BE - Malli

Business Environment
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Acknowledgement
I have taken efforts in this assignment. However, it would not have been possible without the
kind support and help of many individuals and organization. I am using this opportunity to
express my gratitude to all those who provided me the possibility to complete this assignment. I
am thankful for their aspiring guidance, invaluably constructive criticism and friendly advice
during the assignment work. I would like to express my warm thanks to Mr. Subodha Perera.
Thank you for your guidance and support sir. I would also like to thank all the people who
provided me with facilities being required and conductive condition for my assignment.
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Executive Summary
There are different types of organizations. These organizations have different legal forms.
Mainly three types of legal forms which are Sole Trader, Partnership and Limited Liability
Company. Each and every organization will be categorized according to its legal form and
sectors. And each organization will be having a purpose in order to achieve their targets and to
define their responsibilities towards customers. Stakeholders are the people who are interested in
a business organization. Stakeholders are divided according to their power and interest they have
towards the organization. They have certain responsibilities to do effective work in an
organization. The organization has responsibilities like environmental responsibility, social
responsibility, customer responsibility, supplier responsibility, shareholder responsibility etc. In
order to do successful work the following responsibilities should be done effectively.Most
commonly there are three economic systems. Free market economy, Command economy and
Mixed economy. These economic systems have specific features which help for the growth of
countrys economy. Each and every country should follow the suitable economic system to build
successful businesses within their country. In order to help these economic system there are some
particular policies. Monetary policy which changes in short term interest rates influence long
term interest terms and fiscal policy which involves changes in taxation and spending policies.
Competition policy to treat their competitors fairly. There are four types of market structures
which will enable the countries to do effective work in order to help their countrys economic
growth. Demand and supply are the two main concepts which are important for a business. These
business organizations will face various impacts because of the cultural environment. And this
could be a huge challenge for a business organization. And the international trade is the exchange
of goods and services across one or more countries. The main advantage of international trade
includes greater usage of resources. UK business includes increasing sale of international trade
and increasing levels of multiculturalism in UK organizations. This includes political factors,
economic factors, social factors, technological factors, ecological factors and legal factors. In this
UK business organization European Union has some specified policies. Due to the UK
membership of EU local businesses in UK are directly impacted by EU policies and legislations.
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Table of Contents
Acknowledgement...........................................................................................................................ii
Executive Summary.......................................................................................................................iii
Introduction......................................................................................................................................1
1)
Identifying the type and the purposes of following organizations........................................2
2)
Describing the extent to which an organization meet the objectives of different
stakeholders..................................................................................................................................4
3)
Explaining responsibilities of organizations and strategies employed to meet them.........10
4)
Explaining how economic systems attempt to allocate......................................................13
5)
Impact of Fiscal and Monetary policy on Sun Trading vehicle importing company.........15
6)
Evaluating the impact of competition policies and other regulatory mechanisms on the
activities of a selected business organization.............................................................................17

7)
Explaining how market structures determine pricing and output decisions of a business. 19
8)
Illustrating the way in which market forces shape organizational responses using range of
examples.....................................................................................................................................22
9)
Judging how business and cultural environment shape the behaviour of the organization 29
10)
Discussing the significance of international trade to UK business organizations..........31
11)
Analyzing the impact of global factors on UK business organizations such as Cadbury,
British Petroliam and HSBC......................................................................................................33

12)
Evaluating the impact of policies of the European Union on UK business organizations

