ASSIGNMENT

ON

BUSINESS ENVIRONMENT
Introduction

This report is based on business environment under which every organization operates. This
report is based on developing the understanding of the organizational purposes of business and
understanding the nature of national environment in which business operates. This report also
discussed the behavior of the organization in different market environment and the significance
of the global factors that shape national business activities. To discuss all these issues, a case
company has been taken so that researcher can explain these issues in more elaborate and
exemplary manner. The case company is a UK based retail giant Tesco Group. Tesco Group is
one of the leading retail companies in the UK and in the Europe. The business operation and
functioning of Tesco Group is highly impacted by the business environment provided by external
environment of the UK i.e. market competition and the government’s actions on business
operation.

Task 1

Organizational Purposes of Business

1a) Key Purpose of Public Sector Organizations: Public sector organizations are generally
introduced not for making profit solely, but it is actually meant for public and social welfare.
Unlike private sector companies that solely seeks high revenue and profit in any sense of
business irrespective of social support and welfare, public sector companies have the prime
objective is to provide maximum benefits to the public and society by their business activities
and operations. The profit earned in business operations by public sector organizations are used
for social welfare programs like education, poverty eradication through employment generation,
health services and public infrastructure developments etc. Public sector has main objective is to
bring social and economic equality and justice among the general public by giving them better
employment opportunities. The infrastructure development is only possible by huge investment
that is majorly made by public sector companies for the nation development and growth which
has cascading impact on other industries and sectors and it again helps in generating more
employment opportunities.

The main purpose of every organization group is to focus on high revenue and profit generation
policies and action plans and least bother with the social development and contribution to the
public welfare. But public sector organization has clear stated objectives of social welfare and
economic justice among the general public that actually leads them to start new business unit in a
particular field. The prime difference between group’s motive and public sector organizations’
motive is the ultimate beneficiary from the business operations. Group is self-oriented thinker
that is driven by profit generation, while public sector organization has social thinking that is
driven by social welfare and economic justice.

1 b) Stakeholder Objectives: Every organization has various stakeholders and everyone has
their own interest and expectations from the organization. Key stakeholders of the organization
are: Owners, workers, managers, consumer, government and the community. Owners are those
who invest capital in the business and expect profit generation. Workers are those who put effort
to make business operation successful and expect job security and satisfaction. Managers are
those who lead and control various business activities and expect high salary and high growth in
the organization. Consumers are those who buy goods and services from the company and expect
better quality and reliable products and services. Government expects better business operation
under stipulated rules and regulations and also expect timely fulfillment of tax obligations.
Community expects better job opportunities, social responsibility towards society and
environmental protection. Every stakeholder has common objective that organization meets its
goals and objectives keeping the interest and expectations of them at par. They also expect that
organization function in ethical manner that keeps the interest of society and the environment.

Tesco Group tries to achieve the stated organization objectives to maximum extent by keeping
the interest of the shareholders (the real owners of the company); provide better compensation
(best in the industry), job security and job environment for the workers; better growth prospects
for the leaders and managers; high quality products and services to the end customers that fulfill
their expectations and demands from the company; timely fulfillment of tax obligations and also
following the business protocol under stipulated rules and regulations; and contributing largely
for the betterment of society through environment friendly technologies usage, direct & indirect
contribution in education, health and welfare of society and generating more job opportunities
for the people.

1 c) Key Responsibilities of Tesco Group and Strategies to meet them

Every organization has a particular model of structure that indicates how organization will
operate and progress. The entire structure is based on information, power and control. These
three lays the strong foundation for a successful organization. Like any other successful
organization, the key responsibilities of Tesco Group are:

1) Allocation of Duties: Delegation of duties to individuals and the team is a critical part of
group responsibility. It is the key responsibility of any organization to clearly mention the
roles and responsibility of every individual and teams. Tesco group ensures that every
individual is abided by their responsibilities.
2) Coordination: No organization can run as a single entity but it requires proper
coordination and cooperation among the groups, committees and interest groups.
Coordination has direct relation with information and knowledge transfer and
achievement of target performance level by the group.
3) Operation: Operation of business functionality smoothly is another organization
responsibility because it is essential for the achievement of business goals and objectives.
Operation is not limited to a particular department and functionality, but it has wide
scope in the organization and Tesco group ensures it diligently.

