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Learning Outcome 2:
Task 1: Understand the National Environment in Which Businesses Operate 11
Task.2: Evaluate the Influence of Fiscal and Monetary Policy 13
Task 3: Compare the Competition Act 1998 and Enterprise Act 2002 14
Learning Outcome 3:
Task 1: Organizations in their Market Structures and output decisions 15
Task 2: Factors Shaping Organizations 19
Task 3: Explain how the business and cultural environments shape the behaviour 21
Learning Outcome 4:
Task 1: International Trade and Influence of Global Factors on UK 22
Task 2: Impact of global factors on UK: 23
Task 3: Impact of policies of the European Union on UK 25
References
Learning Outcome 1
The organizations have their unique culture and working environment and no two organisations
are the same.
Types of Organization
These organizations are run by individuals, partners, or shareholders and their main aim is to
earn profit.
These organizations are run by government, for example, various local government
departments, their goal is not to earn profit but to facilitate the people. The main aim is to
provide service to the community.
British Council
The British Council was formed in 1934. It connects millions of people with the United
Kingdom through programmes and services in the English language,
the Arts, Education and Society.
The British Council mission is to build bridges of trust and understanding between peoples of
the world. British Council build awareness and understanding of the UK which encourages
people to visit, study and do business in the UK, so contributing to long-term prosperity and
security.
Create international opportunities for the people of the UK and other countries
Build trust between nations
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Market Share & Ethical Issues
British council share world’s 54% of international students coming to study in UK. Dealing
with various cultures and different norms and values always present challenges for the working
of British Council.
Alliance Boots
Alliance Boots has pharmacy-led health and beauty retail businesses in 10 countries. Together
with their associates and joint ventures, they operate more than 4,550 health and beauty retail
stores, of which just under 4,450 have a pharmacy.
“We want to make a real and tangible impact on the lives of people and communities where
our customers and colleagues live and work, by using our healthcare and beauty expertise”
Market Share
Ethical Issues
Tax: Alliance Boots shirt its head office from England to low tax country Switzerland.
Ethical ingredient: Cutting of Palm trees to in their products.
Environmental Issues: Chemicals effects, CO2 & Carbon footprints, Waste disposal
Learning Outcome 1
2
Organizations operates within complex environment. There are several internal and external
factors that influence the working of the organization and play a key role in organization’s
success. These are;
Owners/shareholders
Suppliers
Customers
Climate
Culture
Economy
Government
International relations
Pressure groups
Technology
Alliance boots or Boots UK closely work with all of its stakeholders. Every year Boots hold
dialogues with all of its stakeholders for the purpose of;
Engagement
Reputation
Involvement
Healthcare
Confidence
Transparency
Sustainability
Internal Stakeholder
Employees
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Alliance Boots constantly and continuously keep close ties with all of its employees to improve
the working of the company in all areas through strong employee relations by conducting
surveys and one on one meeting or group meetings, by managing unions and work councils.
Owners/Shareholders
The owners have a group of ‘critical friends’ that advices them on crucial issues like
environmental responsibilities.
External Stakeholder
Media
Alliance Boots regularly publish annual reports to keep its customers, suppliers, and other
stakeholders informed with its performance updates. They also do media releases, and hold
interviews with senior executives to keep in touch with public.
Customers
Alliance Boots have various ways to tackle its customers’ needs such as customer surveys, and
feedback forms, focus group discussions, and by conducting conferences for pharmacists,
pharmacist associations.
Government Bodies/Agencies
Boots UK works in collaboration with governmental bodies on key issues relating to the
pharmacy and healthcare services. In particular, they try to understand the changing
requirements of the government so they’re better able to meet their needs, for example, their
programmes to address smoking cessation and weight management.
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Learning Outcome 1
1. Environment Legislation
Alliance Boots social corporate responsibility provides a great insight into its environmental
strategies for sustainable development.
Use of Chemicals: All Boots products are in some way made or processed using chemicals,
considering the impact of these chemicals on environment is vital for operating in an ethical
and safe way.
Boots Chemical Committee was set up in 2003. Which maintains a database of chemicals and
their effects.
Future Investments
Since 2009 Boots have invest millions in technology to reduce energy consumption in stores
by;
EnergyCare
This programme help employees to actively care for environment and take local action. Boots
highly efficient Combined Heat and Power energy centre produces most of the energy for their
site office. For reducing the carbon footprints Boots won the Carbon Trust Standard award.