36
Conclusion.....................................................................................................................................38
Reference.......................................................................................................................................39
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List of Tables
Table 1: Types and purposes of the organizations...........................................................................3
Table 2: Stakeholders of PC House.................................................................................................5
Table 3: Internal Stakeholders in PC House....................................................................................6
Table 4: Connected stakeholders in PC House................................................................................7
Table 5: External Stakeholders in PC House...................................................................................8
Table 6: Responsibilities of Access Engineering...........................................................................12
Table 7: Regulatory Mechanism of Market System......................................................................18
Table 8: Determine pricing and output decisions..........................................................................21
Table 9: Determinants of Demand.................................................................................................23
Table 10: Determinants of Supply.................................................................................................25
Table 11: Elasticity........................................................................................................................26
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List of Figures
Figure 1: Stakeholders.....................................................................................................................4
Figure 2: Stakeholder Mapping.......................................................................................................5
Figure 3: Stakeholder Mapping for PC House................................................................................9
Figure 4: Demand curve shift to right and left.............................................................................24
Figure 5: Supply curve shift to right and left.................................................................................25
Figure 6: Price elasticity of demand..............................................................................................27
Figure 7: Income elasticity of demand..........................................................................................27
Figure 8: Cross elasticity of demand.............................................................................................28
Figure 9: Significance of International Trade to UK business organizations................................32
Figure 10: PESTEL Analysis.........................................................................................................33
Figure 11: Impact of EU policies on UK businesses.....................................................................37
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Introduction
Business Environment is a subject which gives a clear idea about external and internal factors
which affects the decisions of business. As students who are studying Business Management it is
important to gibe Business Environment education to every student, because without analysis of
business environment no business survives. Especially this subject provides a wide knowledge
about the policies, rules and economy. This also gives a clear idea about the business policies and
rules in UK and EU as well. This helps the students to get a wide knowledge about business
environment and also the techniques and the knowledge gained can be used in future to be
successful.
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1) Identifying the type and the purposes of following organizations
A social unit of people that is structured and managed to meet a need or to pursue collective
goals is called organizations. All organizations have a management structure. This structure will
help to determines relationships between the different activities and the members, and subdivides
and assigns roles, responsibilities, and authority to carry out different task. In Srilanka the
organizations can be categorized into private and government organizations. The private
organizations are managed under the private sector and government organizations works
according to the policies and regulatory system of Srilankan government.
Organization
Access Engineering
Legal Form
Limited Liability
Company
Sector
Private
Purpose
Their purpose is to meet the
challenges in the development of
multi sector civil engineering
projects,
providing
innovative
solutions whilst developing long

term
progressive
relationships
with all the stakeholders

PC House
Limited Liability
Company
Private
PC House provides computer,

Laptop and electronic items in a
wide range in good quality which
will satisfy their customers
Metropolitan
Limited Liability
Company
Private
Metropolitan
Work
Place
Productivity
company
and
offer
Personal
solutions
and
services, that exceed customer

expectations
marketing
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and
unparalleled
capabilities
to
the
Individual
business partners whilst providing
the
companys
opportunity
staff
for
the
personal
advancement with performance

based recognition and rewards
Railway
Department
This is not a business

organization
Public
Railway department provides a

safe, reliable and punctual rail
transport
service
for
both
passenger and freight traffic,

economically and efficiently.
Softlogic Holdings
Limited Liability
Company
Private
Softlogic provides a wide range

of service in many industries.
They provide service in ICT,
Healthcare,
Services,
Retail,
Financial
Automobiles
and
Leisure. The companys purpose

is to make the right decisions to
increase
invested.
returns
on
Employing
money
and
rewarding the best, to leverage

market potential and become the
most admired corporate in Sri
Lanka.
Sarvodaya
This is not a business

organization
Public
Sarvodaya is the largest and most

established NGO in Sri Lanka. Its
purpose to help people in several
ways.
Table 1: Types and purposes of the organizations
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2) Describing the extent to which an organization meet the objectives of different

stakeholders
Stakeholders are individuals or groups who have an interest the operations and objectives of the
business how the enterprise performs. They can be internal or external. Stakeholders are very
important for the organization to be success. They can affect or be affected by the organizations
actions, objectives and policies. There are mainly three categories of stakeholders who have an
effect on the organization.
InteralSkhods
Figure 1: Stakeholders
Conectd ExternalSkhods
PC House can categorize their stakeholders under these main three categories
Internal Stakeholders
Directors
Managers
Employees
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Connected Stakeholders
Suppliers
Investors
Customers
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External Stakeholders
Competitors
Government
Media
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Table 2: Stakeholders of PC House
Stakeholder Mapping
Figure 2: Stakeholder Mapping
Objectives of internal stakeholders in PC House

Directors
In PC House directors serve as the

companys
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central
manager
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developing sound business strategies
and delivering strong leadership

And also their objective is to take
accurate decision which helps for the
success of the company
Managers
In PC House there are several managers
to perform their tasks well

Managers here identify, discuss and
agree clear performance objectives or
standards with the staff which define
effective performance for their job
Employees
Employees are important assets in an
organization
In PC House employees bring the skills
such as creativity and problem solving
which will help the organization to
reduce risks and improve productivity

The employees are well committed
towards work in PC House

Table 3: Internal Stakeholders in PC House
Objectives of connected Stakeholders

Suppliers
In PC House suppliers are very
important
Their objective is to provide good
quality electronic goods
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Increase sales and higher customer

satisfaction
Investors
Investors expect more profitable share
on time
Choosing profitable organizations to
invest money
Customers
Customers expect quality products
from the organization

Customers also expect a good service
from the organization

Customers will give feedbacks on the
product
quality
which
helps
the
organization for further improvements

Table 4: Connected stakeholders in PC House
Objectives of external stakeholders in PC House
Competitors
Competitors provides more quality

products to compete with competitive
Government
companies
Government allocates share of money
from
budget
to
companies
for
development of their businesses.

