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Section 1 – Organisational Purposes of Businesses

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Section 1 – Organisational Purposes of Businesses Identifying the purpose of different variety of legal organisations, including corporations, governments, non-governmental organisations, international organisations, armed forces, charities, not-for-profit corporations, partnerships, cooperatives, and universities. A hybrid organisation is a body that operates in both the public sector and the private sector simultaneously, fulfilling public duties and developing commercial market activities.

In the social sciences, organisations are the object of analysis for a number of disciplines, such as sociology, economics, political science, psychology, management, and organisational communication. The broader analysis of organisations is commonly referred to as organisational structure, organisational studies, organisational behaviour, or organisations analysis. A number of different perspectives exist, some of which are compatible:

From a process-related perspective, an organisations is viewed as an entity is being (re-)organized, and the focus is on the organisations as a set of tasks or actions.
From a functional perspective, the focus is on how entities like businesses or state authorities are used. From an institutional perspective, an organisation is viewed as a purposeful structure within a social context.

Sociology can be defined as the science of the institutions of modernity; specific institutions serve a function, akin to the individual organs of a coherent body. In the social and political sciences in general, an "organisations" may be more loosely understood as the planned, coordinated and purposeful action of human beings working through collective action to reach a common goal or construct a tangible product. This action is usually framed by formal membership and form (institutional rules). Sociology distinguishes the term organisations into planned formal and unplanned informal (i.e. spontaneously formed) organisations. Sociology analyses organisations in the first line from an institutional perspective. In this sense, an organisation is a permanent arrangement of elements. These elements and their actions are determined by rules so that a certain task can be fulfilled through a system of coordinated division of labour.

Economic approaches to organisations also take the division of labour as a starting point. The division of labour allows for (economies of) specialization. Increasing specialization necessitates coordination. From an economic point of view, markets and organisations are alternative coordination mechanisms for the execution of transactions

An organisations is defined by the elements that are part of it (who belongs to the organisations and who does not?), its communication (which elements communicate and how do they communicate?), its autonomy (which changes are executed autonomously by the organisations or its elements?), and its rules of action compared to outside events (what causes an organisations to act as a collective actor?).

By coordinated and planned cooperation of the elements, the organisation is able to solve tasks that lie beyond the abilities of the single elements. The price paid by the elements is the limitation of the degrees of freedom of the elements. Advantages of organisations are enhancement (more of the same), addition (combination of different features) and extension. Disadvantages can be inertness (through co-ordination) and loss of interaction

