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Business Environment depicts all the internal and external factors that influence the business operations of organization. Business environment involves all the factors such as customers, suppliers, competitors, development in technology, market, laws, government activities, social and economic conditions etc. (Iskanius, Page and Anbuudayasankar, 2010). The present report is developed on the case scenario of McDonald which is the world's largest fast food restaurant chain that severs approx. 68 million customers daily in around 119 countries. This report will help in understanding the organizational purposes of different businesses, nature of national environment in which businesses operate and behavior of organizations in their market environment. Along with this, it will help to assess the significance of global factors that shape national and international business activities.
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Different types of organizations in UK are as follows,
Private: Private organizations include all the businesses which are made to gain profit. Main objective of these businesses is to earn profit such as, Tesco, McDonald's and Google.
Public: Public Organizations consist of government, publicly controlled and publicly funded agencies which deliver public programs, services and products such as TFL, HMRC etc.
Voluntary: This type of organizations is also known as community sector or not for profit organizations. Voluntary sector is a duty that is undertaken by the organizations which can be governmental or non-governmental organizations. This is completely different from the public and private sector such as Cancer Research UK.
Charitable: Charitable organizations are also known as nonprofit organizations. In some sort, it is different form the voluntary organizations and it is developed for philanthropic goals and for social wellbeing. For example, educational, religious and other activities which are served for the public interest such as Oxfam in UK.
Mission, vision, goals, and objectives of the cited organization are as follows:
Mission: The Statement of McDonald's in terms of mission states that it want to be the customer's favorite place to eat and drink. This broad mission of McDonald's clearly defines the values of it and reflects the experience that customers expect when they walk into McDonald's restaurant.
Vision: The vision of McDonald's is to promote the choices of people with real ingredients, taste and transparency. Also, McDonald wants to create opportunity for people by creating diversity, offering training to workforce and rewarding their achievements (Lall and Mengistae, 2005).
Goals: Main goal of McDonald is to serve good quality of food in fun and friendly environment by being a socially responsible firm and provide good returns to all the stakeholders.
Objectives: Main objective of McDonald is to provide food to its customers with high standard, quick service and value for money. Thereby, to achieve this objective, cited firm facilitates and dedicates itself to the highest levels of quality and safety measures.
Stakeholders play a crucial role in the business activities of organization. They are being impacted by the organization's activities, aims and policies. Stakeholders of McDonald's and their objectives are as follows,
Employees: Employees in McDonald's give their time and effort to make business successful. Their objective is to gain job security, job satisfaction and satisfactory level pay for their efforts.
Managers: Managers are focused on managing all the operations of business. Managers lead and control the employees to achieve the organizational goals. Their objective is to receive high salary, enhancement in status and growth of the business (Johnston, 2015).
Customers: Customers in McDonald are the people who buy fast food meals from its restaurants. Their objective is to get safe and reliable food which gives satisfaction and value to their money.
Suppliers: Suppliers in McDonald supply raw material and fresh food ingredients. Their Objective from business is to get more profit as well as timely payment.
Government: Government plays a crucial role in business as a stakeholder which is responsible for managing economy and tax charges for the business. Other than this, it monitors the working of business organizations in country. Their objective from the organization is related to establish a successful business in country with considering the laws and regulations. Thus, to meet the objectives of stakeholders, McDonald has to improve the efficiency of its business practices and needs to increase the sales and profitability of the organization (Teece, 2010). Through implementing effective business policy and procedures and by utilizing quality assurance mechanism, McDonald can increase the revenue and profitability and meet the objectives of all these stakeholders.
Primary responsibility of the organization is to consider the following terms such as stakeholder’s interest, legal standards, social needs, environmental factor, business ethics, management responsibilities, public relations and effective corporate image. Thereby, McDonald needs to implement various strategies to meet these responsibilities (Kovacic, 2004). McDonald will produce business policy and procedures to increase the efficiency of services and quality of fast food. McDonald will involve various legislations in the business practices of organization that are implemented by government such as health and safety legislation, environmental legislation, consumer legislation, employee legislation and equal opportunity legislation. Through the implementation of all these policies and legislation in the organizational practice, cited firm can fulfill its responsibility to operate business in a legal and ethical way.
Furthermore, McDonald is responsible for fulfilling the stakeholder’s interest and improving the corporate image. In order to meet these responsibilities, McDonald will increase the efficiency of services and quality of fast food which will increase the sales and profitability of organization (Shafer, Smith and Linder, 2005). Increased sales and profitability of McDonald will help in satisfying the objectives of stakeholders and maintaining their interest towards it. Similarly, McDonald can utilize quality assurance mechanism, cooperation and communication strategies to fulfill management responsibilities and maintain public relations. Further, recruitment of skilled and knowledgeable workforce would also be helpful for McDonald to meet the various responsibilities.
