Business Environment

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Table of Contents
Introduction......................................................................................................................................3

Business environment analysis........................................................................................................4

Different types of organisations.....................................................................................................13

Different legal structures, and the advantages and disadvantages of them...................................13

Major differences between public and private ownership.............................................................15

The competition policy and the legislative framework of the UK................................................16

Competition and market authority of the UK................................................................................17

Monetary and fiscal policy of the government during the recession.............................................17

Globalisation and its effects...........................................................................................................18

Conclusion.....................................................................................................................................19

References......................................................................................................................................20

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Introduction
The environment of a business has more importance than most other things as it has a massive
impact on the performance of an organisation. JCB is one of the oldest British manufacturers of
construction equipment, which has been used for further discussion in this report. In the first
section, different structures of business, and the advantages and disadvantages of these structures
have been mentioned. Later on, differences between public and private ownership have been
discussed. Also, the competition policy and the legislative policy of the UK have been analysed
briefly. Then the operation and impact of the operation of CMA have been discussed. Finally,
globalisation and its impacts have been analysed.

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Business environment analysis

Note: JCB is a British manufacturer of heavyweight construction types of machinery which was
established in 1945 in Rocester, England. Though it is an old company, it’s still doing business

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with great fame. For performing well, the organisation always has to analyse the business
environment so that, it can grab the opportunities of the environment, and can reduce the
problems that are out of its control. However, PESTEL and Porter’s 5 forces model are the most
commonly used tools for analysing the business environment.

Note: PESTEL is one of the most commonly used tools for analysing the macro environment of
an organisation. This tool consists of six factors which are- political, economic, social,
technology, environmental, and legal factors. Political factors are those governmental factors that
affect the performance of a business mostly, both in negative and positive ways (Zha, 2017). The
factors of the economy and their impacts on the performance of an organisation are known as the
economic factors. Different cultural and socio-cultural factors are known as social factors.

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Note: Technology is ever-changing, and it has a massive impact on the performance of an
organisation which is known as the technological factors of the organisation. a business has an
impact on the environment, and at the same time, the environment has also an impact on the
performance of the organisation. Finally, legal factors are different types of legislation or rules
and regulations that affect the performance of an organisation (Keers, 2018).

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Note: Tax rates, governmental controls, political environment, stability of the government, level
of corruption in the government of the UK affect the performance of JCB mostly in the UK.
These same factors in other countries where JCB has its business, affect the performance of the
organisation. These are the political factors, affecting the performance of JCB. Tax rates,
inflation, interest rates are the economic factors that are affecting the performance of JCB
worldwide (Pleninger, 2020).

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Note: Different socio-cultural factors also affect the performance of a business organisation like
JCB such as the population of the country or region, belief of the people, cultural programs,
religion, and so on. Since technology is ever-changing and is a must in the current time, it also
has a massive impact on the performance of a business organisation (Zha, 2017).

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Note: The environment of a country or a region has a huge impact on the performance and the
activities of the organisation. For example, in winter, the weather of the UK remains freezing,
and the operations of JCB remain stopped or slowed down. Different legislations related to the
business of the UK affect the performance of JCB both in negative and positive ways (Shokeen,
2016).

Note: Another most commonly used tool for analysing the business environment is Porter’s 5
forces model. It analyses five external factors that can affect the performance of a business
organisation. Those factors are- threats of new entrants, supplier bargaining power, internal
competition, threats of substitutes, and customer bargaining power. JCB has occupied a strong
position in the market, for which, a new entrant is a less risky factor for the organisation
(Shabanova, 2015).

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Note: When JCB has a contract with one or a few suppliers for the raw materials of its products,
the suppliers can avail evil privileges which can be very harmful for the organisation. Also, when
the customers have several choices, they can bargain for the price of the product. Since JCB is a
reputed brand, it has to face it very little (Pleninger, 2020).

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Note: Sometimes the government of the UK takes an attempt to provide a subsidy of a product
or service which becomes a matter of concern for the related business organisations. If the
internal competition of the market of the UK is in good shape, JCB can avail competitive
advantages over the other brands of the UK. However, there are fewer rivalries in the market
(Keers, 2018).

Note: Analysing the environment of a business is a must for the betterment of the performance
of the organisation. For this purpose, PESTEL, and Porter’s 5 forces are the most suitable ones.
In the discussion of this presentation, these two tools have been implied on the performance of
JCB.

