This report utilizes Tesco plc as the organization of choice. It is a multinational grocery and merchandise retailer with its headquarters in Cheshunt, Hertfordshire in the UK. It is a retail company and it targets all types of consumers in its areas of operation. This implies that it aims at attracting both high income and low income consumers through its moderated prices that aim at generating a high level of profitability. The company is publicly owned by several individuals who hold shares in the company hence promoting its operations. It operates in different parts of the world in order to reach all customers it requires for its operations.
Categories of Organizations, their Characteristics and Purpose
The first significant category of organisations is the sole proprietorship. The first characteristic of sole proprietorship organisations is that they are owned and managed by a single individual. Baye and Prince (2013, p. 35) opine that sole proprietorship organisations are financed by one person from his/her personal savings, and they are easy to form. The owner is bears all losses and profits made by the organisation hence an advantage to him/her. Sole proprietors have unlimited liability. The purpose of sole proprietorship is to generate offer goods and services to consumers and generate profits to a single owner.
The second type of organisations in the UK is companies. Companies form the largest category of organisations and are composed of both private and public companies. The significant characteristic of companies is that they are owned by a large number of members who own shares in the company. They raise their revenues through the issue of shares to the public and are governed by a board of directors. The liability of members in a company can be limited by shares or guarantee. The procedure of forming companies is complicated as they need a certificate of incorporation before they can start trading. The most significant purpose of companies is to produce and sell goods and services in the market at a profit.
The chosen organisation for this assignment, Tesco plc, falls into this category as a public limited company. It is the largest retail company after Wal-Mart and the largest employer in the UK with an estimated number of 450,000 employees (Dinkhoff, 2009, p. 15). It is worth understanding that it operates in the retail industry targeting all types of customers. The mission statement of Tesco plc reads, “Our core purpose is to create value for our customers to earn their lifetime loyalty.” This highlights the organisation’s ambition to give quality to its customers and ensure they remain loyal throughout their shopping experiences.
According to Freeman (2007, p. 41), Tesco plc is characterized by significant goals that govern its operations. One of the most significant goals of the company is to retain loyal customers (both high income and low income customers it targets) at all times. This is achieved through the use of loyalty cards to customers who shop at the company. The second goal of the company is to meet the needs of consumers at all times. The company is always focused on ensuring that its consumers get all the required goods and services for effective satisfaction of their needs. The third goal of the company is to earn returns on its investments. This refers to the goal of creating profits out of its operations on every sale it makes through its supermarkets. More so, the company is guided by the goal of creating value for its customers. This is ensured through the provision of quality products to its customers hence remaining more competitive in the retail market.
Additionally, it is worth acknowledging that Tesco plc has strategic objectives that guide its daily operations. The first strategic objective of the company is to engage in online trading. This came in line with the emergence of the internet and the changing needs of consumers all over the globe. Another significant strategic objective of Tesco plc is to continuously diversify into non-food products. The organisation looks forward to expanding its market by bringing in more new products that do not fall into the food category. Additionally, the company is guided by the strategic objective relating to multinational objective. It looks forward into expanding into other countries hence competing with other retail companies on a global scale.
The last category of organisations is partnership organisations. Partnerships are characterised by the ownership of two or more individuals. Partnerships also entail the sharing of profits and losses in the agreed ratios among partners. Another significant characteristic of partnership organisations is the unlimited liability of each partner. The capital used to run partnership organisations is usually contributed by each partner in the agreed amounts. They are formed for different purposes according to the specification of partners.
The Stakeholder Concept
Stakeholders are the individuals who hold a particular interest in organisations due to their contributions and performance of activities relevant for the business to succeed. Stakeholders can be significantly categorized into internal, external stakeholders, and interconnected stakeholders
Internal stakeholders are those that engage directly with the business in its economic activities. They include stock holders, customers, shareholders, employees, and creditors. They are referred to as such because of their direct interaction with the business.
External stakeholders do not engage into direct economic relations with the business, but can be affected or affect businesses through decision-making. They include the public, activist groups, the government, the media, and business support groups.
Interconnected stakeholders lie between internal stakeholders and external stakeholders. Their relationship with the business cannot be termed direct or indirect. The community which operates as a customer to the business could be categorized as an example of interconnected stakeholders.
Influence and Impact on the Organisation’s Responsibilities
Stakeholders influence the Tesco plc’s decisions on matters relating to quality. Customers make up a special group of stakeholders and they influence the decisions made by the business concerning the quality of products. This influence impacts on the responsibility of the organisation relating to the provision of quality products for its consumers. Similarly, suppliers are always influence organisations through the provision of quality supplies that are geared toward fulfilling the business’s responsibility of providing quality products to its customers. For instance, Tesco’s customers always expect it to offer quality products at all times hence impacting on its responsibility to serve them effectively and maintain them in the future.