The stakeholders of a business are those parties that have a direct or indirect interest in the organisation. Apart from the investors, employees, customers and suppliers; the government, the community and trade associations do also have a legitimate interest in the organisation. The shareholders upon investing in the organisation have risked their capital, but if the company will do well, not just the share price will increase in value but the dividend earned will be higher. On the other hand, if the business fails, they could lose their investment. Furthermore, in today’s competitive world, employees may be required to change the nature of their duties and responsibilities and this will result in either staff turnover or in a difficult situation to terminate some staff. Therefore, employees need a strong company that offers job security which will develop as a protection to their personal lives. With the increase in competition, customers are always looking for the best possible prices available. They will not just seek these opportunities on a regional basis but with the help of e-commerce they can see what’s available on offer worldwide. Suppliers also have their share interest in the organisation, because if the organisation does well, custom may increase and Creditors want the organisation to succeed as well in order to get back the money owed plus making a profit out of the deal. Government on the other hand, does not only benefit from the revenue generated on Company Tax from profits and VAT contributions of successful companies, but if the organisation closes its doors, the government will be faced with a problem in terms of unemployment. On the other hand, the society will be concerned that the organisation, with its operations, is not of any danger to the public and that the damage to the environment is minimised as possible. If the organisation is not financially stable, it may reduce costs that affect these objectives. Even the local community depends on the success of the organisation, as new businesses will open to meet the needs of the large company, and the employees who work there. If the organisation fails, these companies will shut down as well.
Stakeholders analysis is used to factor in the interest of the main stakeholders in the matter concerned. To successfully implement new strategies or projects, the organisation needs to have the support and understanding of the involved parties. In order to minimise as much as possible resistance, the stakeholders need to feel the ownership of the project and what are the advantages gained from the outcome of such developments. The power that stakeholders hold on the company depends on how much the organisation is dependent on the stakeholder. This power either comes from supplying important skills or resources to the organisation or else by the power that is exerted from a strong pressure group. Generally, the objectives of the company reflect the stakeholders’ values and aims but, unfortunately how the polices may be implemented will reflect one group over other, and this will result in conflict between stakeholders. Internal politics, bad management and change in strategies and polices are situations where conflicts may arise
The Power/Interest Grid is a valuable tool for management to determine which are the key stakeholders during a project, that is, who have the most power and influence. Focusing on the main stakeholders will be crucial for the success of the project. With this matrix, it will be easy to establish on prioritisation of energy, time and whom to monitor closely during a project.
Therefore, by satisfying stakeholders’ objectives, analysing stakeholders’ needs and clearly mapping their power, will fruit in successful management.
Furthermore, businesses have also legal responsibilities. Unfortunately sometimes there are organisations that try to take advantages of selling a defective good or inadequate service if they can get away with it. In order to minimise such instances there are various laws and acts set up to protect the consumer. Examples of such laws are the Directive 2005/29/EC, which is, the Unfair Commercial Practices Directive and the Product Liability Directive. Therefore, in order to meet such obligations, the organisation has to have in place a quality control system to check the level of quality of the final product to eliminate or at the least to minimise defect products. Another system would be to set up a professional customer relations office where queries and complaints from the customers will be handled, answered and reported accordingly in order to minimise the inconveniences already caused to the consumer.
The Employment Law address the legal rights of/ on working people and their organisations. It clearly defines the various aspects of the relationship between trade unions, employers and employees. Another requirement is to ensure that the health and safety provisions, as stated in the Health and Safety at Work Act, are met. In order to meet such obligations, employers upon engaging new staff, in the contract of employment can specify exactly the terms of employment, including therein details such as wages and other details and/or requirements as stipulated by law. In respect of the Health and Safety Act, the organisation can set up a Health and Safety Committee that part of its functions would include investigating potential hazards, examine causes of accidents and to make recommendations to the employer about health, safety and welfare matters.
With the growing understanding and awareness in reducing the damage to our ecosystem, international laws have been regulated in a way to provide guidelines regarding pollution, waste, sustainability and conservation. Directive 2004/35/EC clearly stipulates the framework and the responsibilities in this aspect. Apart from being environmental friendly increases the costs of the organisations, organisations have to be more proactive in order to avoid penalties. These penalties will not only have a monetary effect on the organisation but damage will also include to the corporate image and reputation of the organisation. Examples of strategies to meet these responsibilities will include the use of renewable energy resources like solar energy or wind power and the setting up of an Environmental Audit that will help the company to be more compliant with the organisation’s environmental goals and legal regulations.
An economic system is comprised of the various processes of organizing and motivating labour, producing, distributing, and circulating of the fruits of human labour, including products and services, consumer goods, machines, tools, and other technology used as inputs to future production, and the infrastructure within and through which production, distribution, and circulation occurs There are three kinds of economic system which are basically adopted by the different countries. They are: Free market, centrally planned, mixed market.1) Free market economic system: The intervention of government is kept at a minimum level or neglected in free market system and all the economics resources comes under the private sectors as well market. Price mechanism will determine how much of goods or services will be supplied according to the market demands. Most decisions are based on market mechanism. The supply, demand and ability play the vital role in market decision making. As per looking at the free market system it raises the various unsolved questions like who will produce the goods and services and infrastructures for the country to meet the needs of every public.2) Centrally planned economy system: Centrally planned economic system refers that government allocates the economic resources; government makes all the planning regarding the economic activities. Private sectors are kept far away in involvement of any economical accumulation. These kinds of economics were found in the Asian, central Europe, Eastern Europe and Latin American nations but now a days these are found in Cuba, Iraq, Iran, North Korea etc. In these systems basically unemployment problems will not be faced since government plan all the economic activities and resources will be allocated based needs of its people and different industries inputs.3) Mixed economy system: This system is a mixture of all other system. The system where both capitalism and socialism economic system are included it is known as mixed economic system. In this globalizing world most of the countries are obtaining this economic system. Mixed economic system splits the available economic resources available in the country to both private sectors and government. Private sectors are encouraged to get involved and participate in utilizing the resources which helps to gain economic profit for whole nation. Countries like USA, UK, Russia and China to countries like Cambodia, Peru and Vietnam has adopted this economic system. When one fails to meets the public desire other can get it and helps to maintain the economic balance not only in the particular country but also the whole nation.