Boots is a member of The Prince’s May Day Network since 2007.
Packaging
Boots removes all extra packaging before sending them to their stores. Boots regularly review
existing packaging too. For example, they re-launched the Botanics range in 2012 to be even
more environmentally friendly.
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Boots is member of Waste Resources Action Programme that help companies to reduce
the amount of packaging.
Boots introduced a range of boxes in different sizes in more environmentally friendly
packaging.
Boots aim to reduce the overall environmental impact of carrier bags by 25 per cent by;
Transport
Boots hire a third party to deliver their retail products from warehouses to local Boots store to
reduce carbon dioxide (CO2) emissions.
Planning the delivery routes and schedules in efficient manner without affecting stock
availability.
Introducing off-peak deliveries to reduce oil consumption and to avoid traffic breaks.
The use of double-deck trailers to deliver as many products as possible at one time.
Back loading: Using returning, empty delivery vehicles to collect more products from
suppliers,
A pioneering member of Logistics Carbon Reduction Scheme which was later endorsed by the
Government’s Department for transport in April 2011.
Boots takes waste disposal very seriously, following steps are taken by them:
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2. Health and Safety Legislation
Boots know that their colleagues, customers and visitors put their trust in Boots, which is why
the safety of everyone who works for them, visits them and shops with them is really important
to them.
Safety governance
Boots review its health & safety strategies on a monthly basis through the Boots UK
Governance Committee.
Reporting to this committee are two important strategic safety steering groups:
A store director chaired “The Retail Safety Steering Group” for store safeties
The second steering group is chaired by Director of Logistics and ensures that risks at
support office site are properly assessed and the right plans are in place to mitigate risks
Boots realizes that a good safety management system can’t work in isolation. That is why
they’re implementing a Safety Culture Plan. This plan encourages managers to integrate safety
plan into everyday working, and the active communication for sharing lessons and input from
colleagues are important ways to improve safety for themselves and for customers.
Boots work in close cooperation with primary authority partner to review its store safety
procedures and safety plan. The recommendations then used to improve the safety strategy.
Alliance Boots shows zero tolerance for illegal or unauthorized drugs at their stores. Even the
employees using alcohol are banned from the store premises. A strict disciplinary action is
taken against such behaviour.
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3. Anti-Discriminatory
Alliance Boots values and is committed to create harassment free working environment. Their
employees are oblige to treat one another with courtesy and respect, regardless of race, gender,
age, disability, marital status, sexual orientation or religious belief.
There is no tolerance for any such conduct or behaviour that impedes with an individual’s work
performance.
The truthful reporting of any incident will be confidential and will be proper investigate by the
committee and no charge will be taken against on account of the reports of such incidents made
by anyone.
The recruitment policy is fair and merit based and offer equal opportunities to all and no
discrimination is tolerated o grounds of race, national origin, gender, age, disability, marital
status, sexual orientation, religion or belief, or any other unlawful reason. Every employee in
the company is responsible for the execution of Group's equal opportunity policy at the
workplace.
4. Legal Legislation
Alliance Boots fully supports the government’s regulations to eliminate all forms of illegal
pharmaceutical trade. Such trade does not only deprives governments of revenues, promotes
criminality, misleads consumers into buying products of dubious quality and hampers efforts
to block underage sales but it also harms the Boots reputation.
Proper record is documented for every sale and purchase that gives complete
transaction details for the inspection, customs and tax purposes.
Stores have proper controls and procedures that makes sure that policy is implemented,
these include:
Effective ‘know your customer’ controls;
Supplies to the regions that are consistent with legitimate demand ;
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Procedures for investigating and, where appropriate, suspending or terminating sales to
customers suspected of knowing or reckless involvement in illegal trade activities.
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Learning Outcome 2
The government is main controlling agent of all economic activities. Governments direct all
resources to be used for any specific activity. For example, governments decide how many
wheat will be produced for the consumption or how many breads will be made from the flour.
How this Economic system will affect the working of Boots UK?
The government will decide what to produce so Boots won’t be spending so much money on
research and development. The methods of making a product will be controlled by government
so Boots won’t be worried to maximize its production. There will be less innovation and less
CSR will be displayed by the Boots, since every decision is to be taken by government.