More so, stakeholders influence the organisation’s participation in corporate social responsibility in a fair manner. This especially relates to the community who always expect Tesco plc to satisfy other community needs apart from the ordinary business of providing goods and services. Mentis (2013, p. 37) reiterate that the impact on the organisation’s responsibility of balancing its profitability goal with corporate social responsibility boosts Tesco’s acceptance in the entire community. Therefore, it is always forced to make significant decisions relating to corporate social responsibility that will make it more relevant and acceptable among its stakeholders.
Another significant point to note is that stakeholders influence and impact on the responsibilities of the organisation by insisting on full disclosure on the company’s communication with them. Tesco plc is always influenced by stakeholders to disclose its full information such as that relating to profits. This is commonly done by shareholders for purposes of receiving fair dividends from their investments. Therefore, they impact on the organisation’s responsibilities by fostering honesty and integrity in its entire dealings to ensure that it remains appreciated in the course of its operations.
Economic Systems and their Influence on Organisations
The economy is one of the vital components of the external environment that affects the operation any given organisation. Economic systems refer to the way a nation makes decisions on the way it will use its resources to produce and distribute resources. The most significant resources that the government distributes through the economy include capital, labour force, land, and entrepreneurship. The economy could be a traditional economy, market economy, command economy, and mixed economy. The UK utilizes a mixed economy in the distribution of its resources.
Most countries in the world use mixed economies to promote the distribution of resources to their different areas of the economy. Dallago (2004, p. 66) is of the view that the UK government (both national and local government) is always in charge of making economic decisions hence controlling the manner in which organisations are able to operate in the country. The participation of the UK government in the economy affects organisations in diverse ways. One the effects of a mixed economic system concerns organisations that tend to take monopolistic forms. Monopolistic organisations are limited in terms of owning all resources as the government looks forward to ensuring equal access to resources. In a similar way, new organisations benefit from economic decisions that enable them have access to then necessary resources that enable them produce and serve their economies. Therefore, it is important to underscore the fact that the UK mixed economic system gives all organisations the opportunity to access resources through balanced decisions by the government.
This entails the use of government spending and taxation to stabilize the economy during difficult times such as the recession or the boom.
Effects of Taxation
The UK charges taxes on both its natural and artificial persons. Value Added Taxes (VAT) is the largest source of government revenue and is charged at a rate of 20% on supplies of goods and services in the economy (Vaitilingam, 2012, p. 23). The corporate tax is charged at a rate of 26% hence giving each company the opportunity to contribute to the overall revenue source. Taxation affects the UK economy in diverse ways. It is worth noting that taxes are the key source of government revenue that is dedicated to economic growth in the UK. The government collects revenues from taxes that it utilizes for different purposes aimed at economic development in the economy. This is done both at the national government level and the local government level. From this perspective, it can be seen that taxation affects the growth of the UK economy by generating revenues necessary for economic growth. Again, taxation helps in the redistribution of incomes in the economy. This is done through the efforts of the government to collect revenues from people who have money and using them for the development of marginalized areas hence redistributing wealth in the UK economy. Lastly, taxation helps stabilize the economy during harsh economic times such as the recession and the boom. Taxation is a powerful fiscal policy that the government uses to stabilize the economy during a boom or recession. This effect is achieved through the UK government’s strategy of increasing the rate of taxes during a boom and lowering the rate of taxes in a recession.
Monetary policy refers to the measures taken by a monetary authority to control the supply of money often aiming at controlling interest rates in order to regulate the economy.
Effect of Inflation
The government employs monetary policies during inflation to stabilize the economy. This is done through reducing interest rates. Inflation refers to the general rise in prices in the economy. It affects the economy in terms of increasing the cost of living among most citizens in the UK economy. It makes it difficult for most citizens to access even the most essential products and services because of their rising prices. This emanates from the reduction in the purchasing power per unit of money. This harms the economy because it reduces the level of business operations hence slowing down the overall level of economic growth.
The labour force refers employees, both skilled and unskilled, who work for different organisations hence affecting the economy. Flemming and Micklewright (1999, p. 68) affirm that the availability of adequate labour force (skilled, semi-skilled, and unskilled) plays a vital role in boosting the growth of the UK economy. This is because the labour force has a direct effect on the quality and volume of products that are produced in the UK economy. Insufficient labour force slows down the growth of the UK economy because of reduced levels of production and low quality products. However, the UK is always characterised by a combination of adequate skilled, semi-skilled, and unskilled individuals ready to work and boost economic growth in the UK.
