Business Environment - Competition & Markets Authority - Assignment Example

Business Environment Name Name of Institution Business Environment Task 1 AC 1.1 Name of business (10) Local, National, international or Global Ownership (sole trader, Plc and Ltd) Sector (Primary, secondary, tertiary) Purpose of business The MeatWagon Local Sole Trader Secondary The production and sale of fast foods. Duncan Oliver Local Sole Trader Tertiary Operates his minicab service that transports individuals in the city. Hot News Local Sole Trader Tertiary Sale of assorted magazines and rare food items from the US, New Zealand, and Australia. BBC Worldwide LTD Global Ltd Tertiary Marketing and sales of BBC programmes around the world. Antal International Ltd International Ltd Tertiary Recruitment services and acquisition of businesses in emerging markets. Bestway International Ltd Secondary Wholesaler specialising in food and a several non-food items manufactured by the firm. British Petroleum Global PLC Primary Finding and extracting of oil and natural gas for sale British American Tobacco Global PLC Secondary Production and sale of cigarettes Ladbrokes International PLC Tertiary Offers betting services to the retail market in the UK, Ireland, Spain, Belgium, and Australia. The Foundation for Liver Research National Charity Secondary The firm conducts research into liver diseases with the aim of developing better treatment for those suffering from liver ailments. AC 1.2 MCFC Stakeholders Needs/Expectations What the organisation does to meet the needs of stakeholders How successful? Fans Entertaining football, recruitment of top players, trophies. The club has purchased top players in all positions and hired to managers. The club has also invested in a state of the art training facility The club has recently won two Premier League titles. MCFC has also qualified to play in the Champions League. However, there has been no Champions League success. Fans expect the club get to the latter stages of the competition, and finally win in the near future (MCFC, 2015). Shareholders Trophies, returns on investment, media exposure. The club employs top players and coaches to guarantee entry into the lucrative Champions League. Winning trophies also satisfies shareholders. The club has been unsuccessful in terms of generating returns on investment due to the massive investments in top players. However, winning the Premier League, Capital One Cup, and the FA Cup in recent years has satisfied the shareholders (MCFC, 2015). But a higher degree of satisfaction will come with winning the Champions League. Employees Good compensation, recognition, good working conditions, team to win trophies. The team attracts top employees from the profession, invests in top-notch facilities, and aims to win all competitions it enters. MCFC has been very successful in meeting the needs of employees. Its wealth means that it can offer competitive salaries, and MCFC has opened what can be considered as the best football facilities in the country (Wheeler 2014). Recent domestic win also means that employees get satisfaction for being part of a successful organisation. Sponsors Brand exposure MCFC renamed its stadium to become the Etihad Stadium to promote the brand of its main sponsor the Etihad Airways. Players also wear kits that display the Etihad logo to promote the brand. MCFC has successfully promoted the brand of its various sponsors. For instance, hosting clubs such as Barcelona and Real Madrid at the Etihad Stadium in the Champions League exposes the Etihad brand to a global audience. Players Good compensation, professional training, good working conditions, trophies, national team involvement. MCFC employs managers who have already achieved success in the game. The club has also invested in a state of the art training facility known as the Etihad Campus (Wheeler 2014). The club continues to recruit top players to improve the chances of winning trophies. The players are the stakeholders who derive the highest level of satisfaction. The earn some of the highest wages in European football and train in a world-class facility (Wheeler 2014). The club has managed to win trophies, and it provides its players with the platform to be called for their national teams and earn global recognition. Organisations (FIFA, UEFA, Premier League, FA) Expects clubs to follow rules of the game, have legal player transfers, and become good ambassadors of football to attract more fans. The club consults these organisations on various issues. The club tries to ensure that it follows all the rules. The team has failed in meeting Financial Fair Play regulations and paid a massive fine for this failure. In addition, their squads for European Competition will be restricted, and the club will have to be careful in handling future transfers (Gibson 2014). Media Expects MCFC to play entertaining football and gain match-day audiences, prevent hooliganism or racism. The club accepts to follow schedules created by the media to maximise viewership. The club schedules regular interviews with managers. Players also get media opportunities. The club has been successful in meeting the needs of the media. MCFC plays entertaining attacking football and fields global stars like Sergio Aguero and Yaya Toure. The popular matches between