Business Environment Essay
Business environment consists of all the internal and external forces that influence the operating situation of a company. Business environment has a dynamic and complex nature and it impacts greatly the survival and growth of a company. External factor consists of political factors Political factors (Taxation Policy, Unemployment Policy etc.), Economical factors (Inflation rate, Recession or Boom etc.), Socio-cultural (language, values, religion, beliefs etc. ), Technological factors (E-commerce, Rate of technological change etc. ), Environmental factors ( Pollution monitoring, Energy consumption etc. ), Legal factors (employment law, labour laws etc. )
Internal forces consist of organizational culture customs, values, rules and norms shared by the member of an organization) and organizational direction (processes and operations, communication among employees, leadership practises or level of friendliness).
Task 1: The immediate/contextual environment 1(a) Input-process-output (IPO) analyses for Premier Foods and for Vodafone IPO model is a very efficient tool for analyzing and documenting the critical aspects of the transformation process. IPO model is one type of functional that determines the inputs, outputs and the processing tasks that are needed to transform the inputs into outputs. The flow of data and materials from outside are represented by inputs which usually go into the process, process includes all the tasks required to transform the input into output and output are the data and materials flowing out from the process that turned into the finished goods or services.
IPO analysis of Premier Foods
Premier Foods is one of the largest branded food producers of Britain. So the inputs are a bit different than the other manufacturing companies. The inputs that go into process are usually raw materials consist of unprocessed foods and supplies, labour, research findings etc. The process includes the management skill and expertise, procurement and the food preparation and delivery services. The output is the finished packaged food products, customer feedback etc. IPO analysis of Vodafone
Vodafone group is a British telecommunication company which is also a truly multinational company operating over 21 countries. The input of Vodafone includes information infrastructure, research and development, efforts of IT department, efforts of other departments, facilities, staffs, process includes service design, professional competence, network of activities and buffer, and the output includes services, customer satisfaction etc. 1(b) Relative advantages and disadvantages of central planning vs. market economies for Premier Foods and Vodafone Central planning economy is a national financial system where production facility is operated, owned and managed by the government of the country.
Centrally planned economy usually seeks to control how the goods and services are produced and how resources are used and distributed. It is associated with a communist economy and based on the theory that the government will be responsible for the market failure. In contrast, in the market economy the interaction of business and consumers usually direct the pricing of the goods and services and other economic decisions and government doesn’t intervene much in this process.
I think central planning economy will be good for premier foods. Because this company already has acquired a lot and expanded the business fairly. Now it is time to move its focus on other strategies like price cuts, consolidation and efficiency and boosting market support. Market economy usually keeps the prices under control and distributes wealth properly. So this economy will support the strategies of Premier Foods. Another advantage is if a product fail in this economy government will take the responsibility. So it will do well in market economy.
But it has some disadvantages too. This economy doesn’t allow growth. Although expansion is not a concern of Premier Foods now but this policy doesn’t permit them to produce more innovative foods. So this may make the business less profitable. I think market economy will be better for Vodafone. As it is a multinational company, it will want to expand as much as possible and make profit from many countries. It is free to do this in the market economy. Market economy will give it the flexibility to set call rates or other prices. It has a freedom to innovate. But a disadvantage is if the control of market economy spins, consequences can be dangerous because there is no government to support it.
1 (c) Certainty of the customer environment
Premier Foods has more certain customer environment then ten years ago. It has expanded and acquired several brands over the last 10 years. It is one of the largest branded food producers of Britain. It also has the largest grocery division which sells both branded and unbranded products. So they are growing their business every day. The management has formulated a customer friendly strategy by shifting their focus from expansion to efficiency and low price. They have also giving increased attention in marketing. More marketing effort means more communication with customers. So this is increasing customer loyalty. Their current strategic priorities are building good customer relationships by understanding their needs, investing more in quality. Marketing and innovation, being a favourable partner of customers and lowering cost. All these strategies are helping to make a strong long term profitable relationship with customers. So yes, the customer environment is more stable and certain than it was ten years ago.
1(d) Identifying the stakeholders of Premier Foods and plotting them on a power grid Running a company like Premier foods involves a variety of stakeholders. Each of doesn’t have a similar amount of impact on the business. Power interest grid is an analytical tool that helps the company to categorize its different stakeholder according to the power they posses and their interest.