Business behaviours also influence the economy of the UK in significant ways. The behaviour of businesses is seen in terms of their honesty in terms of paying their taxes, and their profitability cycles. The compliance of businesses to the payment of taxes is vital in boosting economic growth because of the revenues collected by the government for such growth. However, non-compliance to taxes negates the growth of the economy because of minimal collections of revenue by the government.
UK Government’s Competition Policy and Regulatory Mechanism
The UK government’s competition policy is characterised by both British and European elements. The Competition Act of 1998 and the Enterprise Act 2002 represent vital statutes that govern the competition of businesses in the UK. The competition policy in the UK aims at achieving wider consumer choice through the availability of diverse organisation producing similar products in the market (Wilkinson 2005, p. 57). More so, it aims at promoting innovations among organisations without necessarily giving some of them an upper hand in the economy. This also leads to effective and moderated competition among suppliers bringing in new resources for the production of goods and services in organisations. The UK competition policy plays a crucial role in the accomplishment of three main tasks. The first task of the competition policy is to prohibit any forms of agreements and practices that hinder free trade and competition between different businesses. This implies that businesses are not supposed to take a dominant role at the expense of others. This makes competition in the UK more effective. The second task of the UK competition policy is to ban any form of abusive behaviour by dominant businesses. This is effective in preventing dominant businesses from engaging in practices such as predatory pricing and price gouging. Lastly, the competition policy supervises mergers and acquisitions of large corporations to ensure they are done in accordance with the law.
Evaluation of How the Regulatory Mechanism affects two Different Organisations
The regulatory mechanism in the UK is achieved through the licensing approach that plays a helpful role in regulating all businesses operating in the economy. This affects two main organisations including private organisations and public companies in the UK. For instance, Tesco plc as a private company is directly affected by the UK regulatory mechanism in its entire operations. This effect comes through licensing, which ensures that organisations engage in legal activities without harming consumers or affecting the operation of other competitive businesses (Baye and Prince, 2013, p. 41). All companies (private and public) must undergo the entire process of registration before they can start formal operations. Again, the regulatory mechanisms require that companies set their objects clear before they can start trading. This affects them in the sense that they cannot form monopolies at the expense of others in the economy. This is the key regulatory mechanism in the UK through which the government uses to determine the legality of the business and their intent to achieve their goals in line with their initial agreements.
Market Types and their Impact on Organisations
The first type of market highlighted in the syllabus is the perfect competition market. This market is characterized by a large number of buyers and sellers implying that everyone has a negligible share in the demand and supply of products. Again, products are homogenous and sellers are required to sell at the prevailing price to avoid losing customers to other businesses. There is free exit and entry of firms into this market. According to Rosenbaum (2000, p. 460), this affects organisations in terms of their pricing and production. Organisations in this market are obliged to produce high quality products at the prevailing market rates, as they cannot set their own prices.
The second significant type of market is the monopoly market. This type of market is dominated by a single business that has access to strategic resources. Monopoly markets may also result from the government’s decision to provide essential services to its citizens. Their effect on organisations is that it gives them the power to set their own prices due to the absence of competition in the market.
The third type of market structure is the oligopoly type of market. This market exhibits some similarities to a monopoly. The only difference between oligopoly market and the monopoly is that it has a handful of producers in the market. The impact of the oligopoly market on organisations is seen in terms of their powers to set prices. In this market, organisations cannot set their own prices, as they have to collude with one another to achieve the most effective prices. However, they also face stiff competition from other organisations in the same industry.
There is also a monopolistic competition market. This market system combines the elements of a perfect competition market and monopoly. It is characterized by numerous buyers and sellers (Nicholson and Snyder, 2012, p. 55). However, each organisation tries to diversify its products in the manner it likes hence charging its own price. This affects organisations in terms of innovations. They are forced to innovate continuously to be successful in this type of market.
The last type of market is monopsony. In this type of market, there is only one buyer for a particular product or service hence giving consumers significant powers in controlling the prices of products. This type of market affects organisations in terms of their pricing decisions. They do not have the power to set the prices they wish, as this is checked by buyers.
Market Forces of Demand and Supply
The forces of demand and supply play a vital role in any given market. Supply refers to the amount of commodities that suppliers are willing to bring to the market at the prevailing prices. The supply of commodities is always responsive to the changes in prices. The level of supply increases when prices rise and decreases with the reduction in prices as producers look forward to earn profits (Dallago, 2004, p. 71). On the other hand, demand refers to the amount of commodities that buyers are able and willing to buy at the prevailing prices. The level of demand increases when prices of products reduce, and decreases when prices of products reduce in the market. Therefore, the forces of demand and supply interact effectively to determine the overall equilibrium in the market.
Elasticity of Demand
Elasticity of demand refers to the degree to which the demand of a good or service responds to a slight change in its price. It is a normal understanding that sales will always increase with a decrease in the price of commodities. Therefore, some products are highly responsive to any changes in prices compared to others. Most essential products are always inelastic and inessential products exhibit a high level of elasticity.