MCFC and local rivals Manchester United is an example of MCFC’s success in attracting a huge audiences for the media. AC 1.3 Legal Responsibilities Strategies Employed to meet them Prevent hooliganism and racism The club retains a list of all the people who attend matches, as well as their seat numbers. Hooligans or racists can be tracked with ease. The club also has surveillance systems and employs many stewards during matches. Follow the rules of the game The club consults football organisations like the FA and the Premier League in order to understand existing and new rules of the game. Employment law The recruitment of various employees who work in the football section or business sections complies with relevant employment laws. The club retains legal counsel to advise them on how to adhere to employment laws. Financial fair play The club strives to grow its revenue so as to be able to spend in the football transfer market. The club has paid a fine for its previous breaches of financial fair play (Gibson 2014). Respect player contracts, carry out legal recruitment of academy players, respect Bosman rule The club has an academy that develops local and international teenagers. The club has to respect the rules regarding local and international transfers of vulnerable children. The club respects the contracts of senior players who retain the right to move and work for any other club in Europe. Business Responsibilities Strategies Employed to meet them High match-day attendances The club moved from the old stadium, Maine Road, to the new City of Manchester Stadium, which had an improved capacity of 48,000. The move allowed the firm to collect higher match day revenues, an important source of income for football clubs (MCFC 2015). Football merchandise sales The club attracts world class players from across the globe. These stars help the club to sell football merchandise and give the club much-needed income. Entry to the Champions League The club has consistently qualified for the Champions League. This gives the club additional revenue from the extra matches as well as huge fees from the media. Sponsorships The club attracts some of the wealthiest sponsors in the planet. For example, Etihad Airways paid the club £400 to get the naming rights for the club’s stadium (Taylor 2011). Taxes The club has to pay various taxes to national and local governments as it functions like any other company. Social Responsibilities Strategies Employed Employ workers from the city A clubs most important social responsibility is to employ people from its vicinity. Manchester City recruits as many people as possible from the city in order to raise the standards of living in the area during times of economic hardship. Redevelop the area around the stadium and academy The city of Manchester has several rundown areas around Ancoats and New Islington. MCFC has decided to invest £1 billion in these areas to build 6000 new homes (Jupp 2014). Develop local English talent England has performed poorly in recent competitions like the 2014 World Cup. MCFC has a social responsibility to locate and give chances to local English players. Consequently, the firm has developed a state of the art training facility that scouts and develops local talent (Wheeler 2014). Engage with charity bodies MCFC has a number of selected charity partners during each season. These charities benefit from support for their activities, initiatives, and fundraising (MCFC 2015b). Improve educations standards in the area In addition to developing football skills, MCFC also focuses on education. An example is its Ready, Steady, Work program that teaches teens some of the skills they would need to get employed (MCFC 2015c). TASK 2 AC 2.1 An economic system defines the mechanism through which a society attempts to meet material needs and wants of individuals through the production of goods and services. The scarcity of resources means that society has to decide about the activities that should be given priority and those which can be neglected (Orr 2011 p. 22). For instance, historical societies concentrated on the production of food while current society concentrate on allocating resources to other goods and services due to food security. There are three types of economic systems; centrally planned, free market and mixed market. Centrally planned systems refer to those where the government is in full control of the allocation of resources. Individuals and private businesses have no say in decision-making. In addition, government decisions do not respond to demand and supply forces, meaning that there are frequent surpluses and shortages in countries that use this system (Orr 2011, p. 33). As such, there is ineffective allocation of resources in centrally planned economic systems. North Korea is an example of a country that uses this system. The country is secluded from the rest of the world meaning that it has access to limited resources. Thus, the government has decided to oversee the allocation of the limited resources. Free market systems are those where corporations are in control of the allocation of resources with minimal government interference. Supply and demand forces play a pivotal role in determining the allocation of resources leading to high levels of competition (Orr 2011, p.22). It is