Strategies Employed

Tesco group has framed clear Human Resource Policy that clearly defines set rules and
regulations related to employment condition, compensation, wage rate, health & safety concern,
employee appraisal and performance judgment etc. Based on these guidelines Tesco practices
their organization responsibility towards their employees. The roles and responsibility based on
the qualification, experience and seniority in the organization confirms the defined position in
the organization. Past performance and contribution to the development of the organization are
also taken into consideration before assigning responsibility to any individual.

The coordination among employees is ensured by the managers and supervisors who are given
responsibility to encourage their subordinates work with mutual understanding and coordination.
The employee issues related to conflict and confusion in coordination are sorted out by the
managers only.
The business operations are made smooth by controlling various favorable and unfavorable
activities in the organization. Tesco group ensures this by conducting regular check of activities
by the external agencies and if they found any glitches or gap in the process, appropriate
measures and actions are taken to fill those gaps.

Task 2

Nature of the National Environment in which Business Operates

2 a) Features of Planned and Mixed Economic System

The economic system of any country majorly decides three things: what to product, how to
product and how to share product of the economy. These three things are decided by three kind
of economic system: Planned, Market and Mixed Economic System. In market economics, the
above three things are decided by the buyer and sellers who interacts with each other without
interference of government authority. In planned economics, the central government authority is
responsible for the formulating plans and execution of it. The central government is the sole
decision makers in this case. On the other hand, mixed economy incorporates the basic elements
of these two economies i.e. market and planned economies.

In planned economic system, it is believed that government is the best regulator of the economy
and it takes care of people and meets their needs properly without any discrimination. On the
other hand, market economic system believes that market is the best regulator of what is
demanded by people and what should be produced. They argue that government planning waste
resources and make the market uncompetitive. On the other hand, mixed economies partially
hand over the regulation to the central authority and partially to the market mechanism.

In planned economic system, the operation of Tesco group is majorly regulated by the central
authority i.e. top management of the organization and they decides how the resources should be
utilized and how the benefits of the organization should be distributed among each member of
the organization based on their contribution. In mixed economy system, the decision of resource
utilization is taken by the top management up to a certain extent and some authority of resource
utilization is given to field managers who decides the organization benefit should be given to
those performs well and deserve according to their efforts.
2 b) Impact of UK Government cuts in expenditure and interest rate measures on
Organization
The decision of UK government cuts in expenditure and interest rate measures in year 2012 has
major impact on the corporate world. The expenditure cuts have direct impact on aggregate
demand of products and services and it will have impact on the revenue and profitability of the
organization. The cut in expenditure is mainly in the area of health, compensation to government
employees and the infrastructure developments and these cuts will reduce the buying tendency of
the end customers. Now people will spend more on primary products and services rather
purchasing consumable products from the stores like Tesco. This will push the production
growth to negative side and it will impact the expansion and growth policy of the Tesco Group.

On the other hand, the interest rate cut especially in the home and property sector will encourage
people to purchase new property at low interest rate. This may again impact on buying behavior
of the end customers as they would less likely to purchase new products and their shopping spree
will be halted to a large extent. The lending rates are not low especially for the business activities
and it is still high and this discourages organizations like Tesco Group to follow the expansion
policy and invest in new area. This not only impacts on the growth policy of the company but the
future growth also.

Overall UK government policy of expenditure cut and interest rate cut has major impact on
overall profitability and expansion policy of the company. The government step might be taking
the whole market in the recession again as the aggregate public demand will be decreased and
accordingly the business operation of the companies especially retail companies like Tesco
group.

