INTRODUCTION TO BUSINESS ENVIRONMENT
It is imperative for a firm to comprehend its business environment wherein business operations are taking place. This comprehension is significant in bringing about various opportunities to excel in future. It is often said that such an environment is critical for both short-term and long-term success of a company. It helps in understanding external and internal factors affecting major operations of firm. Environmental analysis thus, offers sound understanding of ways to deal with these factors with an aim to cope with challenges and uncertainties in future (Pergamon, 2005).
This report considers different scenarios where a business operates with different purposes and structures to aid its attainment of corporate goals and objectives. It explains ways in which an organization namely Royal Dutch Shell satisfies its various stakeholders by meeting responsibilities towards attainment of sustainability. Shell is an Anglo-Dutch oil and gas company which is headquartered in the Netherlands. It serves worldwide with products such as petroleum, natural gas and other petrochemicals. It also highlights factors of European Union affecting major business operations and their impacts on organizational success.
Identifying Main Purposes of Businesses
There are different types of organizations with varied purposes and objectives. They operate on different structures and customs of people which shape performance of its people to achieve overall goals and objectives (Kennerley and Neely, 2003). They are explained as under:
Virgin Atlantic is the private British Airline which is headquartered in England. It operates with 28 fleet size flying towards 38 destinations across the globe. Since it is a private company, its major purpose is to serve customers’ needs and wants against profitability of its operations. It competes with similar rivals in industry such as British Airways, EasyJet etc to earn major share in market and thereby generate more revenues from customers. One of the most common purposes of such firms is to increase customer base and serve maximum number of customers so that their target level of profitability can be increased (Craig and Campbell, 2012). It is because company wants to expand its business and become bigger global company across global boundaries.
National Health Service (NHS) is the publically funded system which offers health care services in England and other parts of the UK. It is primary funded by public authorities through general taxation system of nation. Thus, major purposes of company are to provide healthcare to each single legal resident in the UK and thereby improve their health and wellbeing. It can be said the NHS exists with an objective of meeting needs and wants of general public with no profit and no loss condition (Sloman, 2004). Its objectives also involve charging stable prices from customers with an aim to suppress illegal practices of private firms of asking for higher prices against medical services.
CARE is a non-governmental organization which was founded in 1945 to provide assistance and relief anywhere required due to disaster, terrorism and natural calamities. It is also engaged in fighting poverty around the world and is working in 87 countries with 927 projects in operations. Its major purpose is not to earn profit against the relief and assistance activities given by its representatives but to improve lives and standards of living of needy people around the world (Craig and Campbell, 2012). Thus, its major objectives involve reaching needy people and help them throughout their lives to enhance their standards as well as wellbeing and to generate awareness of social care and wellness.
Meeting Objectives of Shareholders
Objectives of different stakeholders are met by Shell in the following manner:
a.Owners – Owners are those that invest into the company such as preference and equity shareholders, debenture holders and other banking and financial institutions that provide company with funds and financial resources. Objectives of these owners are to receive regular dividends along with important information about operational activities conducted by company. Shell has uploaded all its information regarding share prices and dividend on company website under the head of ‘Investor Centre’. It gives all the significant information to all its investors who are interested in investing in firm (Aras and Crowther, 2011).
b.Employees – Employees are those that work in Shell and contribute well to organizational success in both short and long run. Company has walked extra mile to provide sound employment policies as well as flexible working hours to its workforce with an aim to enhance their standards of living. Shell also provides its new joining employees with initial training programs so that sound employee induction can be undertaken and also some critical aspects of company operations can be explained to them (Brinkman, Navarro and Harper, 2014). Further, training is also given regularly to present staff members with an aim to enhance their skills and competencies for the purpose of achieving their personal as well as organizational and objectives (Craig and Campbell, 2012).
c.Environmental Groups – Environmental groups are some public and independent bodies of people who are concerned about operational impacts of company on environment and community. They serve as a mediator between general public who are affected by company’s oil and gas operations and the firm itself. Thus, to meet objectives of these groups, Shell has taken up various standardized business activities which are based on environmental safety requirements of these groups. Shell owns the ISO 18001 to support environment and generate least pollution from its major business operations (Talloo, 2007).
d.Government – Government is the governing and monitoring body present in the nations where Shell operates. Its objectives require company to operate within ethical dimensions which are established by government. There are legislations and policies which have to be followed by company such as employment, customer and environmental policies etc. Shell positively attempts to meet these objectives by providing quality natural gas and other products to customers on considerable prices while ensuring safety and security of its employees (Kang, 2005). Company has given insurance plans to its employees so that they can be saved form disasters at workplace.