Influence for the business through the
fiscal policy to maintain economy
Media
Media makes a relationship between
the company and consumers.

It
improves
international
communication and creates a vision
about the company.
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Table 5: External Stakeholders in PC House
ID
C
E
o
n
m
i
m
v
p
r
lp
e
ePOWER
s
o
c
tty
io
e
rtre
o
s
s
r
s
LOW
HIG
LOW
HIG
INTEREST
Figure 3: Stakeholder Mapping for PC House
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3) Explaining responsibilities of organizations and strategies employed to meet them

Every organization has some specific responsibilities towards people. It is important for an
organization to have responsibilities towards social, environmental and many other which will
satisfy the people and also it has a positive impact on the organization. The following table
shows the responsibilities of Access Engineering organization and the strategies employees to
meet them.
Environmental
Responsibility
Environmental responsibility is The
environmental
a kind of duty that how the responsibilities of Access

company
going
human
health
to
protects Engineering is achieved
and
the by the strategies that is
environment while operating the
contribution
to
the business. Companies create sustain natural resources

their
own
environmental and the environment for
responsibilities,
follow
responsibilities
and
those future
generations
evaluate through
business
that to attract customers as operations in compliance

well as the community to their to
business.
Through
responsibilities,
produce
their
services
in
environmental
these regulations, conservation
companies of
goods
natural
resources,
and protection
and
environment enhancement of wildlife
friendly way and continue the habitats, strict control of

business
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as
Eco
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friendly the
production
and
Individual
business
because
organizations
many disposal
continue
of
their waste, and support to the
businesses using Eco friendly local

methods.
hazardous
projects
environmental
and
activities.
They also have the go

green concept.
Social responsibility
Social
responsibility
is
the For the social responsibility
obligation that the organization the company has done

has towards the people and the many CSR projects which
society. Its a modern philosophy will help the society. The
states that all individuals and company has done many
organizations are obligated to tree planting programmes,
help the community at large.
apprenticeship
Social responsibilities need to programmes, renovation of

relate to the corporate objectives the kande Nawakkulama
of
the
organization
and Tank,
companies try to attract the Malayaparaththakulama

society for their business through and also the company has
the social responsibilities.
done
mentoring
programmes for university

students.
Customer Responsibility
Customer responsibility is a kind And also the company is

of
obligation
that
the providing
organization has towards their construction
a
service
good
to
customers. Companies produce satisfy their customers as

their
goods
according
to
and
services well. And the company
the
common investsin the advancement
standards and qualities. And also of the construction industry

the
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established through diverse education
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their own standards to produce programs, development of
quality goods and services to human
their
customers.
People
resources
are dissemination
and
of
best
seeking to buy quality goods and practices in construction

services from the companies management
which
will
because of that organizations satisfy their customers.

motivated to follow customer
responsibilities for attract their
customers to the company.
Supplier Responsibility
Supplier responsibility is the As the Civil Engineering

organization work according to and Construction industry
the all rules and conditions that it important to meet the
agreed with suppliers and treated supplier needs. For that
fairy
for
all
suppliers.
The company is maintaining a
organizations try to motivate good relationship with their

their suppliers and help them suppliers
and
through many ways to increase company

their sustainability of supply.
programmes
also
does
the
many
which
will
satisfy their customers.
Shareholder Responsibility
Its the way that how the The company does many
company
treat
shareholders
and
to
give
relevant power to them.
their provides many projects for

the Sri Lankan consumers and
try to increase their profit.
According to their rules,
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they divide the profit in fair
way to their shareholders.
Table 6: Responsibilities of Access Engineering
4) Explaining how economic systems attempt to allocate

Economic system is the way that which a country allocates their resources and produce goods
and services for usage of their community. In the world economy, there are three main categories
of economic systems known as, free market economy, Command economy and Mixed economy.
Generally all these three economic systems face three basic economic problems that are,
What to produce
How to produce
To whom to produce
There are three common economic systems,
1.
Free Market Economy
2.
Command Economy
3.
Mixed Economy
Free Market Economy