The UK economy: size (gross domestic product, gross national product); structure; population; labour force; growth; inflation; balance of payments; balance of trade; exchange rates; trading partners; public finances (revenues, expenditure); taxation; government borrowing; business behaviour e.g. investment, objectives, risk awareness; cost of capital; consumer behaviour; propensity to save; propensity to spend; tastes and preferences

Government policy: economic goals; fiscal policy: control of aggregate demand; central and local government spending; Public Sector Net Borrowing (PSNB) and Public Sector Net Cash
Requirement (PSNCR); euro convergence criteria, monetary policy; interest rates; quantitative easing; private finance initiative (PFI); competition policy (up-to-date legislation including Competition Act 1998, Enterprise Act 2002); Competition Commission, Office of Fair Trading; Directorate General for Competition); European Commission); sector regulators e.g. Of gem, Ofwat, Civil Aviation Authority; Companies Acts; regional policy; industrial policy; enterprise strategy; training and skills policy

Market types: perfect competition, monopoly, monopolistic competition, oligopoly, duopoly; competitive advantage, strategies adopted by firms; regulation of competition

Market forces and organisational responses: supply and demand, elasticity of demand; elasticity of supply; customer perceptions and actions, pricing decisions; cost and output decisions; economies of scale, the short run; the long run, multi-national and transnational corporations; joint ventures, outsourcing; core markets; labour market trends; employee skills, technology; innovation; research and development; core competencies; business environment (political, economic, social, technical, legal, environmental); cultural environment

Global factors: international trade and the UK economy; market opportunities; global growth; protectionism; World Trade Organisation (WTO); emerging markets (BRIC economies – Brazil, Russia, India, China); EU membership; EU business regulations and their incorporation in to UK law; EU policies e.g. agriculture (CAP), business, competition, growth, employment, education, economics and finance, employment, environment, science and technology, regional); labour movement; workforce skills; exchange rates; trading blocs (e.g. monetary unions, common markets; customs unions, free trade areas); labour costs; trade duties; levies; tariffs; customs dues; taxation regimes; international competitiveness; international business environment (political, economic, social, technical, legal, environmental); investment incentives; cost of capital; commodity prices; intellectual property; climate change e.g. Kyoto
Protocol, Rio Earth Summit; third world poverty; the group of 20 (G-20); global financial stability

Learning outcomes and assessment criteria

Learning outcomes

On successful completion of this unit a learner will: Assessment criteria for pass

The learner can:

LO1
Understand the organisational purposes of businesses 1.1 identify the purposes of different types of organisation
1.2 describe the extent to which an organisation meets the objectives of different stakeholders
1.3 explain the responsibilities of an organisation and strategies employed to meet them

LO2

Understand the nature of the national environment in which businesses operate 2.1 explain how economic systems attempt to allocate resources effectively
2.2 assess the impact of fiscal and monetary policy on business organisations and their activities
2.3 evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organisation

LO3
Understand the behaviour of organisations in their market environment

3.1 explain how market structures determine the pricing and output decisions of businesses
3.2 illustrate the way in which market forces shape organisational responses using a range of examples
3.3 judge how the business and cultural environments shape the behaviour of a selected organisation

LO4
Be able to assess the significance of the global factors that shape national business activities 4.1 discuss the significance of international trade to UK business organisations
4.2 analyse the impact of global factors on UK business organisations
4.3 evaluate the impact of policies of the European Union on UK business organisations.

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