Question

COURSE NAME: BUSINESS ENVIRONMENT

Company: Samsung

REQUIRED: 3.1,.3.2.3.3,4.1,4.2,4.3

3.1          Explain how market structures determine the pricing and output decisions of     businesses

3.2          Illustrate the way in which market forces shape organisational responses using a              range    of examples

3.3          Judge how the business and cultural environments shape the behaviour of a selected organization

4.1          Discuss the significance of international trade to UK business organisations

4.2          Analyse the impact of global factors on UK business organisations

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

Answer 1

Ans 3.1

Market structure is defined by economists as the characteristics of the market. It can be organizational characteristics or competitive characteristics or any other features that can best describe a goods and services market. The major characteristics that economist have focused on in describing the market structures are the nature of competition and the mode of pricing in that market. Market structures can also be described as the number of firms in the market that produce identical goods and services. The market structure has great influence on the behaviour of individuals firms in the market. The market structure will affect how firm price their product in the industry .For example in a competitive market the firms are price takers while the industry has the sole duty of price setting. The market structure will affect the supply of different commodity in the market. When the competition is high there is a high supply of commodity as different companies tries to dominate the markets. A market structure will affect the barrier to entry for the companies that intend to join that market. A monopoly markets structure has the biggest level of barriers to entry while the perfectly competitive market has zero percent level of barriers to entry. The other factors that influence the firm behaviour under a market structure are the efficiency. Firm will be more efficient in a competitive market while firms will be least efficient in a monopoly structure. The level of competition in firms will be influenced by the market structure. A competitive market structure and a monopoly will have different levels of competition.

Features of market structure

·The number of firm operating in a market; It will cover both the local and foreign markets.

·The concentration ratio of company; this will show the market share held by the large companies.

·The amount and nature of costs in the market; It will show how the different costs affect the contestability in the market. It will include the economies of scale and the presence of sunk costs.

·The degree of vertical integration; Vertical integration is the process of combining the different stages of production and distribution to be managed by a single enterprise.

·The levels of product differentiation

Ans 3.2 Market forces illustrate the relation between supply and demand within a market. Organizational response is the reaction given by a business or a company to a business or economical circumstances. Organizational response to market forces has great impact on the company’s reputation and profits. Most of the successful companies do proper market research and analysis to ensure that they are able to provide service or products to their customers. McDonald’s able to judge the market demand for their products correctly which keeps their customers happy by supplying products in right amount what customer ordered. The profit of McDonald’s is increasing as they judge their margin correctly to be able to supply and sell as much of their products as possible without over stocking, bringing added finance to the business. Some of their brunches are facing loss as they judged very poorly. As a result they are either leaving customers empty handed as not enough products has been supplied or leave their business overstocked as customers don’t want the quantities supplied. If the company is not able to satisfy its customers the reputation may be tarnished. The relationship between market forces and organisation response is therefore paramount in terms of business success and customer satisfaction. For this reason, market research is key in order to determine market forces so that an organisation can respond correctly to the market they are operating in. It is also important to continue in monitoring market forces to ensure that an organisation can respond to any changes in market conditions. More or less product may be needed to match customer demand during different market seasons (Philips, I.).

Ans 3.3.

Business and cultural environment has great impact on organizational behavior. There are two kinds of business environment: economic environment and non-economic environment. The economic environment includes economic system, economic policies and economic condition. On the other hand non-economic environment consists of natural, demographic, technological, legal, political, social environment. McDonald’s is operating more than 119 countries in the world. Their operation largely depends on the business and cultural environment of the countries where they operate. Economic environment is not same for all countries. For example, per capita income of UK and India are not same. UK has higher per capita income than India. Product prices are higher in UK than India. Economic policies like industrial policy, fiscal policy, monetary policy, foreign investment policy and export-import policy are not same for those two countries which have great impact on the organizational behaviour. Social environment of business includes social factors like life expectancy rate, literacy, poverty, beliefs, values, traditions and customs. In Indian culture beef is prohibited for Hindus, so most of the people don’t eat beef. McDonald’s does not sell beef in Hindu communities and pork in Muslim communities. Political environment includes the political system, the government policies and attitude towards the business community and the unionism. All these aspects have a bearing on the strategies adopted by the business firms. The stability of the government also influences business and related activities to a great extent. Legal environment refers to set of laws, regulations, which influence the business organisations and their operations. McDonald’s has to obey, and work within the framework of the law. Technological environment include the methods, techniques and approaches adopted for production of goods and services and its distribution. The varying technological environments of different countries affect the designing of products. Demographic environment refers to the size, density, distribution and growth rate of population. All these factors have a direct bearing on the demand for foods of McDonald’s. The natural environment includes geographical and ecological factors that influence the organizational behaviour. These factors include the availability of natural resources, weather and climatic condition, location aspect, topographical factors, etc.