Business Environment Analysis Case Study

Introduction: Market Structures and Policies

The success of the organization is impacted by the policies and the regulations which are formed by the government. For fair and effective work the company needs to follow all the regulations of the policies which have been formed by the government. Tesco has been selected as the private sector company for the completion of the assignment as it is the leading groceries company of the UK with a market share of 27.2%. The company has used a combination of various sources of finance, which includes retained earnings, borrowing and long term capital market issues. This report includes the different legal structures which are included in the formation of the company and its advantages and disadvantages. This will also describe the detailed comparison between the public and the private sector ownership based on the sources of finance. The report will also describe the market structure chosen by Tesco and its impact on the success of the organization. This report will also include globalization and its impact on the working of the organization.

Task 1: Enclosed In Ppt. - Types Of Organizations

Enclosed In Ppt.

Task 2: Legal Structures of the Organization

1. Providing An Overview Of The Different Types Of Organizations In Different Sectors

Public Sector Organization

NHS falls under the category of public sector units whose main motive is to offer high-quality services to users.

Private Sector

Morrison's is one of the leading private organizations which operate in the retail industry. It offers a wide range of retail products & services to the customers at discounted prices. The company is enjoying a high customer base and profitability in the competitive business arena.

Charitable Organization

British Red Cross is a well-known charitable organization which works for the welfare of others. It provides people with equipment and other resources which they need for living life effectually (British Red Cross, 2023).

2. Legal Structures Of The Organization

Different types of the legal structures prevailing in the UK are as follows:

Sole Trader:  This is the type of business in which the entire firm is controlled and managed by a single individual. This type of organization is not required to go through lengthy regulation and can be started and closed easily. For Example: Willard Marriott is the successful sole trader of the UK.

Advantages:

• This provides complete control over the operation of the firm and helps in quick decision-making.

Disadvantages:

• The liability of the owner is unlimited making it more risky. All responsibility belongs to the single individual making it difficult to manage the firm, and the scope for raising capital is less.

Partnership: It refers to a contract between two or more individuals to carry out the operation of the business at the predetermined ratio of profit sharing. Trust between the partners is the key to the success of partnership firms (Dewi and Fitriana, 2022). For example: Louis Vuitton & BMW is a successful partnership firm of the UK.

Advantages:

• Financial burden could be reduced as more capital could be gathered by this structure of the business. This does not include any extra Tax charges and the risk could be shared among the partners.

Disadvantages:

• It leads to a delay in the decision-making process due to disagreements between the partners. This also includes sharing of the profit among the partners so no sole beneficiary.

Limited company: It is the type of business structure which aims at limiting the liability of the shareholder of the company to the extent of shares they are owned. In this type of organization, the company has a separate legal existence. B&M retail, Virgin Atlantis, Greenergy are the various type of the company operating in UK.

Advantages:

• The liability of the shareholders is limited and the ownership could be transferred.

Disadvantage:

• The dividend for the shareholder is provided after tax, and it requires a high amount of capital to establish the company.

Comparison Of The Public And Private Ownership:

There are various sources of financing available for both private and public-owned companies. Some of the sources of finance are described below:

3. Sources Of Funding For Public And Private Ownership Companies

For The Public Company

• Equity capital: It is the type of fund in which the company can make the offering to the general public to purchase the share of the company at the determined rate. The investor is provided with the profit in the form of a dividend, which depends upon the number of shares issued (Janicka-Michalak, 2020). This type of funding dilutes the ownership of the company, and investors are provided with voting rights.
• Debt capital: This is the borrowed fund in which the company needs to pay regular interest and the repayment of the loan amount after the maturity date. This increases the liability of the company to repay the interest regularly, irrespective of the profit the company has generated.

For The Private Company

• Private Equity: This is the seed funding which is provided by the investors in exchange for significant ownership in the company. This includes the venture capitalist and the angel investors who provide to the company, which shows growth potential.
• Bank loans: This type of funding creates an obligation for the company to pay interest regularly.

4. Legislative Framework And The Competition Policy Of UK

The nature and the degree of competition in the market are determined by the market structure in which the company is operating. There are 3 types of market structure prevailing in the UK, which are described as follows:

• Monopoly: This is the type of market structure in which the goods and services provided by the company do not have any close substitution available in the industry. In this type of industry, the owner enjoys the utmost profit at the initial stage. The price of the goods and services determined by the industry is always high, and the consumer has no option but to accept it.
• Oligopoly: In this type of market structure, the number of suppliers is limited, which does not include a high amount of competitors. The goods offered in the oligopoly market vary from others on some basis. There are high market shares of each company prevailing in the market.
• Perfect competition: There are plenty of competitors available in the market which are providing the same type of goods and services. In this, the price of the product needs to be kept at a minimum as consumers can shift to different suppliers (Mustak, 2019).