Individuals holds the central command in the free economic system. The unconstrained
interaction of individuals and companies in the marketplace determines how resources are
allocated and goods are distributed.
The owners will keenly take interest and show enthusiasm to promote and progress their
business. There will be tough competition so Boots will spent more on research and
development and technology and innovation to maximize its output procedures and profit.
Advertising will play important role for business promotion. There will be more emphasis in
CSR to display responsible attitude to impress public and more incentives and rewards for
employees for better performance or downsizing to reduce expense.
3. Mixed Economies
There type of economy refers to a combination of above two systems and is called mixed
economy. Mixed economies have a private sector, public sector and such sectors which are run
and operated by both sectors collectively, such as healthcare.
Effects on Business
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Currently, Boots UK is working in mixed economy where some of its decisions are taken by
the owners under the guidelines of the governments. E.g. which products and which ingredients
they can use.
A transition economy is one that is changing from planning to free markets. E.g. Chinese
economy
Impact on organization
In case of transitional economy, all the decision power will be transferred to the owners of the
business and they have to play key role with respect to customers demand in the market. Boots
will be able to produce more and more innovative products in such way to attract its customers
and increase market share.
Learning Outcome 2
Fiscal Policy
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Fiscal policy is government's decisions regarding spending and taxing.
Government Spending
Government spending are used to control the growth of economy. If government spend more
this will increase demand for goods and services. Since demand goes up, production must go
up. If production goes up, Boots have to hire more employees. People will get jobs and will
earn money to spend on goods and services may be from Boots. This creates a cycle of demand
growth. And if the government wants to slow down the economy it’ll decrease spending that
will result in low demand and slow economy.
Taxes
Fewer taxes motivate economic growth as people tends to invest more in the economy. If taxes
are fewer, Boots will have more money in his pocket that Boots will wither spent or save. And
if Boots decided to spend it, it’ll improve the economy with more investment. There will be
more jobs and overall conditions for common man in the economy will be improved.
Monetary Policy
Monetary policy deals with the money supply and interest rates determined by the Bank. This
policy is governed by Bank of England. When it wants to fast pace the economy it increases te
money supply in the market by decreasing the interest rates. So investors borrow from bank
and invest in the market and vice versa. During expansionary policy Boots will invest more
and tight monetary policy force Boots to reduce investments.
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Learning outcome 2
Task 3: Compare the Competition Act 1998 and Enterprise Act 2002
This Act amended the Competition Act and strengthened the power of the regulators, especially
in terms of detecting and punishing abuse of market dominance and cartel-like behaviour. The
main provisions of the Act were:
There was a shift of emphasis from considering the public interest criteria to a more narrow
concern regarding the effect of behaviour on competition.
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Learning Outcome 3
Market Structure refers to the interconnected characteristics of a market. Market structure are
as follows;
1. Perfect Competition
2. Oligopoly
3. Monopoly
4. Monopsony
1. Perfect Competition
Characteristics
The perfectly competitive firm is a price taker. A price taker is a seller that has no control over
the price of the product it sells. From the individual firm’s perspective, the price of its products
is determined by market supply and demand conditions over which the firm has no influence.
The perfect competitive conditions make it impossible for the perfectly competitive firm to
have the market power to affect the market price. Instead, the firm must adjust to, or “take,”
the market price.
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The level of output is directly linked with its price. At low output levels, the firm incurs an
economic loss—it can’t cover its fixed costs. At intermediate output levels, the firm makes an
economic profit. At high output levels, the firm again incurs an economic loss—now the firm
faces steeply rising costs because of diminishing returns. The Boots UK and Superdrug UK
will charge the same price for Panadol.
2. Oligopoly
Oligopoly is a market structure in which a few very large sellers dominate the industry. A
market structure characterized by competition among a small number of large firms that have
market power, but that must take their rivals’ actions into consideration when developing their
competitive strategies.
Characteristics
The price-output decision of an oligopolists is not simply a matter of charging the price where
MR = MC. Making price and output decisions in an oligopoly is like playing a game of chess.
One player’s move depends on the anticipated reactions of the opposing player.
There are different oligopoly models because no single model can cover all cases. The
following is a discussion of four well-known oligopoly models:
1. Non-price competition
2. Price leadership
3. The cartel
4. Game theory
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Non-price Competition
Major oligopolists often compete using advertising and product differentiation. Instead of
“slugging it out” with price cuts, oligopolists may try to capture business away from their rivals
through better advertising campaigns and improved products.