The key players are the people whom a company has to manage closely. They have high power and high interest. The key players of Premier foods are is the Vodafone who is the exclusive provider of integrated communication, the gores group with whom it has formed a joint venture, the top level management and the developers. These stakeholders are mainly the decision making bodies, have power of negotiation, should be engaged in decisions and consulted regularly. The people with high power and low interest should be kept satisfied. The company should meet their needs. This category includes stakeholders of the power brands like Ambrosia custard and rice pudding; Bachelors soups; pasta, rice and noodles; Bisto and OXO stocks and gravies; the Sharwoods and Loyd Grossman cooking sauces range; and Mr. Kipling cakes, finance and legal department etc. They should be consulted and informed about their interest area.
The company should show consideration to the people with low power and high interest. This category includes outsourced managers, training managers, supporting brands like Angel Delight whipped dessert, Atora suet, Be-Ro flour, Bird’s custard, Homepride cooking sauces, Lyons cakes, Marvel powdered milk, McDougalls home baking range, Paxo stuffing mixes, Saxa salt, and Smash instant potato. The company should inform them about interest areas and involve them in low risk activities.
The company should monitor only the people who have low power and low interest. They are mainly the customers and the community. They should be informed by the general communication like the newsletter, direct mail, broadcast and print media etc.
1 (e) Discharging the responsibilities to its different stakeholders The stakeholders are a vital part of the organization. The organization has certain responsibilities towards its stakeholders. The responsibilities are:
Transparency in marketing.
Keep the promises that have been made.
Delivering quality products
Providing honest and fair experience
Building a loyal customer base
Active participation in community activities
Join the local chambers of commerce and other service clubs
Allowing employees paid time off
Maintain fair labour laws.
Fairness in hiring and promotion.
Promote a co operative culture through workplace diversity
Good reward system
Suppliers and Partners
Look out for the supplier and partner’s interests
Operate fairly and honestly
Maintain the trust
As Premier Foods is one of the most profitable companies it can be assumed that they are discharging their responsibilities in a good way.
Task 2 : The general business environment
2 (a) PESTEL analysis of Premier Foods’ business environment: PESTLE analysis is a framework to scan the external environment of a company. The PESTLE analysis of Premier Foods is discussed below.
The operations of Premier Foods is affected by some political factors like the government polices about regulations on food business, control of government generated by the concerns about cardiovascular diseases and cholesterol issues, taxation policies, trade barriers etc.
Economic issues like inflation; interest rates etc. are concern of this factor. Economic situation is also a factor because it affects the buying power of willingness to buy products. The accessibility of finance, taxation regulations also are the concerns of this policy.
Premier Foods has to constantly monitor some socio cultural factors. The foods products that customers demand are usually influenced by the attitude, belief and values of them. These things are greatly conditioned by the society. As concerns about health issues are increasing, customers approach toward this food product is constantly changing. The lifestyle of people and the changing population is also a social factor as those also affect operations of Premier Foods.
The technology advancement has a great impact on the operations of Premier Foods. The advancement in the equipment and machineries of the food production process can save time and money. The innovation in processes can also have a good impact. The supply chain management system can help manage suppliers properly. There are systems to check the food quality. The company has to keep the technologies up to date because otherwise competitors may get an advantage. Above all, implementation of technologies makes the management efficient and cost effective.
The legal factors can be the labour laws , tax regulations, quality and environment certification, business registration, licensing and the laws about operating hours.
To help maintain and sustain the natural environment, Premier foods has doing important things like reducing the wastes, using environment friendly technologies, recyclable packaging etc.
2 (b) Effect of macroeconomic factors on Premier Foods’ business Microeconomic factor has a great impact on the business environment of Premier Foods. CPI inflation: consumer price index (CPI) is the key to measure the price level of consumer goods or market basket that is purchased by household. Premier Foods is mostly affected by CPI inflation because if the consumers have less power and ability to buy foods and other products the business will face loss. RPI inflation: Retail Price index helps to measure the change in retail goods and services. I I think RIP inflation affects the company fairly because if the price of retail goods is increasing then the price of the products will also increase.
And increased price leads to decreased demand of foods as there are many competitors available. Interest rate: it is the proportion of loan that is charged as interest. Interest rate is also important for the Premier Foods to determine higher interest rate leads to lower profit. Unemployment rate: Unemployment rate affects the businesses of the companies. Unemployment rate hinders the mass production which results to less profit that it was possible. Plus the unemployed people are less able to purchase the goods. Exchange rates: the value of currency while conversion of one to another is exchange rate. Exchange rate affects Premier Foods in case of shipping products to some other place where currency is different.
2 (c) The social and cultural factors affecting consumers
Social and cultural factors are important for consideration while doing a business. These different factors can have diverse effects on consumers. Changes in social and cultural factors affect the business environment of Premier Foods. The socio cultural factors are mainly the lifestyle, preference, demographics, education, religion, interest groups, family, social organizations, aesthetics and lifestyle etc. Companies should be keep this factors in mind while formulating strategies, segmenting target market and doing their business as a whole. Premier Foods has split its business into ‘Power Brands’ and ‘Support Brands’.