Free market economy is also called as capitalism. Here the economic decisions are taken by the
market mechanism. The supply and demand of goods and services to be determined entirely by
the values of the market rather than the government. This is a type of economy where the price,
supply and demand are distorted by government regulations. The free market and the free price
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system, commodity around the world available to consumers.Here the economic decisions are
taken by the market decisions and firms try to maximize their profit in order to be successful in
the market. Individuals can make their own decisions without any barriers and because of that
they try to produce goods through the minimum cost. And the consumers expect greatest benefits
through the products for least cost.
Command Economy
Command economy is also called as planned economy. It is controlled by the state or
government. Here the decisions will be made by the central planning committees. Government
makes all the planning regarding economic activities. Private sectors are expected later in the
involvement of all economic accumulation. Here the government allocates all resources
according to the central plan and uses the nations capital, labor and natural resources in the most
effective ways. The central plan sets strategies to product all goods and services and the main
aim is to supply enough foods, housing and other basic needs to everyone in the country.
Mixed Economy
The mixed economy is controlled by the government and the market. In this globalized world
most countries are getting this economic system. Mixed economic system divides the available
economic resources available in the country for the private and government sectors. An example
for the mixed economy is Sri Lanka. Most modern economies display the features of two or
more economic systems. In many economies, the private sectors are working to increase their
sales of products as well as the profit. But the government is not like that because they provide
goods and services to increase the standards and life style of the community. They do not provide
to increase the profit. But mixed economies do not block the profit seeking of private sector.
So considering these economic systems the mixed economic system is the suitable one for our
current world. The advantage of this market is that it allows competition between producers of
regulations in place to protect society as a whole. With the government being present in the
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economy, it brings a sense of security for sellers and buyers. This security helps maintain a stable
economy. Overall, businesses, and consumers in mixed economies have freedoms that are
important to both. And while the government actively participates and supports, its control is
limited, which is good for the structure. So for the current situation mixed economy is the most
appropriate one.
5) Impact of Fiscal and Monetary policy on Sun Trading vehicle importing company
Sun Trade import cars from Japan as Auto Auction Agency. The company provides low price and
high quality cars. So considering here the economic policy makers has said that there are two
kinds of tools to influence a countrys economy as well as to companies. That is fiscal and
monetary policy.
How Fiscal Policy impacts on Sun Trade Company
This involves changes in taxation and spending policies. Low taxes mean more disposable
income for consumers. When the government decides on the goods and services it purchases, the
transfer payments it distributes, or the taxes it collects, it is engaging in this policy.. Fiscal policy
is mainly based on the theories of British economist John Maynard Keynes (1883- 1946) He
believed government can change economic performance government spending and maintain tax
rates. Through the fiscal policy, government tries to achieve the rates of low unemployment,
price constancy and the economic progress.
So in Sun Trade Company is a leading vehicle importing company in Srilanka. As a vehicle
importing company fiscal policy is directly involved to this company. Tax related fiscal policy
affects businesses by changing the amount of income that people have to spend. Higher taxes
decrease companys net income and lower taxes increase companys net income. When it comes
to this company if there is higher taxes, company need to pay more amount of taxes and the net
amount of income will decrease. On the other hand if the government cut taxes company can
reduce their extra cost of taxes and company will be able to reallocate it to manufacturing
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process. And also the government can take tax revenue and reallocate it to new businesses
through grants, subsidized loans, or other spending options towards businesses.
How Monetary Policy impacts on Sun Trade Company

Monetary policy influences the economy through interest rates, exchange rates, control of the
money supply and controls over bank lending and credits. When we consider Sun Trade vehicle
manufacturing company, the company supposed to conduct their vehicle importing from foreign
companies and markets. If the exchange rates are high, company need to spend more money to
import foreign vehicle. This has an impact on their profit, because it can reduce the profit level.If
Central Bank doesnt control the money supply through the monetary policy, the amount of
supplying money will increase and it may cause inflation. So considering this it has a negative
effect on the country and the value of money might go down. It can also have a negative impact
to Sun Trade vehicle manufacturing company, because when the value of money goes down, the
quantity of goods that we can buy from money will also decrease. If this situation happens,
company need to spend more amount of money for the imports. And also it might have an impact
on companys profit, which means it can decrease the profit.
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6) Evaluating the impact of competition policies and other regulatory mechanisms on

the activities of a selected business organization
Competition Policy
Competition policy is the Government policies to prevent and reduce the abuse of monopoly
power. Abuse of monopoly power can lead to market failure and be against the public interest.
Therefore Governments are concerned to intervene and protect the interests of the consumers.
The aims of competition policy are to promote competition and make market work better. Its aim
is to ensure,
Technological innovation which promotes dynamic efficiency
Effective price competition between suppliers
Wider consumer choice
Regulatory Mechanisms
Regulatory mechanism is the means by which something can be controlled or monitored. They
are appointed by the government to see how market works and the outcomes that results for both
producers and consumers. This controls the internal environment relatively stable and maintained
with narrow limits.
Regulatory Mechanism of Market System
Facts
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Considerations
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The regulatory mechanism in Supply and demand is a The
government
plays
the free market system is common economic theory that regulatory role in the market
competition.
Competition applies
to
free
market system.
Too
drives the acquisition and use system. This graph allows involvement
much
results
in
of economic resources and the companies to determine at command economy, where the
sale of goods and services to what price point the company government
dictates
consumers. High competition can sell the most goods or economic
many
transactions.
is a natural factor for keeping services.
Although some regulations are
the production costs low to
necessary
attract the customers to make
system, the long-term effects
them
of these policies may not
buy
the
companys
products.
in
the
market
produce desired results.
Table 7: Regulatory Mechanism of Market System