There are three types of economic systems. These are as follows,
1.Capitalist Economy: Capitalist economy system depicts the system in which all the means of production and services are owned and controlled by private individuals for the profit making. For Instance, right of the productivity factors such as land, factories and machinery are managed under the private ownership.
2.Socialist Economy: In Socialist economy, material substance of production such as factories, capital, machines and mines etc. are completely owned by the community represented in the state. With regards to the socialist economic system, all the members of the particular community will get equal benefits of socialized planned production.
3.Mixed Economy: Main aim of developing a mixed economic system is to include the best features and merits of both the controlled economy and market economy (Economic Systems, 2015). Mixed economic system acknowledges the benefits of private enterprise and private property with their intensity on the motive of gaining profit.
UK has a mixed economic system with more influence of capitalist system on free trade and global economy, instead of its limitation which is established by the government of UK. Mixed market economic systems of UK emphasize that products and services that been demanded by customers are been produced by the businesses and government can only intervene where the market fails. Role of government in mixed economy of UK is related to implement laws and regulations related to health care, education and other sectors. Thus, economic fluctuations can be avoided in UK due to centrally planned mixed economic system.
On the contrary, China has capitalist economic system in which whole the production process is owned and controlled by private individuals for the purpose of gaining profit (Hult, Hurley and Knight, 2004). According to capitalist economic system, freedom of choice provide the maximum satisfaction to customers and preserve the fundamental rights, rights of freedom and rights to consume private property. However, due to capitalism system in China, large wealth production is distributed by few. Thus, rich individual becomes richer and poor becomes poorer.
Fiscal policy and monetary policy plays a significant role in business. Fiscal policy is made by the government of country to adjust the spending levels and tax rates as well as to monitor and maintain the economy of country. On the other hand, monetary policy is developed by the monetary authority of country for controlling the supply of money and targeting inflation rate and tax rate in order to assure price stability and maintain the exchange rate of currency (Metcalf, 2015). The overall impact of fiscal and monetary policy on organization and country is described as follows,
Change in taxation and Interest rates: Change in taxation and interest rates are the decisions of government regarding the spending and taxation. If, government of UK wants to enhance the economic growth of country then it can increase the spending of products and services which automatically increases the demand of products and services which will be beneficial for the economy of country in order to earn from tax and interest rates. However, if demand of the product will be high than production will also gets increased. If, production increases then firm will recruit more employees (Merrilees, Miller and Herington, 2012). Thereby, unemployed people can get jobs and earn money to spend which is beneficial for the economic stability of country as well as organization to increase its sales and profitability.
Change in currency exchange rate and quantitative easing: Currency exchange rate plays a crucial role for the organization like McDonald's who operates business in multiple countries so that exchange rate leads to increase or decrees its growth. For instance, strong or increased exchange rate of currency can increase the profit margins of McDonald's. On the contrary, low exchange rate can make negative impact on the business’s profitability.
Competition is an essential factor in the business environment. Various competition policies and regulatory mechanisms implemented by the government of UK are as follows:
Competition Act 1998: This act provides the updated framework for identifying and dealing with restrictive business operations and to deal with abuse of dominant market position (Leith, Moldovan and Rossi, 2012).
Enterprise Act 2002: This act is managed by the parliament of UK which was developed with the major changes in the competition act of UK with regards to the change in laws that are governing the economic condition and bankruptcy.
European Union Law: European Union law is a body of written agreement and legislation. Purpose of EU behind this law is for the mutual development and maintaining peace between competitors.
Fair trading act 1973: Fair trading act 1973 is implemented by the government of UK to control the misuse of monopoly of the businesses and encouraging the fair trading in business.
With regards to above discussed act, the competition policies and regulatory mechanisms developed by the government of UK helps in controlling the competitions and misuse of monopoly among the business. Thus, McDonald follows all the policies and acts that are implemented by the UK government (Davig and Leeper, 2011). For instance, if, McDonald promotes its fast food by advertising low prices and other attractive offers, then it would also mention all the terms and conditions regarding the offer. Also, cited firm is responsible for providing the same offer as it displayed to its customers.
Market Structure of McDonald depends on the nature and level of Competition in the business environment of fast-food and restaurant services. There are four types of market structures. These are as follows,
Perfect Competition: Perfect competition is a structure that consists of several small buyers and sellers of similar products and services. In this structure, customers have complete and accurate information about the prices (Afonso and Sousa, 2012). In this type of market structure, all the participating organizations make same purchase and offer high quality products to retain customers.