evident that this system leads to highly efficient allocation of resources. The main limitation of the free market system is that a few private corporations might profit while the needs of the public are ignored due to lack of desire to create not for profit goods and services like infrastructure. A completely free market economic system is unattainable in the real world. But a nation like Hong Kong has an economic system that tends towards a free market system (Forbes 2015). The absence of government intervention can be seen in the lack of quotas and tariffs on imported goods. The third economic system is the mixed economic system. The system combines the features of the free market and centrally planned economic systems (Orr 2011, 42). Globalisation has caused many governments to move towards the mixed economic system. The allocation of resources is efficient as the needs of the public and private corporations are considered. The UK and the USA are countries that use the system. They both have vast resources that are mostly in private hands, but the governments regulate the allocation of these resources through measures such as antitrust laws and taxation. AC 2.2 Fiscal and monetary policies define tools that governments use to influence economic activities. Monetary policies focus on the supply of money while fiscal policies concentrate on government spending and taxation. The implementation of these policies have different impacts on businesses as well as the overall economy. Variations in government spending have different consequences for businesses and their activities. A reduction in government spending will lead to reduced demand in the economy, and it may lead to a recession. In contrast, an increase in government spending will increase demand and encourage business to increase production activities. The net effect will be a growth trend in the economy. When it comes to taxation, an increased tax rate will lead to reduced business activities. A reduction in the tax rate will prompt businesses to increase activities. This can be through investing in new production technology, increasing production, and spending more money on promotional activities. As stated, monetary policies concentrate on the supply of money. Variations in exchange rate have huge impacts on UK businesses. A rise in the value of the Pound will make exports from UK businesses more expensive, meaning that they will be less competitive. A depreciation of the value of the currency will have the opposite effect, and UK businesses will be more competitive. Similarly, changes in the interest rate have massive impacts on UK businesses. A rise in interest rates will limit access to credit leading to a reduction in business activities. This measure can lead to a recession as businesses will cut jobs and reduce spending. A reduction in interest rates increases access to credit and increases the supply of money in the economy. The result will be more business activities and a growth trend in the economy. It is worth mentioning that there can be situations where these systems become ineffective. For instance, when the interest rates approach 0%, further reductions will have minimal impacts. Quantitative easing applies when other monetary policies have limited impacts (Fasano-Filho & Wang 2002, p.3). The policy involves the government creating new money and purchasing government bonds from financial institutions. These financial institutions, in turn, use the available funds to lend to businesses and individuals. The economy gains from the creation of jobs and increased spending, leading to a growth trend. AC 2.3 The protection of the interests of the public is among the roles of government. The implementation of various competition policies is one of the ways a government can protect these interests. Competition policies improve efficiency, promote competition, and widen consumer choices. Examples of these policies include antitrust laws, control of state aid, market liberalisation, and merger/takeover controls. The Competition & Markets Authority is the regulatory body that enforce these measures to regulate the competition between firms operating in the UK. The body works with local and international organisations to ensure that it meets its mandate (Competition & Markets Authority 2015). BP is a UK based company that specialises in the mining, production, and sale of natural gas and oil. Competition policies have various advantages and disadvantages for the firm. Market liberalisation is advantageous as it gives the business the freedom to operate in the energy supply market. State aid control also benefits the firm as government actions do not affect competition levels. The dominance of BP in the energy sector means that antitrust laws and merger controls can be disadvantageous to the firm. For instance, the firm loses operational flexibility as any changes in pricing or attempts at mergers have to be evaluated by relevant regulators. TASK 3 AC 3.1 Market structures describe the characteristics of a market and how they are organised. Some of the characteristics that distinguish market structures are number of firms, market share, product differentiation, and how customers can switch between suppliers. Examples of market structures include oligopoly, monopoly, monopolistic