Market system is an accumulation of buyers and sellers engaging in various economic
transactions. Fonterra Srilanka Ltd and Suwasewana Ltd are private companies, so the
companies are working under a competitive environment. When considering Suwasevana it has
many competitive hospitals in the market and also Fonterra is a nutritious food products
providing company and it also has many competitors. So considering the competition policy the
companies should be fair with their competitors and the company should follow the appropriate
rules and regulations. Maintaining a fair relationship with the competitors by following
competition policies will help the company to gain more customers and helps to reduce prices as
well. (Keat, et al., 2006)
According to the regulatory, government create regulators for the businesses to evaluate how
does market works. They try to influence to the businesses through their regulatory. So
considering the regulatory mechanisms it can impact on these organizations as following,
Prices are pressed down and it tries to provide after services
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Both organizations makes decisions and strategies in order to develop their standards in
the market
Competition encourages the companies to perform well
Both companies are in a high standard so the customers are attracted to this, so the
companies are maintain a fair price range
7) Explaining how market structures determine pricing and output decisions of a

business
Market Structure
Pricing Decision
Monopoly
Monopoly market has the The monopoly firms have the
Output Decision
power to establish any price power to decide any price it

that it wants. And the ability wants. But the key point is
of monopoly to sat its price is monopolies
further
limited
by
the prices
using
establish
the
their
demand
possibility of rising marginal curves and the price elasticity

costs of production
of demand for its products.

The price elasticity of demand
defines how many people are
willing to buy in relation to
price decreases or increases.
They should not establish their
prices in highest levels. They
set it at the right level and at
that
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level;
its
marginal
Individual
revenue is equal to marginal
cost.(
Keat,
Young
and
Banerjee, 2006)
Oligopoly
The pricing decisions made by When firms under oligopoly

managers in oligopoly market. agree formally not to compete
Whether
the
sellers
in with each other about price or
oligopoly compete each other output, it is Called collusive

by
differentiating
their oligopoly. The firms
may
product, dominating market agree on setting output quota,

share, or both the fact that or fix prices or limit product
there are relatively few sellers promotion or agree not to
creates a situation where each poach
in
each
others
is carefully watching the other market.

as it sets its price
Monopolistic Competition
In monopolistic competition, In the short run monopolistic

there are many firms in the competition
resembles
market to produce goods. A monopoly. Short run profit is

monopolistic
competitor
is maximized by following the
able to set its price established MR=MC rule. If the price

by the forces of supply and equals the ATC curve the firm
demand under condition of earns
short-run
normal
perfect competition. ( Keat, profit. In the long run, the

Young and Banerjee, 2006)
monopolistically competitive
firm will not earn an economic
profit, only a normal profit.
Short run profits and easy
market entry will attract new
firms to the industry.
Perfect Competition
There are so many sellers in Profit

the
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offering
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maximization
firms
same under conditions of perfect
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product. And also there is no competition that is MR=MC
way to that firm to charge but under different market
higher
price
than
its structures. Depending on the
competitors because all firms market
structure
sells a standardized products. maximization

And the main thing is the different
interaction
of
supply
price
firms
profit
makes
and
and output decisions are different
demand decides the price for from social implications.

all participants in this market
structure. ( Keat, Young and
Banerjee, 2006)
Table 8: Determine pricing and output decisions
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these
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8) Illustrating the way in which market forces shape organizational responses using
range of examples
Demand
Demand refers to the quantity of a good that is desired by buyers. An important distinction to
make is the difference between demand and the quantity demanded. Quantity demanded refers to
the specific amount of the product that buyers are willing to buy at a given price.
Determinants of Demand
Income
A rise in a persons income will increase the

persons demand (shift demand curve to the
right). A fall will lead to a decrease in
demand for normal goods.
Consumer Preferences
Favorable change leads to an increase in

demand and unfavorable change will lead to a
decrease.
Number of buyers
The more buyers will lead to an increase in

demand and the fewer buyers lead to a
decrease in demand.
Price of related goods

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Substitute goods Price of substitute

