are four main types of market structure:
This table shows difference between them
Monopoly is an extreme form of imperfect competition, in which the only seller complete control over the production of goods in the market. It is inevitable in a market economy – each competitor in the market wants to become a monopolist. The price of goods is highest in monopoly. Monopolist can put any price for a good because nobody except it produces the goods.
Oligopoly is the market structure consisting of a small number of large firms, some of which control a large share of the market. In this situation, market entry of new firms is possible, but difficult. It is too expensive. Non-price competition is nature (technical excellence, quality and reliability of products, etc.)
In Monopolistic competition there a lot of firms and they produce the same products but the brand are different. For example in Holborn there are too many cafes which provide good coffee. Each café has own place in the market. Large number of buyer and seller the same goods but different branding and fierce competition.
Perfect competition is a competition that takes place in a market where a very large number of interacting firms producing standardized, homogeneous goods. In these conditions, any firm can enter the market, there is no price control. The price regulated by demand and supply .In the market of perfect competition single buyer or seller has little impact on the level of the current market price. Seller can not set higher price for product or service than the market one as buyers are able to buy it for any amount of goods they need from competitors.
3.2 Illustrate the way in which market forces shape organizational responses using a range of examples.
Market forces – conditions affecting supply and demand in the free market by determining prices, the behavior of buyers and sellers, lenders and borrowers, encouraging improvement in production, increasing efficiency and quality of work.
Supply is a quantity of goods or serves which are provided in the market. For example if you have 5 phones, then your supply of phones is 5.
Demand is a quantity of buyers which would like to buy goods in the market. For examples if there are 6 people who want to buy the number of demand will be 6.
Demand and Supply have an enormous affect in free market. It is general rule of this market. The interaction between them makes prices on goods. If there more supply then demand the prices are cheaper, but if the demand more the prices increase. For example the price of oil directly connected with this rule. Several months ago when Libya stopped providing oil to the market the price of oil increased gradually. It happened because Libya is one the biggest exporter of oil so there was little shortage in the market. C:UsersÐÐ°Ð²Ñ€ÑƒÐ·DownloadsSimple_supply_and_demand.png
Caption: Simple supply and demand
Competition in the market also influenced on price. The more competitors, the less price. The less price means increasing demand as a result increase a profit. It is important for competitors to create something new – distinction. For example Apple differentiated its products in order to become market leader. Differentiated its product by using touch screen technology several years ago in that time competitors did not think about implementing this technology. People bought Apple product even it more expensive 2 or 3 times, even now they are still buying because of unique product.
3.3 Judge how the business and cultural environments shape the behavior of a selected organization.
Today successful companies in one local market can’t be success in other market or they might be but it is difficult. Business and cultural environments have great impact on organization. Business environment includes social, political, legal, economical conditions. Anything not related to political and economic system can be considered as social cultural environment.
Culture is an important factor in making business. Sometimes different things mean differently in different countries or cultural environments. When you organize business you should note in which market your goods are targeted domestic or international. It is too difficult for companies to enter to other market.
In any society, people have certain fundamental values. For example, most Europeans believe that the most important thing in their lives – it is to be honest, hardworking, have a good family and did not spare the money to charity, care about environment. Companies must adapt to such circumstances and gain profit from it. For example Gazprom which is a leader of providing gas energy in EU invests money in environment because the company knows how it is important value of environment in culture life for Europeans. C:UsersÐÐ°Ð²Ñ€ÑƒÐ·DesktopÐ‘ÐµÐ·Ñ‹Ð¼ÑÐ½Ð½Ñ‹Ð¹.png
Gazprom as a Russian biggest company is always under political pressure especially from EU and Ukraine.
According to Shemetov (2012): “Russian energy giant Gazprom accused the European Union of levying political pressure against the company in a bid to force down fuel prices. This statement came after the EU launched a probe into the company’s alleged violation of antitrust laws.
The investigation of The European Union is illustrating that Gazprom alleged of unfair competition and price-fixing in Europe energy markets. The EU claimed Gazprom has created hindrance in the flow of gas across EUs member-states. Gazprom was also suspected in imposing unfair costs on it customers by Brussels”
4.1 Discuss the significance of international trade to UK business organizations.
International Trade is an exchange of goods and services between countries. International trade allows UK citizens to expand the markets for goods and services that would not be available to them without it. Thanks to it, we can buy foreign goods, to choose not only between domestic competitors, but also between foreign. As a result, there is a large international trade in a competitive environment, and vendors try to offer consumers better prices.
World Trade Organization (WTO) was created to regulate and liberalize international trade between participating countries in 1995. WTO is responsible for the development and implementation of new trade agreements, and to ensure the observance of members of the organization all the agreements signed by most countries and ratified by their parliaments. According to official website(wto.org) now there are 157 members on 24 August 2012.
International trade in services and goods not only leads to improved performance, but also allows countries to participate in the global economy, the possibility of encouraging foreign direct investment, which are funds invested in foreign companies and other assets in the package.
Mostly UK organizations provide services rather than raw materials. London is the important place in International Trade. Major foreign exchange operations are conducted here. Moreover biggest banks (HSBS, Barclays, RBS.) insurance companies, hedge funds are situated in UK. Many biggest companies are opened even they do not provide services here. It is because of not strict regulation and government fulfillments of their responsibilities. A lot of big financial and non-companies are quoted in British Stock Exchanges.
According to statistic which provided WORLD Bank (cited worldbank.org), 32 % of UK GDP accounted for export in 2011.
The picture below shows what and where exported UK in 2009/2010 Source(http://www.economywatch.com/world_economy/united-kingdom/export-import.html)C:UsersÐÐ°Ð²Ñ€ÑƒÐ·DownloadsUK exports graphic.jpeg
4.2 Analyze the impact of global factors on UK business organizations
UK economy as well as other economies is vulnerable to global changes. Global factors relate to external business environment. As stated above UK is one the biggest exporter and importer in the world and any changes in the world affected to UK business directly. We can divide Global Factors into several Groups. Social, political, economic, legal and technological factors.
e.g. EU enlargement, the euro, international trade, taxation policy
e.g. interest rates, exchange rates, national income, inflation, unemployment, Stock Market
e.g. ageing population, attitudes to work, income distribution
e.g. innovation, new product development, rate of technological obsolescence
e.g. global warming, environmental issues
e.g. competition law, health and safety, employment law