2 c) Impact of UK Competition Commission/Office of Fair Trading and Food Standards

Agency on Tesco Group

The Competition Commission of UK is majorly responsible for regulating the market

mechanism, investigating market related inquiries and ensuring the consumer interest & welfare.
It is a competition regulator that ensures healthy market competition among the organizations in
the United Kingdom for benefiting the economy and the consumers. Office of Fair Trading is
also an integral part of Competition Commission of the UK and ensures that companies follow
right market practices and providing benefits to the end customers. It is a non-departmental
public body has major impact on the market activities of the organizations like Tesco Group.
Retail sector in the UK is highly competitive and many small and big size retail organizations
offer their products and services to the end customers. The quality standards and the pricing of
the products are controlled and regulated by Competition Commission and it ensures that end
customer gets it at lower price than the maximum retail price. For example, the grocery and daily
use items from the branded manufacturers are provided at the common price to all stores
irrespective of retailers, so this makes cheap availability of product to the end customer as every
retailer would like to sell products from their stores only. The further reduction in price by the
retailer can be made possible in heavy shopping.

The Competition Commission ensures that no company can take unfair advantage of product
pricing specially the common market products. This may impact Tesco Group in overall
profitability and revenue.

Individual Summary

This report is mainly based on business environment under which every organization has to
operate. This report has discussed many aspects of business environment right from the purpose
of businesses to the significance to the global business factors. In this report, Tesco Group has
been taken as reference organization and its business activities have been discussed under
various conditions.

In the first discussion, the organizational purpose of business has been discussed where
researcher has outlined the key purposes behind introduction of public sector organizations in
any country. It has discussed that public sector organization is not only meant for the profit
making unlike many other private organizations, but it has major objective is to provide social
benefits and economic justice to the public where equal employment opportunity is given to
people and also the corporate benefits are distributed to the local public through various
corporate social responsibility programs. It has been discussed under this theme is that every
organization especially the private organization are meant for profit making and revenue
generating and most of the time it ignores their responsibility towards the society for which they
have started their business operations.

In other part of the discussion, the expectation of stakeholders from the organization has been
discussed. In this discussion, the importance and objectives of stakeholders in the organization
have been discussed one by one. From the owner of the company to the consumer of company’s
product is responsible for the organization development and every stakeholder have high
expectations from the company. The fulfillment of stakeholder expectations by Tesco Group is
done to a large extent. Tesco Group not only seek high profit generation like any other private
firm, but it also committed to provide better quality product and service to the end customers;
make their employees happy in all sense and finally stick to the government obligation under the
stated rules and regulations.

Tesco Group has three key organizational responsibilities i.e. allocation of duties, coordination
and smooth operation of business. These three responsibilities are met through organizational
and HR policy of the company. Allocation of duties and coordination among employees are
integral part of HR planning and policy, but smooth business operation is ensured by conducting
regular check of activities by the external agencies and if they found any glitches or gap in the
process, appropriate measures and actions are taken to fill those gaps.

In second part of the report, the researcher has discussed the nature of national environment in
which business operates. In the first section of discussion, the fundamental features of planned,
market and mixed economic system has been discussed. In each economic system, the regulatory
authority of decision making with respect to resource utilization is the main difference. Keeping
these economic systems in the consideration, its impact on the operation of Tesco group has been
discussed. In the discussion, it has explained that planned economic system allows the central
government authority to take final decisions regarding the resource utilization and allocation;
while in case of market economic system the market mechanism decides the resource utilization
and allocation completely based on demand and supply of consumers.

In second section of discussion, the impact of UK government cuts in expenditure and interest
rate measures on activities of Tesco Group since the year 2012 has been discussed. It has been
discussed that the expenditure cuts have direct impact on aggregate demand of products and
services and it will have impact on the revenue and profitability of the organization. The cut in
expenditure is mainly in the area of health, compensation to government employees and the
infrastructure developments and these cuts will reduce the buying tendency of the end customers.
Interest rate measures are also not encouraging for the corporate business as high interest rate
does not allow Tesco Group to take loan from banks and seek for business expansion in other
parts of the country.

In the last section, Impact of UK Competition Commission/Office of Fair Trading and Food
Standards Agency on Tesco Group has been discussed. It has been explained that competition
commission of the UK is majorly responsible for regulating the market mechanism, investigating
market related inquiries and ensuring the consumer interest & welfare.

References

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participation, Policy Research Paper Series, The World Bank.
 Buckley, G.; Salazar-Xirinachs, J. M.; Henriques, M. (2009): The Promotion of
Sustainable Enterprises, Geneva: International Labour organization.
 Leibenstein, H. (1968): Entrepreneurship and development, american Economic Review,
58 (May), 72-83.