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and demand for the other good are
directly related
Complement goods
Price
of
complement and demand for the other

good are inversely related.
Expectation of future
Future price Consumers current demand

will increase if they expect higher future
prices, their demand will decrease if the
consumers expect lower future prices.
Future Income Consumers current demand
will increase if they expect higher future
income, their demand will decrease if they
expect lower future income.
Table 9: Determinants of Demand

Demand curve shift to the left
If the price of substitute good (Dove Shampoo) decreases, the demand curves of good
(Loreal Shampoo) will shift to the left.
If the prices of complement good (Toothbrush) increases, the demand curve of good
(Toothpaste) will shift to the left
If the income of consumers decreases, the demand curve for jewelries will shift to the
left.
If the amount of consumers decreases, the demand curve will shift to the left.
Demand curve shift to the right

If the income of consumers increases, the demand curve will shift to the right.
Increase in the price of substitute goods
If the number of buyers increases, the demand curve will shift to the right.
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Figure 4: Demand curve shift to right and left

Supply
Supply is the total amount of a good or service available for purchase at any specified price.
Higher the price, higher the quantity supplied. Producers supply more at a higher price because
selling a higher quantity at higher price increases revenue. (Investopedia, 2014)
Determinants of Supply
Number of sellers
Increase in number of sellers will increase

supply
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and
shift
the
supply
curve
Individual
rightwards and the decrease in number of
sellers will decrease the supply
Goods own price
An increase in price will induce an increase in

the quantity supplied
Production cost
If the production cost is high it will reduce the

profit and hinder the supply
Technology
New
technologies
help
to
reduce
the
production cost and it will increase the profit.

It occurs higher supply
Future price expectation
If producer expect higher prices in future,

theyll try to hold on to their inventories and
offer the products to the buyers in the future
Table 10: Determinants of Supply
Supply curve shift to the left

If the costs rise, theres less can be produced at any given price so the supply curve will shift to
the left. A shift to the left in which less will be supplied at every price caused by,
Increase in average cost of production

Taxation of raw materials
A switch in production
Supply curve shift to the right

Supply curve shifts to the right because that more is supplied at every price. This occurs due to,
Reduction in average costs of production
Improvements in technology
Subsidy on labor
Subsidy on raw materials
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Figure
right
5: Supply curve shift to

and left
Elasticity
Elasticity is used to
assess
the change in the goods
price. In
economics,
elasticity
refers the degree to which individuals (consumers/ producers) change their demand/ amount
supplied in response to price or income changes. (Investopedia US, 2014) There are main three
types of elasticity in the economy.(Keat, et al., 2006)
Price elasticity of demand
Price elasticity of demand is the degree of

responsiveness of quantity demanded of a
good to a change in price. In other way, its
defined as the ratio of changes in the
quantity demanded of a good caused by
given change in price. This can be divided
into three groups,
1. Unitary Elasticity
2. Elastic
3. Inelastic
Income elasticity of demand
The income elasticity of demand mentions to

how sensitive the demand for a good is to
change in other economic variables. In other
hand, it can be define as the degree change of
quantity demanded of a good to a change in the
income of a consumer.
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Cross elasticity of demand
Individual
It measures the responsiveness in the quantity
demand of one good when a change in price
takes place in another good. The measure is
calculated by taking the percentage change in
the quantity demanded of one good, divided by
the percentage change in price of the substitute
good.
Table 11: Elasticity
Figure 6: Price elasticity of demand
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Figure 7: Income elasticity of demand
Figure 8: Cross elasticity of demand
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9) Judging how business and cultural environment shape the behaviour of the
organization
Considering Sun Trade, Fonterra and Suwasewana, in these organizations the cultural
environment has an impact, these environment shape the behaviour of the organization.The
cultural environment is which affect the basic value, behaviors and preferences of the society that
have an effect on companies marketing and other decisions.(Kotler, et al., 2009)This is caused
by,
Religion
Plans and strategies
Social class
Peoples Attitude
In order to be successful in the market it is important for an organization to keep their customers
satisfied. So the customers have different tastes according to their religion, social class and
attitude. Cultural environment can critically affect an organization. Considering the business, it
has two environments that is,
1. Internal Environment
2. External Environment
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Peoples Attitude
Considering the peoples attitude it differs from each other. If we take these organizations it is
important to consider their employees and customers attitudes. Fonterra is dealing with their
customer so the customers attitudes can be changes. But the company should make sure that
they manage it well and also the company should consider about the employees attitude, because
employees are an important asset for a company. So they should know about the employees
attitudes as well. So this will help the organization to maintain a good relationship with their
employees and customers.
Social Class
It is important for an organization to consider about the social class. There are different social
classes. So each and every organization should take it as an important, and according to these the
companies can decide the price range, because some people expect high quality and they can
purchase on high rates as well. At the same time some people will expect good quality products
in a reasonable price range. So every company should consider about the social classes and they
should make decisions bases on it. This will bring great advantages to their organization.
Religion
Religion is also important when considering the cultural environment. The organizations should
consider about the religion as well. These organizations must be having lots of employees from
different religions, so the organizations should provide equal rights for each and every religion
people and also considering the customers they must be having different believes according to
their religions, so the organization should value every religion and they should provide products
and services to the customers according to their wish. This will satisfy the customers and it will
also help the organization to be successful in the market.
Plans and Strategies
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It is important for an organization to consider about the plans or strategies and they should make
sure that it is suitable for the countrys culture, because there are different cultural people in the
country. If the organizations could not fulfil their customers needs, people wont be interested
and they might ignore it.
10) Discussing the significance of international trade to UK business organizations