There are limited numbers of super market the UK which are having high market share. This indicates that Tesco commonly prevail in the Oligopoly market structure, which is influencing the industry. This market does not include constant change in the price of the goods and helps in maintaining the constant price.

5. Competition And Markets Authority

To protect the rights of the consumer, the UK government has set up the Department of Competition and Market Authority. This department aims to ensure the organization's work is conducted after following all the standards formed by the government and aims to protect the consumer against unfair trade practices (Competitor and market authority in UK, 2023). CMA aim to put restrictions on forming cartels in the market, which will help in safeguarding the consumers.

6. Macroeconomic Objectives

The objectives of macroeconomics are to increase the national income of the country and maintain sustainable growth. It aims at reducing the level of unemployment in the country and tries to stabilize the price of goods and services. In macro economies it also aims at maintaining the equilibrium level of export and import in the country. A country can enjoy maximum profit if the productivity in the country has been improved therefore, it aims at improving the productivity.

Fiscal, monetary, supply side and exchange rate policies are the instruments through which the government intervenes in the working of the organization. The tax rate and the spending pattern in the country are determined under fiscal policy whereas monetary policy helps in controlling the flow of money and credit in the country. Through exchange rate policy the government aims at controlling the foreign currencies of the country. The impact of these policies on the working of the Tesco could be understood through following points:

Impact Of Government Intervention On The Employment Of The Firm

The government policy has direct or indirect impacts on the employment opportunity in the country. This could be understood through following points

• Tax rate: If the tax rate decreases, the company's profit increases, which helps in creating the scope for expansion. This will increase the need for employees in the company.
• Interest rate: With the increase in the rate of interest, the loan became expensive, which made it difficult for the company to expand, and the need for employees reduced.
• Exchange rate: During appreciation in the current, the number of exports increases, which needs high productivity (Roszko-Wójtowicz and Grzelak, 2020). This aims to increase the need of employees in the organization and decrease unemployment in the country.

7. Globalization And Its Impact

It refers to exchanging goods and services between countries with the help of technology. It defines setting up of the company in more than one country and improving the political, economic, Social and cultural connection between the countries. The Impact of Globalization:

Increase in the off sharing manufacture leading to the high unemployment rate in the country. The cost of the production and prices of the good will be reduced which will benefit the consumer in the country.

Conclusion

It has been concluded from the report that sole proprietorship, partnership, and the company are various legal structures prevailing in the industry. Equity shares and debt are the sources through which the public company can be funded. Bank loans and equity financing are the most popular forms of funding for the private company. Tesco is prevailing in the oligopoly market with a significant amount of market share. Fiscal, monetary and the exchange rate policy are the instruments by which the government is intervening in the operation of the company. It has been identified that Globalization has created a high level of competition for local businesses in the UK.

References

Books And Journals

• Bernanke, B.S., 2020. The new tools of monetary policy.American Economic Review,110(4), pp.943-983.
• Dewi, A.S. and Fitriana, D., 2022. Sole Proprietorship Legal Entity in Establishment of Small Medium Business in Indonesia.Issue 3 Int'l JL Mgmt. & Human.,5, p.1430.
• Janicka-Michalak, T., 2020. Venture Capital and Private Equity funds as source of financing enterprises in Poland.Economic and Regional Studies/Studia Ekonomiczne i Regionalne,13(3), pp.307-327.
• Mustak, M., 2019. Customer participation in knowledge intensive business services: Perceived value outcomes from a dyadic perspective.Industrial Marketing Management,78, pp.76-87.
• Roszko-Wójtowicz, E. and Grzelak, M.M., 2020. Macroeconomic stability and the level of competitiveness in EU member states: a comparative dynamic approach.Oeconomia Copernicana,11(4), pp.657-688.
• Zhang, X., González Rivas, M., Grant, M. and Warner, M.E., 2022. Water pricing and affordability in the US: public vs. private ownership.Water Policy,24(3), pp.500-516.

Online

• British Red Cross. 2023.[Online] available through :< https://www.redcross.org.uk/>
• Competitor and market authority in UK. 2023. [Online] available through;< https://www.gov.uk/government/organisations/competition-and-markets-authority>
• Impact of Fiscal policy in UK. 2023. [Online] available through :< https://researchbriefings.files.parliament.uk/documents/CBP-9329/CBP-9329.pdf>