In power brands it has listed those foods which are readymade and one can have them right away like Ambrosia custard and rice pudding, pasta, rice and noodles etc. Support brands are the products that support the power brands while cooking. Salt, sauce, milk etc. are the ingredients that are used to support the main food. Social and cultural factors are affecting consumers. Because some people prefer readymade food. Specially the students, young customers, Bachelors etc. And some families like to cook food for them. The preferences of people are having a great impact here. Demographics are also affecting the consumer decision.
2(d) Evaluation of the current strategy of Premier Foods regarding shifting focus from expansion to consolidation and organic power: Premier Foods has expanded their business through acquiring different brands. Over the last 10 years, they have been focusing on expansion. But now they have changed their strategy. Their current strategy focuses more on consolidation and organic growth. There are some reasons behind this change of strategy. Because, expansion of business can often bring unintended consequences. It becomes very difficult for the management to handle all the operations properly. Rapid expansion declines the quality of the product, the hiring and training of employees become difficult, it needs large capital investments and above all the company loses control over its operations.
Because of these reasons the company has shifted its focus to consolidation and organic growth. Consolidation is the process to cut production and overhead cost and adding revenue by a skilled management and economy of scale. Consolidation increases the size of the market resulting in increased sales and profit. Consolidation helps a company to become industry leader; it also helps to attract different partners and suppliers. It does some financial savings by reducing duplicate assets. Organic growth also has some advantages. Because when one grows its business by planning effectively and with strong management of the activities, he knows his business very well. He can respond quickly to the opportunities, changes in market offers. One can have the choice to grow business in his own comfortable rate. Instead of merger and acquiring, it can focus into maturing itself. So it may be assumed that the current strategy is a right one.
Task 3 The international legal and regulatory environment
3(a) Effect of the changes in EU on Premier Foods
If the UK government has announced an immediate referendum on EU membership with polls showing a 62% majority in favour of leaving the EU entirely, then it is not a very good news for the premier foods. But it has relatively a small impact on Premier Foods.
Premier Foods is mainly a UK based company. So it will not have to deal with the trade barriers or taxation policies of other countries.
One good news is, because of the change in the policy, some other foreign companies may face some difficulties in trading. They may leave from the country or even if they don’t, they may lose profit as they have to raise the prices due to unfavourable tariff rates. So this means that some competitors will leave from the country. So if the competition is less sever then Premier foods has more chances to increase profit.
But it does purchase some inputs from the other countries of Europian Union. So some problems may arise there. Because the alliance is broken. So the trade will not be easier as before.
Previously there was a scope for the countries if EU to come on common grounds by meeting on a regular basis. But this opportunity is also lost.
3(b) Evaluation of the relative impact on Premier Foods and Vodafone of the UK leaving the EEA Vodafone and Premier Foods both have something to lose by this arrangement. They will not be able to do business like they used to. But from these two countries I think Vodafone has more to lose. Because Vodafone is truly a multinational company. It means that it has business all around the world, also in other European countries. If UK has to leave the EEA, then Vodafone will face many difficulties. Trade barriers may increase which means Vodafone may have to pay more tariff or tax to do business in other countries. More tariff means setting higher price to cover up this.
Setting more price will make the product less competitive and also decreased the demand. So it will lose profit. Another problem will be the alliance will be broken. So the companies and the countries will not be as co operative as before. This will also create difficulty in doing business. The market barriers will also be higher in other countries, so Vodafone will not be able to penetrate the market easily. This will result in loss of their customers and increased opportunity cost. On the other hand, Premier food is a domestic local company. It doesn’t have much to do with other countries. It may have to import some inputs from other country, but it may face a less difficult situation than Vodafone.
3(c) Effect of the new EU arrangement on Premier Foods and Vodafone regarding being outside of a common regulatory framework for business In the case of UK leaving the UK regulatory frameworks, I think Vodafone has more to lose. Because, Vodafone is a multinational company. It has to do business in different countries. If there is a common regulatory framework for business, doing business will be much easier. Because then Vodafone doesn’t have to adjust much in other countries. There will be similar business process, regulation system in all the countries.
Registering or licensing the business will be easier. But if the regulatory framework is different then Vodafone has to formulate different business strategies for different countries. This will create a chaos for the management team. And the co ordination among different branches of the company will be affected. Plus there will be additional cost for train up the employees for the different frameworks. Employees will have to adjust to the completely new environment; this may make the management less skilled. On the other hand, Premier Foods is a domestic country. It operates only within the Britain. So it doesn’t have to face these difficulties.