Topic- businesses' external and micro-economic environment
Word Count: 3,000 words
LO1. Present knowledge on the fundamental elements of the internal environment of organisations and the interaction with the external environment.
LO2.Explain the role of government and how market economy functions.
LO3.Evaluate the economic environment within which businesses operates in the United Kingdom.
LO4. Demonstrate why countries benefits from trade with each other.
LO5.Explain growing impact of the European Union on British business.
Produce an academic essay on a chosen Mobile Phone company and employing relevant Business environment and Micro Economic concepts and approaches. Identify how and why your chosen Mobile Phone company requires to audit their External and Internal business environment and also how they can achieve insights into their Micro Economic Environment.
This task cover LO1 and 3.
In modern times, the business environment is changing and fluctuating with time as well as nature in order to conduct different types of operational activities that happen within organisation (AÄ‡imoviÄ‡ and et.al., 2014). Contemporary business environment is defined as on-going procedure that move due to different elements such as sudden changes in demand and supply, customer interest and changing taste & preferences. There are defined different elements like suppliers, inner and external factors, competitors that present impact on the efficiency of an organisation. To understand the concept of the report selected organisation, Alcatel Lucent Nokia this is a French global telecommunication company. The report identify all the microenvironments, organization can consider different aspects such as supply as well as demand, internal analysis, elasticity etc. These aspects impact on the business profitability in positive manner.
In this report discuss on different topics like supply and demand curve, price elasticity, internal auditing and PESTLE of the selected organisation. Along with, there are consisting of external audit in which involve SWOT Analysis that enables to understand the strength, opportunity, weakness and threat of the business.
Overview of Company
Alcatel Lucent Nokia is a French company that operate business activities in global telecommunication equipment. The company headquarter established in Boulogne Billancourt, France. It was founded in 2006, December 6 by the merger of France based Alcatel and U.S. Depended Lucent. On November 3, 2016 Nokia acquire the company and merger with the network of Nokia division. The company has been dealing into different areas such as mobile, fixed, IP technologies, converged networking hardware, software and services with different operations across the 130 countries.
1. Business Environment and Micro economic Concepts and Models
Business environment is set of the internal and external activities which is defined how to environment fluctuated due to different activities. It is consisting of government activities, suppliers, workers, technological modification, requirement of customer, changes in economy, market aspects etc (Darlington, 2017). Due to cultural trends require to strategic planning and analysis competitive activities that show impact on the procedure of business in enormous way.
Demand: It is a economic principle where consumer demand of particular products and services from the company. To fulfil the requirement of existing products and services known as the demand in the term of economic. As per the demand of product customer willingly pay the amount in favour off item bought. The link between quality of product and price is shown by the curve which is change as per the demand of product and changes of product price. It is effective economic principle that defined that when the price of product increases so demand of products goes down and when price of product decrease so demand of the commodity is increase. So both have negative relations and both factors impact on the on price for longer period of time (Cardoso, 2017).
As per the above curve it is understanding that quality of commodity bought on effective price which is known as demand curve. This graph presented that price and goods have negative relation. If price increase so quality goes down and if price decrease so quality demand increase.
Supply: It is part of the economic principle where the amount of goods commercially available. The term of supply defined that when customer demand the products and company supply on time that particular products. In essence, value and amount create where involve positive relationship because when price increase so supply increase and price decrease so supply decrease (Kalitanyi, 2019).
The curve of supply is helpful to defining the link between price of good and quantity supplies in market in certain period of time. Due to increase price so present positive impact and movement in supply curve as each firm dealer wants to supply the maximum quantity to earn better benefits. As per the above graph it understands that there is good relation in between quantity and good. As per the increase the price from 2 to 3 so quality supplied also climbed from 30 to 40.