Responsibilities of Shell and Strategies employed to meet them
There are various responsibilities of Shell which company meets by employing a number of strategies that are explained as under:
a.Employees – Responsibilities of Shell towards its employees are related with their health and safety at workplace. Company follows Health and Safety Act at workplace and thereby offers required equipments and safety tools to staff to prevent from hazards and disasters. In this way, company meets its responsibility of providing a safe and sound workplace where staff works to safely within operations of dealing with oil and natural gas across different types of areas of work (Richardson, 2002). Shell is also engaged in offering equal opportunities to its employees by offering jobs in accordance with skills and qualification of candidates for different job vacancies. This certainly meets requirements of complying with governmental regulation regarding Equal Opportunities Act in the UK (Svensson, 2001).
b.Ethical Issues – Shell is also responsible to meeting some major ethical issues that are gaining attention of general public in today’s era. They are related with pollution and global warming. There are various operations of Shell which can lead to generation of considerable amount of pollution such as oil extraction, natural gas production and other related operations. Thus, to control such pollution, company has adopted various standards such as ISO 14001 that standardizes its activities regarding the same to enhance its outcomes leading to reduced pollution (Wang, 2006).
Further, global warming is another factor which is needs to be considered by Shell. Company has taken this matter into account and thereby monitored well its usage of natural resources so that they do not extinct leading to increment in global warming. In this way, Shell meets its organizational responsibilities towards these ethical issues with an aim to become a sustainable organization that supports strengthening of environment and society (Smith and Pezeshkan, 2013).
Impact of Competition Policy and Regulatory Mechanism on Activities of Microsoft
Impacts of competition policy have affected Microsoft in both positive and negative manners. Competition Act 1998 has restricted Microsoft from engaging into anti-competition practices. The European Commission of European Union has taken such an action against the company because it failed to comply with its competition policies in the UK. Thus, it has controlled Microsoft from engaging into illegal practices and thereby obtains dominant position in markets. Further, Act is also responsible for prohibiting company from charging excessive prices against its products and services to customers with purpose of gaining abnormal profits in short run and thereby exploit customers (Filippov and Kalotay, 2011). This has affected Microsoft in negative manner as it had to divulge certain information about its server products and also release a Microsoft Windows version without including Windows Media Player application (Temponi and Cui, 2008).
On the other hand, regulatory mechanism in the form of European Commission of European Union has impacted activities of Microsoft in the same manner by investigating its business activities and operations because of its dominant power in industry. In this way, company is restricted to utilize abusive of market power so that customers cannot be exploited and other competitors can have equal opportunities to compete in industry (Kunnanatt, 2011). Hence, Microsoft is certainly affected from European Union policies and mechanism regarding competition in whole of the UK and Europe (Craig and Campbell, 2012).
Business and culture environment shapes the behavior of organization
Internal factors are the one that can affect ways in which business enterprise meets its goals and objectives in market place. In most of the situations they tend to lay positive impact on business, but they even comprises of deleterious effect due to weakness which is being possessed by them. This factor generally operates within nation and impact working of organization within it. In regard to this, some of the internal factors of Shell have been discussed (Chen, L. and Mohamed, 2008). First and foremost are political factors which majorly comprises of rules and regulations which has been formulated by government. In order to ensure its smooth functioning, it becomes very necessary for organization to comply with legislations so that they can retain in market place for longer duration of time. In the similar manner, in case if ruling body has changed legislation related to environmental policy then Shell has to follow the same (Goyal and Goyal, 2013).
Other than this, socio-cultural factors are yet another set of internal aspect which is to be considered by Shell. In this, they have to keep produce goods and services as per changing needs and preferences of population operating in UK. Along with this, with an aim to improve their productivity as well as profitability ratio management has to keep track of attitude of consumer towards product and industry and environmental issues to gain competitive edge against rivals (Kennerley and Neely, 2003). It is required on their part to consider trends of majority of population so that its products and services can become easily accepted at market place.
In this context, business enterprise such as Shell has to follow educational factors so that they can hire and recruit trained and well educated personnel for delivering their services within place of work. On the basis of independent survey, it has been found that educational level of people residing in UK is considerably high as compared to others. In recent times, educational standard has improved up to great extent as a result to which most of organizations are hiring people from UK. This proves to be of great use for Shell as by means of this they can make team of experienced and trained professionals which will carry out their duties diligently (Khattab and et.al, 2012).
