Purpose of Business Organization

Keywords: business purposes, purpose of organization

In this modern business world, the environment is highly competitive. The businesses are very much willing to take a peak place in the world market. The nature of the competition and the business is very dynamic. Every business is now trying hard to keep pace with the dynamic nature of the business environment. The business environment is depended on several things like- culture, politics, society, different policies including monetary policy, fiscal policy, government intervention etc. The companies have to obey the rules, regulations and policies of a certain region where they want to conduct business. In UK, the government is very much helpful for businesses. Government always tries to keep the normal activities to the businesses like a guardian. There are many things the business persons need to be concerned like- the laws of the country for business, the central bank policies, the main purposes and strategies of different businesses. Mainly, the business development department of any company is responsible for doing such things (Accenture, 2003).

In UK, the businesses get much privilege than the other part of the world. The facilities of conducting business are excellent.

I have chosen British American Tobacco for my business report. It is the second best tobacco company after Phillip Morris in the world.

This business report will be presented on the main purposes of the businesses in UK, the strategies being used in these businesses, the policies of government and there will be critical analysis of different business situations.

1. Understand the organizational purposes of businesses

Understanding the purposes of business is mandatory for starting a business in any region or culture. The purposes must be set clearly in the starting otherwise the business will not be run in a systematic way.

1.1 Purposes of different types of organization in UK

There are different types of organizations in UK. They have different purposes, too. The main types are named as- Sole Trader, Partnership, Private Limited Company (Ltd), Public Limited Company (Plc), Limited Liability Partnership (LLP) and Guarantee Company (non profit) (Cloke, 2009).

Now, there will be discussion of various types of organizations in UK.

Sole Traders

The main purposes of sole traders’ are-

• Make highest possible profit by personal effort.
• Keep the high risk as low as possible.
• Satisfy the customers with product availability.
• Keep good relation with both customers and suppliers.

Partnership

• Make profit by acquiring the good relation with the clients.
• The property or assets must be used appropriately.
• Try to minimize the risk by good relation with the partners

Private Limited Company (Ltd.)

• Highest possible growth.
• Survival
• Profit maximization
• Sales maximization
• Grab the market share

Public Limited Company (Plc.)

• Keep the public interest.
• Serve the general people.
• Give the general people opportunity to participate in the business by issuing share.
• Growth and survival.

Limited Liability Partnership (LLP)

The purposes of limited liability partnership are same as the partnership business but the only difference is that the partners enjoy limited risk in this kind of business. They do business without any problems of joint and various liabilities of normal partnership business.

Guarantee Company (non profit)

• Do charity works.
• Help the disabled people.
• Run by donation.
• Use the profit in benevolent works.

British American Tobacco (BAT) is a private ownership company. So, we need to follow the purposes of the private companies.

1.2 The extent to which an organization meets the objectives of different stakeholders

A company has several stakeholders surrounding their business activities. One of the core objectives of a company is to meet the satisfaction of the different stakeholders through making profit and other business activities. There are some limits to which the company tries to meet the satisfaction of the various stakeholders (Cooke, 2002).

There are two types of stakeholders in a company including- direct and indirect.

• Direct stakeholders

Direct stakeholders are those who are directly related to the company and who have the most priority as a stakeholder. They are employees, managers, owners and customers.

• Indirect stakeholders

Indirect stakeholders are those who are staying surrounded the company. They do not have direct impact on the company but the impact is sometimes very strong. The indirect stakeholders are competitor, society, government and the environment.

Now, there will be discussion that how the company can meet these different types of stakeholders’ objectives.

Employees

Give handsome salary.

Provide healthy working environment.

Provide well technological support.

Give bonuses based on performance.

Give training.

Owners

Give the right information about the company.

Give accurate financial statements.

Handle the communication smartly.

Customers

Give the best possible product.

Keep the price reasonable.

Provide after sale services.

Build relationship.

Government

Obey the rules and regulations.

Give tax regularly.

Publish annual report in a popular newspaper.

Help to audit the company.

Society

Do not serve with harmful products.

Keep the environment good.

Maintain the corporate social responsibilities.

BAT is playing very important role in every economy where they conduct business. This statement can help them to identify the objectives of different stakeholders.

1.3 Responsibilities of an organization and strategies employed to meet them

The responsibilities of a company are numerous. A company may find it difficult to meet the responsibilities if their strategies are not appropriate to face them. It is expected that the company will meet majority of the responsibilities smoothly (Allen and Gale, 2008).

The main responsibility of a company is to serve the society. Moreover, there are several types of responsibilities in the company. These responsibilities also have different viewpoint.