Monopolistic Competition: Monopolistic competition refers to a market structure which includes all the characteristics of the perfect competition and monopoly market structure. Monopolistic market structure offers substitute products and has many buyers. Although, substitute products can be differentiated on the basis of image, advertisements and attributes (Trkman, 2010). For instance: McDonald's and subway offer similar fast food but they are different on the basis of ingredients, taste, and recipe. Thus, McDonald applies monopolistic market structure to determine the price and other important decisions of the fast-food business.
Oligopoly: Further, oligopoly is an industry infrastructure which is dominated by the limited organizations that function independent businesses without much competition (Vanhaudenhuyse and et. al., 2011). Oligopoly market structure is normally followed by the countries who provide undifferentiated products and have limited suppliers of a particular product in the market. For instance: barrels of oil, ounce of gold, airline services and manufacturer of cars.
Monopoly: Here, the monopoly market structure consists of single producer and supplier of product and service which has no close substitute. In this structure, business is considered as a single industry player which controls all the resources and technology as well as blocks the potential competitors.
There are several market forces that help in shaping short and long term organizational responses such as, pricing, cost control, collaboration, acquisition and mergers. These market forces are as follows,
Demand and Supply: Demand and supply are the effective market forces that shape organizational responses like price, cost control and collaboration etc. for instance, due to festive season, demand of fast food is increased, while production and supply of raw materials and ingredients is limited. So, price will be increased for fast foods in that particular time (Rugman, Verbeke and Nguyen, 2011). On the contrary, if demand of fast food is low then prices will be decreased in order attract more customers. Thus, demand and supply of products and services make its huge impact in shaping the short term and long term organizational responses.
Customer Perception: Moreover, the customer's perception shapes the short term and long term organizational response in the cost control of organization. Customer's perception includes buying behavior and decision making ability of the consumer. Customer perception is based on the receptive content of products and services which is used in promotion and marketing activities (Gupta, Clements and Inchauste, 2004). Thus, it is recommended to McDonald's to represent itself in an effectual way to attract more customers and change their perception. This will put positive impact on customer's perception and their decision-making ability.
Business and cultural environment such as changing economic situation, cultural diversity and life style make its huge impact on shaping the behavior of organization. Business environment of McDonald consists the economic and non-economic environment. Non-economic environment of McDonald's depicts all the macro factors of business environment such as social, political, economic, technological and legal (Cavusgil and et. al., 2014). On the contrary, economic environment of McDonald depicts the economic system and policies that affect the business practices of cited firm. For instance: if McDonald decides to expand its business in culturally and technologically developed country then it must involve the trends and other social factors of people regarding the food preferences. Through this, cited firm can effectively maintain cultural diversity in the organization in changing economic situation and increase the sales and profitability of organization.
International trade is necessary for all the business organizations as it helps in expanding business within the country as well as outside the country. Through international trade, organizations can maintain diversity in business. Some particular products can be available in the organization and some may be not. In this situation, these products can be exchanged with products and services through international trading (Carroll and Buchholtz, 2014). This can provide competitive advantage to the organization as well as customers. Furthermore, international trading can be beneficial for economy of the country as well. For instance: businesses from other countries can bring lot of business opportunity for company and also support the economic growth of country. In developing countries, fast food business can provide high revenue to the McDonald with the availability of low expenditure.
Impact of global factors on business can be analyzed through PESTAL analysis. These factors are as follows:
Political: As per this factor, McDonald's should analyze the government influence on business. Political factors are related to regulatory bodies, rules, and regulations that are implemented by the governmental body of the UK.
Economical: Economical factor of McDonald depicts the economic growth and stability of business in the country (Hult, Hurley and Knight, 2004). These economic factors depict exchange rate, fiscal and monetary policies that affect the business of McDonald.
Social: Social factors refer to the social and cultural impact on the fast-food business of McDonald.
Technological: Technological factors depict the technological growth of the country which affects the business practices of McDonald.
Legal: As per legal factors, McDonald's should consider all the laws, policies, rules and legislation that are implemented by the government in order to manage business practices in a legal and ethical manner.
Business organizations in UK maintain all the rules and regulations that are implemented by the government with the influence of European Union. Different economic situations of country make its huge impact on the businesses. Economic stability of the country decides the growth of organization (Kovacic, 2004). Furthermore, rules and regulations implemented by European Union are essential in order to manage national and international trade. For instance, if McDonald's is operating business in European Union country than it has to take prior approval from the European Union. Furthermore, European Union assists businesses in foreign exchange and trade.
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It can be started from the present report that it is essential for the manager to improve its knowledge regarding the fiscal and monetary policy before making decisions with regard to the selection of an appropriate strategy. However, if the mentioned policies will not be considered on time, then the profits of the corporation will be impacted.
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