Price Leadership
Price leadership is a pricing strategy in which a dominant firm sets the price for an industry
and the other firms follow.
The Cartel
A cartel is a group of firms that formally agree to reduce competition by coordinating the price
and output of a product. The goal of a cartel is to reap monopoly profits by replacing
competition with cooperation.
Game Theory
3. Monopoly
Characteristics
Single Seller: Monopoly means that a single firm is the industry. One firm provides the
total supply of a product in a given market
Unique Product: A unique product means there are no close substitutes for the
monopolist’s product.
Impossible Entry: In the case of monopoly, extremely high barriers make it very
difficult or impossible for new firms to enter an industry.
The firm is the price maker the firm has considerable control over the price because it can
control the quantity supplied. This means a monopolist has the ability to select the product’s
price. In short, a monopolist can set the price with its corresponding level of output. As the
monopolist lowers its price to increase the quantity demanded, changes in both price and
quantity affect the firm’s total revenue.
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4. Monopsony
This is a market similar to a monopoly except that a large buyer not seller controls a large
proportion of the market and drives the prices down. Sometimes referred to as the buyer's
monopoly.
Characteristics
Single Buyer: As the only buyer, a monopsony controls the demand-side of the market
completely. If anyone wants to sell the good, they must sell to the monopoly.
No Alternatives: A monopsony achieves single-buyer status because sellers have no
alternative buyers for their goods.
Barriers to Entry: A monopsony often acquires and generally maintains single buyer
status due to restrictions on the entry of other buyers into the market.
In monopsony buyers generally purchases less for the lower price. Even the price paid by a
monopolistically competitive buyer is less than the marginal revenue of the product. Because
a monopsony is a price maker with market control, it faces a positively-sloped supply curve.
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Learning Outcome 3
The principle states that when a particular good or service has limited supply and increased
demand, the price of the good or service will be higher and vice versa. Accordingly, Panadol
at Boots is cheaper because of its high demand while a medicine for HIV or cancer is expensive
because of its low demand.
Research and development is the success key by which business open up a future growth for
its company by developing new products or processes. The research and development also
support a company to survive in the competitive environment. If Boots is not introducing new
and improved medicines or healthcare product any other company can take competitive
advantage by introducing one.
Economies of Scale
Economies of Scale is the state in which long-run average cost curve declines as the firm
increases output. There are many reasons for this.
The labour market is a systematic relationship that exists between workers and work
organisations. In order to achieve its strategic objectives, an organisation is to make sure that
it has the right person for the right job.
The growing demand for temporary staff and manpower, and outsourcing and offshoring has
continued to grow. Technology has made possible for geographically distant workers to work
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all the time. The online marketplaces such as oDesk and freelancer.com, lets people with a few
spare minutes work on “micro-tasks” such as transcribing podcasts or image-tagging.
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Learning Outcome 3
The culture of Alliance Boots is a dynamic in nature. They focus on employees, customers and
community. They provide their employees an encouraging environment and great incentives
to grow. It recognize the individual contributions and provide opportunities for development.
Their culture is throughout reflective of their key values: partnership, trust, service,
entrepreneurship and simplicity. This ensure that all employees feel motivated to do their best
for customers and patients at all times.
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Learning Outcome 4
Overall local businesses in United Kingdom are not at advantage in international trade. As the
volume of imports are on rise than exports for a numbers of years. The main reasons is the
competitive advantage of other countries like China and India because of their low labour costs.
Learning Outcome 4
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Task 2: Impact of Global Factors on UK Businesses
1. Emerging Markets
There are many world markets which are emerging and taking place of existing markets and
are becoming potential priority for doing businesses. These includes Korea, Taiwan, Turkey,
China, India and Indonesia. Some of these markets have already captured a major share of
world market. Qatar, Dubai and Saudi Arabia have already high level of economic activities.
While some markets like Nigeria, Bangladesh are expected to show 7% above growth rates.
2. Protectionism
Methods of Protectionism
Import Duties: These are taxes on imported goods. They raise the price to customers
and make them less attractive
Quotas: These are limits on the quantity of a product that can be imported into a country
e.g. 100,000 cars
Regulations: This includes laws and safety guidelines
Britain was in favour of free trade until the 20th century. In the year 1932 a trading policy was
passed which levy 10% tariff on imports.