Economies of Scale
Economies of scale refer to the advantages that businesses derive from large scale production. This is always seen in terms of the cost per unit of production decreasing with the increasing scale of production as fixed costs become more spread out over additional units of production. The variable cost also tends to decrease with the increasing scale of production.
Cost and Output Decisions
Cost and output decisions refer to decisions that relate the changes in variable costs as the level of output changes. Most companies always aim at making decisions that would ensure the reduction in variable costs with the increase in the overall output. This is always done with a specific focus to the creation of profits for the organisation and the assurance of consistent delivery of the required revenues at all times.
The Significance of Global Factors that Shape National Business Activities
Globalization is an external aspect of the business environment has come with changing trends that shape national business activities. One of the most significant global factors that shape national business activities is globalization. The changes in the economy in different parts of the globe are significant in determining the performance of national businesses at the global level. Geiersbach (2010, p. 69) opine that ccontinuous changes in the global economy are significant in determining the profits and overall operations of national businesses. This shapes their operations in terms of setting in place mechanisms to ensure they remain strong with the changes in the global economy.
Another significant global factor that shapes the activities of national businesses is global technology. This is significant in ensuring that national businesses in the UK economy work in a more efficient manner in order to remain relevant on the global scale. The changes in global technological factors are significant in ensuring national business activities deliver high quality services and products to their consumers. Therefore, it is significant in shaping UK national businesses by ensuring they adopt new methods of production that would assist them meet the standards of products required by consumers all over the globe.
Emerging markets represent other significant factors that shape national business activities in the UK. Markets have been continuously emerging with different trends and forms of demand (Kose, et al., 2008, p. 22). The significance of global markets is to highlight the new trends of consumption and purchasing trends of consumers in the market. They shape national business activities by ensuring they understand and conform to the changing needs of consumers in the global market. Therefore, global markets are significant in shedding out light on new consumption trends in the world and the changing purchasing trends.
Lastly, the emphasis on a clean environment all over the globe through various organisations is a key factor shaping national business activities. This is significant in influencing national business activities relating to dumping of wastes and social responsibility to the environment. In regard to this, national businesses have understood that operations that do not meet environmental standards required at the global level. Therefore, the changing global trends on the environment are shaping national business activities by ensuring they adhere to the required standards concerning packaging and the dumping of wastes in order to be acceptable at a global scale.
The Role and Impact of EU Policies and Directives on Business and Tesco plc
The European Union (EU) is a political and economic cooperation among 28 member states. It is established in line with a series of treaties that affect different business including Tesco plc. EUs policies and directives on competition, internal market, environment, and monetary union play a vital role in all business including Tesco plc. Therefore, these policies and directives impact enormously on businesses such as Tesco plc.
One of the most significant roles of EU policies and directives is to moderate the level of competition among different organisations bound by its laws. Knill and Lehmkuhl (2002, p. 266) assert that this comes in tandem with EU’s competition policy, which is always aimed at facilitating undistorted competition in the single market. This policy impacts on all businesses including Tesco plc, which are expected to adhere to a moderate level of competition. This policy and directive on competition impacts on all businesses and Tesco plc in the sense it limits them to the single market established in the region. They do not get the opportunity to form monopolies that may end up harming other businesses in the retail market. Therefore, the policy and directive on competition plays the role of promoting fair competition hence impacting on Tesco plc’s intention to form cartels and other forms of monopolies.
European Union policies and directives on the environment play the role of protecting the environment even as businesses in the region continue with their activities. The EU is extremely strict about the protection of the environment through pollution control, waste management, and the overall protection of nature. This is achieved through the Institute for European Environmental Policy that is dedicated to ensuring all environmental directives are observed by all businesses including Tesco plc (Archick, 2013). The policies and directives here impact on organisations such as Tesco plc by ensuring they maintain an environmental discipline. They are always subjected to legal actions in cases where there is a violation of such policies and directives. Tesco plc is able to utilize its resources in a more significant manner in accordance with the EU policies and directives on the environment.
Additionally, EU policies and directives monetary union plays the role of ensuring a smooth flow of operations among different companies in the region. The emphasis on a single currency came in tandem with the Maastricht Treaty in 1993, which required the creation of a single market where a single currency would be used. This policy impacts on businesses such as Tesco plc by expanding their market. Tesco plc is able to operate in any country bound by the EU hence ensuring it earns high level of returns from its operations. Tesco plc has been able to generate profits from the wide market that emanates from the use of a single monetary unit among different organisations in the region (Hey, 2012, p. 24). Therefore, Tesco plc has continued to earn profits from the use of a single currency making it one of the largest companies in the EU region.
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