Mainly, the responsibilities can be described as follow:

Responsibilities

• The model of structure

Every organization has a model of structure of the business activities. This structure shows the path to do the things of a company. This structure determines how the company will be run and how the resources will be allocated towards different sectors. The laws and policies help to maintain this responsibility.

• Duty allocation

There are several persons in an organization to do several duties. The responsibility of the company is to allocate the duty perfectly and clearly so that no one will become confused about their jobs. This confusion is very harmful for the progress of the organization. Here, strong leadership is needed to maintain this task.

• Coordination

There are numerous entities in an organization. The entities need to be coordinated very well and fair. A successful organization always has build up a strong coordination among all the parts of the organization. The performance of all the human resource of a company needs to be coordinated well.

• Operation

Finally, every action will get success if the operation of the company is perfect and smooth. Operations must be in a way that is goal oriented and technically sound.

• Strategies

The company can use many strategies to meet the responsibilities. There are many strategies suggested by many researchers. We can use the Ansoff Matrix to meet the above stated responsibilities and objectives.

Ansoff Matrix

It is a strategic planning instrument for the growth of the company and it links with the general strategies of the company to meet all the responsibilities and the objectives of a company.

• Market Penetration

Market penetration means working in the existing market with the existing products.

• Market Development

It means creating new markets for the existing products.

• Product development

It means creating new products and competing in the existing market.

• Diversification

It means creating new products and building a new market for that product.

In the business run, BAT has applied many strategies and this matrix is the best suitable for them.

2. Understanding the nature of the national environment in which businesses operate

It is very clear in the modern business arena that the national environment has a great impact on the business activities in a country. Businesses have to follow and observe the environment very well and keep pace with the changing environment.

2.1 How economic systems attempt to allocate resources effectively

Economic systems includes many stages and procedures like organizing and motivating labor, production, distribution and circulation of the resources both human and others. The human resource must have productivity otherwise the resources could not be used effectively. A company’s productivity and other resource allocation are depended on the economic systems (Jhingan, 2005).

Throughout the world, there are only three economic systems are used for businesses. These systems are- Free market economic system, centrally planned economic system and mixed economic system.

Free market economic system

Government has low control over a free market economic system. The private sector is the main in this system. Majority of the economic resources are used and managed by the private sector. In this system, there are three criteria for deciding the pricing decision activities like- supply, demand and capability.

Centrally planned economic system

The government is the most powerful in this economic system. Government takes all the economic decisions and allocates all the economic resources. Furthermore, government takes all the responsibilities to run all the internal and external business of the country.

Mixed economic system

This is the most popular economic system nowadays around the world. Most of the developed economies apply this system. In this system the private ownership and public ownership both are inspired to conduct business. All the resources are distributed between these sectors. USA, UK, Russia and China are applying this system.

My business is operating the activities in a mixed economic system as the UK practices the mixed economy.

2.2 Impact of fiscal and monetary policy on business organizations and their activities

According to Jhingan, the usage of money supply and the determination and measuring the expenditure in an economy is called the monetary policy. Monetary policy includes many crucial decisions for an economy including: money supply, money demand, issuing bonds and other exchangeable (Jhingan, 2005).

According to Ackley, the policy which is used to measure the total government expenditure and control the taxation to determine the economic activities of an economy (Ackley, 2003).

The monetary and fiscal policy has direct impact on the economic system of a country. These impacts are very apparent. Some of the main impacts are:

• If government spends very frequently, the output of the economy will be greatly influenced.
• If government spends more on capital expenditure, it will also have impact on the output.
• The tax revenue earnings have impact on the degree of economic activities.
• The money supply in a economy has impact on the economic activities, too.

Fiscal policies can be made based on several techniques. From these techniques the individual economy must chose the best suitable one and apply it. Some of the techniques are:

• Taxation
• Borrowing
• Consumption and
• Sale

The government can find it easy in the taxation system in the normal condition of an economy. And the business activities will be controlled perfectly by the government in this system.

2.3 Evaluation the impact of competition policy and other regulatory mechanisms

In the modern and competitive business world, the impact of the competition policy and other regulatory mechanisms is very much obvious. For example: British American Tobacco is a world leading tobacco company after Phillip Morris. There is a very tough competition between these two companies. As a result, British American Tobacco has to formulate their strategies very carefully and perfectly. They need to observe the market very closely and sharply. Marketing research can be a very useful tool for the company. They may hire experts and do research on the dynamic markets. The competition and the regulatory mechanisms can be controlled if the company is sincere and smart. The competition can be diverted positively, if the nature can be predicted earlier (Larch and Martins, 2009).