International trade is the exchange of goods or services along international boarder. International
trade has become more important to the countys economy and it represent a huge amount of the
GDP (Gross Domestic Product) Without it, consumers need to satisfy their wants by using only
same products made by their country. This International trade has much significance towards
Cadbury Chocolate Ltd and other UK business organizations.
International trade is very important for every nation as it is not possible to grow or produce all
goods or services within a country. Some goods are available in some countries, so it needs to
exchange the products and services which are not possible to execute without international
trading. International trading is very much profitable. Some of the significance of international
trading to UK business organizations will be,
UK based companiesproduce products only for domestic use, they will fully limit their potential.
They can exports those products to other countries. By doing trading domestically they can gain
a stable growth in their country but if they do it internationally they will gain international
reputation as well the organizations can gain more profit. International trade increase traffic,
sales and consumers.
Production Cost
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By doing their business in other countries, the company also can lower their production costs.
For example, Cadbury Chocolate Ltd imports many similar products from other countries for
cheap price and availability.
Materials
For many productions, UK largely depends on other countries. Many raw materials are exported
from other countries only because of international trade and products like banana and mango did
not grow in the UK and for those products UK have to export from hotter countries. Similarly
many countries need expensive and luxurious materials like arms, cars, engines which they
import from UK. It is quite tough to be self-dependent in all sectors. International trade gives the
opportunity to exchange products otherwise there will be very scarce choice for each nation.
As
result
of
International
Trade
UK
has
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gained
the
following
significance,
Individual
Figure 9: Significance of International Trade to UK business organizations
11) Analyzing the impact of global factors on UK business organizations such as

Cadbury, British Petroliam and HSBC
Global factors impacting UK business include increasing sale of international trade and
increasing levels of multiculturalism in UK organizations. Increasing levels of inter dependency
of national incomes and others. The impact of global factors on UK business organizations can
be effectively analyzed using PESTEL analysis that is political, economic, social, technological,
ecological and legal factors impacting UK business organizations. When it comes to these factors
these are the factors impacting UK business organizations. So this global factors has a huge
impact on UK business organizations such as Cadbury, British Petroliam and HSBC. So when
considering the PESTEL analysis,(Jones & Evans, 2013)
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Figure 10: PESTEL Analysis
Political Factors
Threat of international terrorism
Tariffs between UK and other countries
Freedom of media
The global trade control
The level of global political stability
The level of bureau currency in international affairs
Economic Factors
Global economic crisis
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Impact of the World Bank and world trade organization
Stock market fluctuation
Cost advantages possessed by the immerging countries such as India, China etc.
Impacts of intensifying economic globalization
Social Factors
Changes in family values in global sales
Changes in family patterns, same sex marriage, single parent etc.
Increasing popularity of immigration and migration practice
In greater concern for minorities in society
Technological Factors
Regular immersions of innovative communication technologies
Adoption of technology
Ecological Factors
Increasing level of air and pollution
Increasing level of sensitivity towards green problem among business stakeholders
Impact of global warming tendencies
Legal Factors
Increasing levels of globalization
Laws and regulations related to data protection
Changes in cross country employment, health and safety laws
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12) Evaluating the impact of policies of the European Union on UK business