Protectionism reduce trade between the UK and the rest of the world. It is argued that if trade
falls the UK will lose out on many benefits such as:
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3. Exchange Rate
An exchange rate is the price of one currency expressed in terms of another currency. The
exchange rate determines how much of one currency has to be given up in order to buy a
specific amount of another currency. For example for every £1, you can buy $1.50 US dollars
i.e. the £/$ exchange rate.
E.g. the exporters will take advantage from a weak pound “The weak pound has made UK
exports more attractive, and manufacturers are benefiting from the pick- up in world trade,”
The impact on the labour market is considerable on all different sectors of the economy. Every
industry now required highly specialized workforce. The effects of this movement are very
encouraging, as it provides us with a wide range of skilled labour and work opportunities for
workers in other countries of Europe. United Kingdom is both benefitted from this and also
become victim of this movement. As it offers great opportunities to the citizens it also becomes
home for low skilled workers.
Learning outcome 4
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Task 3: Impact of EU Policies on UK Businesses
1. Business
2. Economy
The membership of EU affects our economy in number of ways. EU policies ensures freedom
in a single market. Only EU can negotiate the investment agreement with countries outside EU
and it also impose tariffs on imports which largely affects our economic terms with non-EU
countries.
The dire effects on fiscal policy as UK being a contributor to the EU budget. The external
tariffs effect the price of consumer goods. And the fact of EU membership may also affect the
foreigners’ decisions regarding the investment in the UK.
3. Trade
EU trade policies have significantly positive effect on trade between member countries. EU
works as a single market and there are no trade tariff barriers. But there are non-tariff barriers
for example price conversion of different products. The direct benefits may not be much visible
but indirect benefits like economies of scale and productivity is there.
4. Environment
EU oversight has increased the level of ambition for UK environmental legislation and has
subsequently improved green performance. In areas such as waste to landfill, air quality, and
biodiversity. Moreover, regulation on chemicals and other environmental standards was seen
by many businesses as important in providing a level playing field across the Single Market
and driving growth in environmental products and services.
Several organisations questioned that in some cases UK regulations are more ambitious than
those in Europe, citing the 2008 Climate Change Act that commits the country to a series of
binding emissions reduction targets through to 2050.
References
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Reference material provided by Grafton University
Oliver E. Williamson, 1991. Comparative Economic Organization: The Analysis of Discrete
Structural, Alternatives. Administrative Science Quarterly, Vol. 36, No. 2. (Jun., 1991), pp.
269-296.
Paul L. Joskow and Nancy L. Rose, Handbook of Industrial Organization, Volume II, Edited
by R. Schmalensee and R. D. Willing, Elsevier Science Publishers B.V., 1989
Irvin B. Tucker, 8th Edition, Survey of Economics, South Western Cengage Learning, USA,
2013
Irvin B. Tucker, 7th Edition, Macroeconomics for Today, South Western Cengage Learning,
USA, 2011
Alan Griffith & Stuart Wall, 10th Edition, Applied Economics, Prentice Hall, England, 2004
N. Gregory Mankiw, 7th Edition, Macroeconomics, worth Publisher, New York, 2010
http://www.britishcouncil.org/sites/britishcouncil.uk2/files/the_shape_of_things_to_come_-
_higher_education_global_trends_and_emerging_opportunities_to_2020.pdf [Accessed on 18 Dec,
2014]
http://www.britishcouncil.org/sites/britishcouncil.uk2/files/d554_annual_report_final.pdf [Accessed
on 18 Dec, 2014]
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http://www.boots-
uk.com/App_Portals/BootsUK/Media/PDFs/CSR/2BCE_AWARDS_Paper_v3_general_release.pdf
[Accessed on 18 Dec, 2014]
http://www.boots-
uk.com/media/App_Media/BUKCSR2013/Home/pdf/Palm_oil_soy_oil_and_their_derivatives.pdf
[Accessed on 18 Dec, 2014]
http://www.boots-
uk.com/media/App_Media/BUKCSR2013/home/pdf/Boots_UK_CSR_Performance_Update_2013-
14.pdf [Accessed on 19 Dec, 2014]
http://media.allianceboots.com/App_Media/AllianceBoots/Financial%20information/Alliance%20Bo
ots%20Annual%20Review%20Webfinal.pdf [Accessed on 19 Dec, 2014]
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