competition, and perfect competition. In an oligopoly, there are a few dominant firms, high barriers to entry, and differentiated products. Pricing is done to retain market share while output decisions depend on demand in oligopoly structures (Hall & Lieberman 2012, p. 292). The mobile phone industry given in the scenario provides an example of an oligopoly market structure. A monopoly defines a structure with one or two firms with high barriers to entry and limited product differentiation. Pricing and output decisions are based on the need to maximise profits. When it comes to perfect competition, the market has many firms, no entry barriers, and similar products. Pricing is based on the buyer’s willingness to pay, and output is determined by the level of competition and the need to retain market share. Finally, a market with a monopolistic competition structure has many firms, no entry barriers, and differentiated products. Pricing and output decisions are set with respect to supply and demand (Hall & Lieberman 2012, p. 292). AC 3.2 The mobile phone industry is a vibrant industry where the leading firms have to produce innovative product in order to remain relevant. Thus, successful firms like Apple, HTC, and Samsung have study market forces and come up with suitable responses. The demand and supply curves below can illustrate the impact of market forces on a firm in the mobile phone industry. The first graph provides two demand curves and a supply curve. Taking the case of Apple and assuming that the demand for an iPhone 5 was D1, the equilibrium price was at P1. Apple’s recent introduction of the IPhone 6 forced competitors to come up with better products. Thus, at the point of introduction, the iPhone 6 had higher demand than the iPhone 5 and the competing products. The added demand will lead to a shift to the right of the supply. It is notable that the equilibrium point will also shift towards the right and correspond to a higher price, P2. Thus, the high market demand will lead to a response of high pricing. HTC, Samsung, and Blackberry are bound to come up with new products in response to the iPhone 6. In this case, the demand and price for the iPhone 6 remain at D2 and P2 respectively. The launching of new products by the competitors will reduce demand for the iPhone 6 and correspond with a shift to the left of the supply curve. The equilibrium price will also reduce to P1. Thus, Apple will be forced to sell the iPhone 6 at a lower price as a result of increased competition. The second graph shows two supply curves and a demand curve. The assumption is that Apple introduced the iPhone 6 at a point when it experienced high production costs. At this point, the firm will be willing to produce fewer iPhones at a higher price, corresponding to S1 and P1. If the firm innovates its production process and realises a reduction in production costs, the firm will be willing to supply more iPhones. For this reason, the supply curve moves to the right of the demand curve, leading to lower prices. However, if there is a change in global factors such as the economy and production costs increase, the firm will be unwilling to produce many iPhones. In this case, the Supply curve will move to the left of the demand curve. The equilibrium price will also shift meaning that customers will be asked to pay a higher price. AC 3.3 Apple is a successful global firm that operates in the technology industry. It is worth acknowledging that factors in the external environment can have tremendous impacts on a firm that is successful as Apple. A PESTLE analysis can show how cultural and business factors impact the behaviour of Apple. Political factors: Apple is an American firm that sells a significant portion of its products to the global market. The firm also relies on international supplies, some of whom are based in Asian states. The worsening of political relations between the US and other states can impact the sales of Apple products and the acquisition of valuable supplies. Economic factors: The firm operates in a global environment and concentrates on high-end products. The firm is vulnerable to exchange rate variations, inflation, and recession. Social factors: Apple products are status symbols in society leading to high demand. Technological factors: Customers demand the latest pieces of technology. Apple has to be innovative and introduce new products with improved features to retain market share. Legal factors: The business has to comply with the laws of different countries. Apple has been subject to legal battles about patents with other technology firms. The firm has also had to address legal issues related to the conduct of its suppliers. Environmental factors: Many Apple devices are replaced within a short duration. The firm has to design products whose components are environmentally friendly. TASK 4 The world is becoming increasingly global. The implication of this trend is that businesses have to consider internal factors, as well as external factors from a global perspective. This is because these factors can have considerable impacts on business. In the case of UK business, the have the benefit of operating within the EU environment. This makes it easier for UK firms to shift their focus to the global business environment. This report begins with an