organizations
The European Union is a politico- economic union of 28 member states that are located primarily
in Europe. It is also governing common economic, social and security policies. The European
Unions members are Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech, Denmark, Estonia,
Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg,
Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the
United Kingdom. Due to UK membership of European Union local business in UK are directly
impacted by European Union policies and legislation. They are playing a big part in influencing
business activities through taxation and spending, laws and regulation, through encouraging
business activities and by providing advice and support for business. According to the European
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Commission (2015) European Union made policies to work in all areas, from agriculture to
transport and also these policies will help UK to enhance their business and the organizations can
be more profitable. The European Union policies help their member countries to get
opportunities to achieve growth of their countrys trade. So the policies of the European Union
on UK business organizations are,
Employment Policy
Governments play an important part in trying to stimulate employment. For example, the present
government is tried to encourage business efficiency so that UK businesses are competitive in
international markets and its create jobs. For those who have difficulty finding work, the
government has created what is termed 'The New Deal', offering people the opportunity of
developing training and experience on government funded and sponsored employment programs.
Enterprise Policy
Enterprise policy of EU focuses on financing for small sized and medium sized enterprises to
develop their businesses. And the European Commission aims to give successful
entrepreneurship and improve the business environment for SMEs.
Regional Policy
Regional policy sets out to compensate for the fact that with the development of the more
prosperous parts of European Union, jobs have been lost in other areas. At EU funds are made
available to support regions of high unemployment and social deprivation.
Inflation Policy
The governments make sure that there are no sudden general rises in prices through the
Monetary Policy Committee (MPC) of the Bank of England which sets interest rates. Interest
rates are put up if theres a danger of people borrowing and spending too much by pushing prices
up.
Impact of EU policies on UK businesses
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1
2
3
4
Figure 11: Impact of EU policies on UK businesses
Conclusion
In order to conclude business environment is the sum total of individuals, institution, and other
forces that are outside control of a business enterprise but it may affect its performance. Thus,
the economic, Social, political, technological and other forces which operates outside a business
enterprise are part of its environment. So also the individual consumers or competing enterprises
as well as the government, consumer groups, competitors, courts, media and other institutions
working outside an enterprise constitute its business environment. The important point is that
these individuals, institutions and forces are likely to influence the performance of the business
although they happened to exit outside its boundaries. For example changes in government
economic policies, rapid technological developments, political uncertainty, change in fashions
and tastes of consumers and the increased competition in the market. All influence the working
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of business environment in important ways. Increasing taxes by government can make things
expensive. Technology improvements may render existing products obsolete. Political
uncertainty may create fear in minds of investors or shareholders. Changes of fashion or tastes of
consumers may shift demand from existing products to new one. Increasing competition in the
market may reduce the profit margin. And also the International Trade is an important part in
each and every countys business, so the significance of International Trade in UK business
organizations and the impact of global factors on UK business organizations have been
identified.
Reference
Jones, P. & Evans, J., 2013. Urban Regeneration in the UK. 1 ed. UK: SAGE Publications.
Keat, P., Young, P. K. & Banerjee, S., 2006. Managerial Economics. 5 ed. USA: Pearson
Education Inc.
Kotler, P., Keller, K. L., Koshy, A. & Jha, M., 2009. Maketing Management. 13 ed. USA:
Pearson Education Inc.
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Business Environment

Identifying the type and the purposes of following organizations........................................2

Describing the extent to which an organization meet the objectives of different

Explaining responsibilities of organizations and strategies employed to meet them.........10

Explaining how economic systems attempt to allocate......................................................13

activities of a selected business organization.............................................................................17

Discussing the significance of international trade to UK business organizations..........31

Analyzing the impact of global factors on UK business organizations such as Cadbury,

British Petroliam and HSBC......................................................................................................33

Evaluating the impact of policies of the European Union on UK business organizations

1) Identifying the type and the purposes of following organizations

solutions whilst developing long

with all the stakeholders

PC House provides computer,

services, that exceed customer

advancement with performance

This is not a business

Railway department provides a

passenger and freight traffic,

Softlogic provides a wide range

Leisure. The companys purpose

rewarding the best, to leverage

This is not a business

Sarvodaya is the largest and most

2) Describing the extent to which an organization meet the objectives of different

Figure 2: Stakeholder Mapping

Objectives of internal stakeholders in PC House

In PC House directors serve as the

and delivering strong leadership

In PC House there are several managers

to perform their tasks well

Employees are important assets in an

reduce risks and improve productivity

towards work in PC House

Objectives of connected Stakeholders

In PC House suppliers are very

Increase sales and higher customer

Investors expect more profitable share

Customers expect quality products

from the organization

from the organization

organization for further improvements

Competitors provides more quality

development of their businesses.

Media makes a relationship between

the company and consumers.

Figure 3: Stakeholder Mapping for PC House

3) Explaining responsibilities of organizations and strategies employed to meet them

Environmental responsibility is The

a kind of duty that how the responsibilities of Access

protects Engineering is achieved

the by the strategies that is

environment while operating the

the business. Companies create sustain natural resources

environmental and the environment for

that to attract customers as operations in compliance

these regulations, conservation

environment enhancement of wildlife

friendly way and continue the habitats, strict control of

their waste, and support to the

businesses using Eco friendly local

They also have the go

the For the social responsibility