Analysis of impact of external factors
External factors are usually concerned with outside influences that have the capacity to impact overall functioning of business. These are beyond the control of management and other concerned parties as a result to which it becomes quite difficult to manage them. In regard to business enterprise such as Shell, technological factors are one such aspect. In recent times, technical forces are changing at fast pace which has affected operations of business enterprise. In order to gain success in market place, it is quite essential for Shell to install new and improvised technology (Calderini, Garrone and Sobrero, 2003). It has been seen that Shell earlier used obsolete and outdated machinery and system by means of which they were not able to perform better as compared to its competitors. They have to make best possible use of available technology in order to mark their presence in front of its competitors. Due to intense competition they have to upgrade their technology which may either raise or lower entry barriers for competitors. In addition to this, they have to carry out innovation and creativity in their daily course of action which might affect Shell and industry favorably and unfavorably (Chen, L. and Mohamed, 2008).
Apart from this, legal factors are another set of aspect which cannot be controlled by business enterprise such as Shell. Depending on the nature of services and products it can lead to negative and positive results. In order to attain desired outcomes they have to follow various laws and regulations such as consumer law, safety standards, labor law and so on (Goyal and Goyal, 2013). It majorly comprises of both internal and external side. In case Shell fails to comply with legal rules, then they have to face strict actions from the side of government. Environmental factor comprises of all such factors that affect or determine surrounding environment in which company carries out its functioning (Khattab and et.al, 2012). Shell has done a lot for environment and society by realizing its corporate social responsibility. They started following the concept of Go Green by stopping use of scarce natural resources. In the similar manner, organization has opened many schools and educational institutes along with generated number of employment opportunities for the purpose of improving living standard of people. They have even reduced CO2 emission and expanded their geographical location with an aim to cover large part of market (Kennerley and Neely, 2003).
Impacts of European Union on UK Business Organizations
Policies developed by European Union have direct impact on the UK business organizations and companies have to plan all their operations keeping in view all these policies. Impacts of such policies on firms are discussed below:
Employment policy: Such policy is developed by government in order to encourage employment. It is beneficial for people are not having jobs and to cope up with the issue of unemployment it is necessary to take some corrective actions. In this policy government conducts training and development sessions for people living and society and this directly encourages organizations operating in UK to recruit such people as they are having right skills and knowledge (Aras and Crowther, 2011). Main aim of regulatory authorities is to work for the welfare of society and supports companies which are operating at global level (Orth, Lockshin and d'Hauteville, 2007). So with the help of employment policy people who are unemployed can develop training and experience programs and government provides fund to carry out such program. In UK unemployment rate is very high as in urban and rural areas people are not well educated. So it is necessary to consider this issue for the development of society. By providing training and experience government is directly increasing the employment level and in future nobody will have to face the situation of unemployment in the society (Clark, 2014).
Inflation policy: Currently whole economy is suffering from the issue of inflation as prices of commodities are rising and purchasing power of consumer is limited. So it has become difficult to survive and has negative impact on the society (Kennerley and Neely, 2003). So as per this policy it is ensured by government that prices of products may not rise in future. With the help of monetary policy Committee of Bank of England government controls inflation and interest rates are set according to that. In case people prefer to borrow more and spend in high amount then interest rates are kept high and vice versa (Dudovskiy, 2013). So it directly benefits organizations operating in UK as they can sell their products in large amount and helps to achieve the targeted objectives. Inflation is a curse for the entire society as people living in society are not able to buy the commodities sold by business organizations. So it is necessary to control the inflation level so that its impact can be reduced easily. Whereas it will benefit every firm as purchasing power of consumers will allow them to buy the products offered by company (Vernon, 2011).
From the above report it has become easy to understand the importance of analyzing business environment. Presently the environment in which company operates is very complex and many hurdles are present that prevents firm form achieving targeted objectives. Shell has developed effective strategies so as to satisfy need of its stakeholders and they work for the welfare of enterprise. Company takes all decisions keeping in view their interest and it directly acts as development tool. Company should understands its responsibilities towards environment and effective strategies have been employed in order to fulfill them (Brinkman, Navarro and Harper, 2014).
For welfare of employee’s health and safety policy has been adopted and it directly helps to gain competitive advantage. At global level various factors affects the operations of enterprise like technological, environmental and legal so Shell is able to reduce the impact of all these factors. Company is financially sound so it uses advanced techniques in production. Whereas the policies developed by European union has direct impact on organizations operating in UK as companies have to follow them and it is necessary to comply with the requirement. Policies like employment, education, inflation are developed for the welfare of society and positively affect business organizations.
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