In the case of tobacco business, it is competitive because the Phillip Morris is the world’s best for many years and there is every chance to get over them.

3. Understanding the behavior of organizations in their market environment

The behavior of the company sometimes depends on the market environment of the certain economy. Market environment is the elements of the market which are the main factors of determining the market structure like: size of the market of certain product, price of the product and the nature of the customers etc.

3.1 How market structures determine the pricing and output decisions of businesses

The pricing and the output decisions of a firm is determined on various types of market structures. Different pricing decisions are made in the different market structures. Usually, the decision of pricing and output are independent. But, when the market is perfectly competitive, the price of a single firm can not affect individually because the influence is very tiny as a single company in a vast industry. In these circumstances, the company is expected to take the market price and decide how much amount they want to produce (Kotler et al., 2005)

In a less competitive market, the companies can get the opportunity to influence the market by changing the prices only when the company has a great influence over the industry. This type of situation arises when the company can get most of the customers’ attention and consideration. If the company can create high positioning in the customers’ mind, the market will be getting less competitive.

The market structure in which the BAT is conducting business is competitive.

3.2 Market forces shape organizational responses

Market forces are the interactions between demand and supply in a market. On the contrary, organizational responses are defined as the reactions of the organization in terms of the different conditions of the certain economy. However, the responses of the company are important to run business because the success of the company depends on how well the company can react with the different economic situations. These responses are very crucial for the businesses because it has a great impact on the business. The good responses depend on the market strategy of the company. The company needs to conduct several market researches for knowing the actual condition of the market. The supply and demand of any product in the market is the base of setting price of that product. So, if the company fails to know the correct scenario, the company will lag behind the race (Cloke, 2009).

For example: The demand of a medicine is fall down and the other companies lower the supply to balance the situation. If any particular company fails to know the situation, they cannot respond well with that situation and fail to balance of its stock.

The respond system of BAT is very good. It is highly sensitive with the change of the market forces.

3.3 Judgment of how the business and cultural environments shape the behavior of a selected organization

Business environment is the combinations of characteristics of the business activities. It sometimes depends on the culture practiced within any organization and the industry, too. And the cultural environment is the core culture of the organization. For example: if any company comes from Netherlands, it would maintain some sort of culture from the origin. The cultural environment determines the motivational activities in the organization. If the cultural practice is good in an organization the employees get inspiration of doing more works and thus the productivity of them increased.

Moreover, when a company wants to start business in the foreign arena, it needs to analyze the environment and culture because the business has to run its activities within a certain culture.

4. The significance of the global factors that shape national business activities

4.1 Significance of international trade to UK business organizations

International trade means selling and buying products across the boundary of a nation. International trade is the main base of international economy because the whole world is now more interdependent than before. So, the importance of international trade is merely described. In UK, international trade has a great impact because UK is considered the center of the world (Lenza et al., 2010). Accordingly, in doing business in UK one must know about the international trade very well.

In case of BAT, knowing about the international trade is must because the business of BAT is spread throughout the world.

4.2 Analysis of the impact of global factors on UK business organizations

The global factors must be concerned as a serious issue because the world is becoming smaller and smaller. The effect of one corner of the world is now affecting the other side. The businesses are now growing as international businesses more than before. The main cause is the development of the transportation. So, the global factors which can affect the business must be studied seriously. The main global factors are: political, economic, social and technological. If there is political unrest in an economy, the economy will be severely hampered. If the economic condition is not in favor, the business may find difficult to survive (Williamson and Zeng, 2009). If the social factors are not friendly, the business will be in trouble. Finally, if the technological support is not up to the mark, the business cannot compete with the others.

4.3 Evaluation of the impact of policies of the European Union on UK business organizations

As UK is the part of European Union, the businesses in UK must follow the rules and regulations of the European Union. In this way, European Union has direct impact on the businesses of UK. So, every business must be concerned about the monetary and other policies of the EU. There is a currency system in EU. European Money Union (EMU) is one of the components of that policy. All the businesses in UK must follow this currency system (Williamson and Zeng, 2009).

Conclusion

The business world is now changing very rapidly day by day. The entrepreneurs have to take it seriously and try to keep pace with the change otherwise anyone can be lost from the highly competitive market. This business paper represents the various purposes of businesses, the rules and regulations, the culture and environment, the nature of competition, the global factors and international trade. The paper is informative and analytical. There is analytical analysis of different business situations with examples.