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Different types of organisations
According to Contractor (2020), a business organisation can be of different types according to its
size, goal, capital, legal structure, and so on. This type may vary depending on the business
function of the organisation too. In the UK, there are several types of business organisation that
can be divided into three major categories which are- public, private, and voluntary sectors.
These categories are briefly discussed below-

 Public sector: The government of the UK owns a lot of businesses that are mainly
focused to do the welfare of the public of the UK. Most of these organisations are not-
for-profit organisations, and the income of the organisations is either used in voluntary
works or used in governmental projects.
 Private sector: All the businesses of the UK which are owned by the general public, or
the organisations on which the government has no ownership, can be summed under this
category. It can be a sole proprietorship business, or even can be a multinational business
(Demircioglu, 2017).
 Voluntary sector: These organisations are known as not-for-profit organisations, or
NGOs. They are focused to do the welfare of a specific group of the society, and
sometimes, different welfare societies establish these kinds of organisations for the
welfare of the members of those societies.

Different legal structures, and the advantages and disadvantages of them

In the aforementioned categories of business, there can be business organisations of different
legal structures which are eligible in the UK. Some of the most common legal structures of the
UK are mentioned below along with their advantage and disadvantages -

Sole proprietorship: This is the oldest structure of the business organisation of the world, and is
also popular than any other structures of business structure at this time too. About 80% of the
total business organisations of the UK are under this structure, which indicates, a business
organisation will have only one owner, and all the profit, losses, and liabilities will be consumed
and carried by the single owner. There are no legal obligations or rules that needed to be
followed while starting the business, or running the business (Hanna, 2018).

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 Advantages Disadvantages
 Better control of the business.  Unlimited liability, which can even
 No share of the profit. make the owner bankrupt.
 No legal obligations to running the  The loss has to be beard alone by the
business. owner.
 Short of capital (Hop, 2021).
 Fewer chances of expanding the
business.

Partnership: When some sole proprietorship business owners or some individuals come up to
start a business together with their combined capital, it is known as a partnership business. it is
different from a company business although having more than one owner since the owners don’t
register this business in the company house, rather they make a deed for their partnership. The
main advantage of this business is more capital than the sole proprietorship business (Isabelle,
2020).

Advantages
 More capital than the sole proprietorship
business.
 The liability is split between the owners.
 There is no legal obligation in this
organisation, which indicates fewer
paper works needed to be done.
Disadvantages
 Profit is divided among the owners.
 Though the liability is split among the
owners, the liability of the owners is
unlimited.


Limited liability organisations: These are mostly the private ownership businesses of the UK.
These organisations are registered in the company house of the UK. For starting this type of
business, some individuals have to provide capital and register the business in the company
house of the UK. Though these organisations are listed in the company house, their stocks can’t
be transacted in the SEC. The main advantage of this organisation is a limited liability (Kasahun,
2020).

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 Advantages Disadvantages
 Huge capital  More paper works
 More profits  A lot of obligations
 Limited liability  Profit is distributed among the owners,
which can be a lot in number.

Corporations: These are the organisations that are registered in the company house of the UK,
and the stock of these organisations can publicly be traded in the SEC (J, 2021). These
organisations are run by a board of directors. Though there are lots of paper works have to dine
for starting this business, it provides several advantages that have made it one of the most
popular business structures of the current time.

Advantages Disadvantages
 Unlimited capital gaining opportunity  Most complicated business.
 Liability is limited according to the  Less confidentiality of internal
number of shares held by an owner. information
 Fewer chances of being bankrupt easily.  Less profit since profit is divided among
a lot of owners.

Major differences between public and private ownership

Structural differences

key points Public ownership Private ownership

Minimum shareholders At least two shareholders are Minimum one shareholder is
needed to register the business. required to register this business
Maximum shareholders There is no limitation Maximum 200 shareholders
Minimum capital For registering this business, It’s not required in private
minimum capital has to be ownership (Keers, 2018).
arranged by the entrepreneurs.
The trading opportunity Organisations can sell different There is no opportunity to
of stocks types of financial instruments
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 along with stocks. publicly trade the stocks.
The opportunity of Organisations can raise capital No chance of increasing the
raising capital by selling reserve shares or by capital, or increasing the
authorising more shares by the number of shares (Pleninger,
company house. 2020).

Financing differences

Shabanova (2015) says the financing of these two types of ownership is different since the
ownership is different from each other. Public organisations get some extra advantages over
private limited companies because of their chances to trade their financial instruments in the
capital market. The stocks of public ownership can be traded publicly in the SEC. On the other
hand, the private ownership companies have no chance to trade their stocks in the SEC. For
starting the business, these organisations can take bank loans from IB or commercial banks.
Public companies have the chance to increase their capital by authorising more shares, which
can’t be prevailed by private ownership organisations.