examination of international trade and its significance to businesses in the UK. This is followed by considering the global factors that influence UK businesses. Finally, the report evaluates EU policies and describes their influences on businesses within the UK. International trade simply defines the exchange of goods and services across national borders. This involves having nations that import and export commodities and services from each other. The advent of technology and faster means if international travel have meant that nations have become more interconnected. For instance, the UK has accumulated considerable experience in the manufacture of heavy machinery. On the other hand, Brazil is one of the global leaders in the production of sugar. It is worth acknowledging that the UK has a comparative advantage in the production of machinery and that Brazil has a comparative advantage in the production of sugar. Thus, the UK can concentrate on machinery knowing that international trade can guarantee the supply of sugar from Brazil. Similarly, Brazil can focus on sugar production and procure machinery from the UK. It is evident that international trade can have massive impacts on businesses in the UK. First, international trade means that firms within the UK can have access to a global market. This gives them an incentive to utilise resources in the most effective manner and to specialise in products that can acquire the largest portion of the global market. The second implication of international trade is the added competition, meaning that affordable prices and high quality are mandatory requirements for UK businesses. Producers within the UK have to acknowledge that local consumers have access to many imported options as a result of international trade. Another impact of international trade on UK business is exposure to the consequences of key global factors. An example of a key global factor is economic crises. International trade leads to a high degree of interdependence where an economic failure in one part of the world can have global ramifications. The recent financial crisis provides a poignant example of the impact of economic crises. UK businesses suffered from insufficient access to credit as banks became cautious and tightened the supply of credit, leading to a decline in productivity (Bell & Young 2010, p. 311). War is another global factor that can have an influence on UK business. The UK’s involvement in the Iraq war led to an increased military spending. Baker (2007) argues that this military spending diverts critical funds that could have been used for local investments and government spending. Additionally, a war in a region where the UK gets necessary raw materials can also lead to shortages within the UK, leading to reduced productivity. Regional and global trade organisations also have a tremendous influence on businesses in the UK. The World Trade Organization sets rules that govern trade among states (WTO 2014). The body can be beneficial or harmful to UK businesses depending on individual rules. But the organisation is necessary as its regulations provide a conducive environment for trade. BRICS is an example of an international grouping of nations whose economies are growing. The countries in the group include Brazil, Russia, India, China, and South Africa, and together they contribute to a large portion of international trade. BRICS intends to increase corporation between the member states. The implication is that UK businesses will find it harder to trade with individual members of BRICS as they will prefer to trade with each other. The environment and technology are other global factors that have an influence on UK businesses. The major environmental issue is global warming, and the Kyoto Protocol is a measure that was instituted to combat climate change. UK businesses have felt the influence of the treaty as they have had to spend a lot of money and become innovative to ensure that they cut down on emissions. This can be viewed as a negative impact in the short term, but UK businesses will derive a lot of positives and become sustainable if climate change stops. The UK is a member of the European Union. The union has come up with wide-ranging policies that have significant impacts on UK businesses. The policies cover the movement of persons, agriculture, employment, climate change, justice, science and technology, energy, and the economy. The UK’s economic status means that it has a major input in the creation of EU policies. As such, it can be argued that most EU policies have beneficial impacts on UK businesses. For instance, UK businesses have access to a very large market as a result of the EU economic policies. UK businesses also have a wider access to talent as a result of the freedom of movement. Additionally, EU policies make international trade easier as UK businesses use one set of laws when trading with all EU members (Euromove 2011). In conclusion, it is evident that international trade, global factors, and EU policies have a major influence on UK businesses. This report shows that most of the influence is positive despite exposure to risks that come from international trade, global factors, and membership in a regional body. References About US 2015. 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