The competition policy and the legislative framework of the UK

Though the market of a country or region can be balanced by international competition, it also
can be harmful if there is the availability of illegal competition among the business organisations
of the market. If the government of a country fails to prevent these types of competition, the
country will ultimately face losses, and international companies will show fewer interests in
investing in those markets. Though the UK market has fame worldwide, still there are some
illegal competitions in the market which are harming the performance of the market. For
preventing this, the government of the UK has imposed several anti-competition policies
(Shokeen, 2016).

Mainly, the government of the UK has imposed three policies for preventing illegal competition.
The first one is an embargo on those contracts which are harmful to free trades in the market.
Then the second one is for preventing the monopoly in the market so that, one company or
several companies altogether can’t take the whole control over the market. The final one is
prohibiting such transactions which are harmful to the competitive environment of the market.

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Imposing all those anti-competition policies has reduced illegal competition from the UK
market.

Competition and market authority of the UK

Widely known as CMA is a British non-ministerial department which is mainly formed to keep
the business market of the UK balanced and smooth, for which, it has to ensure strong
international competition, and reduce illegal competition in the market. This organisation has to
inspect the market, and figure out the illegal competition and lacks international competition to
make the market healthier for attracting the international investors to invest in the UK market.
Also, CMA has to ensure fewer barriers for the entry-level organisations to enter the market
easily (Zha, 2017).

The main responsibility of CMA is to ensure such a competitive environment in the market that
is good for both organisations and the consumers. Every business organisation tends to do
something new or unique that can give it a competitive advantage so that, the organisation can
earn more revenue than other organisations in the market. But sometimes this tendency becomes
harmful since many organisations adopt unfair means to get this competitive advantage. The
main goal of CMA is to detect this kind of competition, and prevent them for the betterment of
the market, and the consumers. Since the policies of CMA is to detect and prevent those unfair
means, these policies have a direct impact on the consumers in a positive way.

Monetary and fiscal policy of the government during the recession

During any recession, the government of the UK has to play a crucial role to save the economy
of the UK and ensure a healthy business environment. the government has to adjust the fiscal and
monetary policy for ensuring a healthy business environment. Monetary policy and fiscal policy
are interrelated, more specifically, fiscal policy is a part of monetary policy where the
government fixes its spending levels, and tax rates for keeping the economy smooth (Hop, 2021).
Since the earnings of business organisations sloth down in the recession, the government also has
to bring changes in monetary policy. The government also changes monetary policy to control
the money of the market so that, it remains at a balanced level. For this, the government sells
financial instruments when a lot of cash remains to people, and at the time of scarcity, the
government has to buy back those instruments.

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Globalisation and its effects
The term globalisation indicates the process of going beyond the national borders and
communicating with each other from any corner of the world. It has a massive impact on the
business of the UK which ultimately affects the economy and competition of the UK. More
multinational organisations are starting their business in the UK due to globalisation and the
healthy economic situation of the country. Moreover, globalisation also helps business ideas to
be renovated in different ways in different countries or regions of the world. Also, globalisation
has negative impacts on the economy of a country. For example, when there are lots of
multinational companies in a country, most of the revenues of the companies are sent to the
origin countries of those organisations which are known as the leakage effect (Kasahun, 2020).

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Conclusion
An organisation must analyse its environment for the betterment of its performance. Analysing
the business environment will provide several benefits to JCB. Several business structures have
different advantages and disadvantages. If a country wants to do well in international business, it
must keep the competition and the market well balanced. For this reason, CMA has been
established which ensures balance and reduces illegal competition from the market. Since
globalisation has massive impacts on the performance of a business, the factors are needed to be
analysed effectively.

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References
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Hanna, T.M., 2018. The return of public ownership. Renewal: A Journal of Labour Politics,
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Hop, M., 2021. What is the voluntary sector?. [online] Reach Volunteering. Available at:
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Isabelle, D., Horak, K., McKinnon, S. and Palumbo, C., 2020. Is Porter's Five Forces Framework
Still Relevant? A study of the capital/labour intensity continuum via mining and IT industries.
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Kasahun, A.K., 2020. The Impact of Working Capital Management on Firms’ Profitability-Case
of Selected Sole Proprietorship Manufacturing Firms in Adama City. IOSR Journal of
Economics and Finance (IOSR-JEF), 11(1), pp.45-55.
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fractionalisation on redistribution. World Development, 130, p.104945.
Shabanova, L., Ismagilova, G., Salimov, L. and Akhmadeev, M., 2015. PEST - Analysis and
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Shokeen, S., 2016. Porter's Model: A Critical Examination. International Journal of Engineering
and Management Research (IJEMR), 6(3), pp.178-183.
Zha, Y. and Li, J., 2017. CMA: A reconfigurable complex matching accelerator for wire-speed
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