Elasticity: In the economic term, it is a method which is utilised to define the financial factor in relation to changes in some and other factors. When the elasticity of commodity is higher of 1 so demand of the market is impact on the price while lesser than 1 so that time elasticity is not affected by the price (Cascio, Boudreau and Church, 2017). After analysis the volume adjustments impact on the commodity price and material will be called as elastic. There are discussed several types of elasticity such as:
Cross Elasticity: In this present the graph link between the two commodities in order to measure the responsiveness of the quantity demanded for a good changes and price of other goods. In the case of extra commodity demand of the elasticity factor regarding to cross price present adversely effect. To calculate this applies the particular formula such as:
Cross Price Elasticity of Demand = (Q1X – Q0X) / (Q1X + Q0X) ÷ (P1Y – P0Y) / (P1Y + P0Y)
Price elasticity: It is most essential factors that use for measurement and present good relation in between changes of price and and quantity that known as the price elasticity of demand (Wang and Bao, 2015). For this apply this formula:
Price Elasticity of Demand = % change in quantity / % change in price
As per the above graph it is understanding that when the price increase at the particular point like 50p to 60p so see the impact in decrease way in quantity like from 100 to 50. The main example of the elastic goods is luxury goods and substitutes in market place.
Income elasticity: It is a kind of the elasticity which is present the relation among the income level of individual and quantity demanded (Cook, 2017). In the general sense when customer has enough income so according to that purchase the products from market. Formula to calculate it:
Income Elasticity = % Change in the demanded quantity / % Change in Income
As per the above graph it is analysed that increase income of customer so change the quantity which is presenting the income elasticity of demand. Like Q denotes as quantity and DD denotes as income elasticity and Y presents the income level.
Oligopoly: It is a framework of the competitive environment that related with the small organisation, none of which can keep the others from having significance impact. The market position is high so few suppliers supply the different products as well as services (Kennedy, 2016). Such as Alcatel Lucent Nokia in the market is not oligopoly because other companies provide same products with same features. So provide competition to other companies required to focus on design f products and their features that different from others.
Internal audit: It is helpful to analysing the actual internal position of the business in case of efficiency of staff members and involvement. The manager of the company conducts this audit that helps to make effective policies and develop positive improvement as per the current situation. There are discussed different elements such as:
- Productivity: In most of the organisation a operational manager responsible for the arrange all the productivity where define all the elements in different manner. In this mainly focus on the large production, size, several standards, diverse operations etc. Moreover, to measure the efficiency applies the benchmarking management tool that supports in different productivity at several division due to compare with the other organisation but in similar industry (Kasemsap, 2015). There are defined the requirement of the productive measurement such as:
- Revenue for every foot
- Production of goods per unit time
- Milestone per time
- Business strategy diagram: Every business wants to increases their performance as well as profit so they want to prepare effective market strategy (Fell, Li and Paul, 2014). In Alcatel Lucent Nokia, the manager applies the different types of business strategies such as marketing mix, online trading and E-commerce. Company follow the modified SEO software which is able to compete with the other company and attract customer regarding to their product. The manager of Alcatel Lucent Nokia, develop their own site in effective manner where clients search about the product. The company uses different method to sell the the mobile phones and other products. The company use B2B e-commerce applied top sale out various products to other companies.
The above diagram presents the business has been utilised the particular business strategy to generate income that helps to raise profitability as well as productivity in positive manner. The company has been provided different types of products to attract for the company (Pantea, 2015).
- Political Factors: This factor includes the various aspects which affect the production as well as profitability of the company such as political stability, corruption, market lobbying, governance policies etc. Every organization have its main objective is to maximise their profit margin and it is totally depend upon the political factors. If it is in favour then it’s beneficial for the company such as Alcatel Nokia (Amuna, Al Shobaki and Naser, 2017). They continuously raise the lobbying expenses which hit the revenue of the company. In addition, local governments are highly influential because most of the regulations implemented by them.
- Economic Factors: There are various factors such as exchange rate, shift in demand of good in the economy, workforce productivity etc. Due to increase in the foreign exchange rate moist of the organizations have incurred losses and Alcatel Nokia is one of them. Increase in the workforce productivity will positively impact the company and maximise the overall revenue of the organizations. Before making any strategies, managers of Alcatel Nokia need to evaluate the economic factors and analyse that it is beneficial for the business or not. Along with this, increase in the income of household also increases the demand of Nokia's product which is the great opportunity for the company.
- Social Factors: It includes the market trends, consumer's behaviour or attitude, power structure etc. These factors not only affect the economy of the country but also impact the availability as well as level of consumer's demand. In context of Alcatel Nokia, there are various factors which affect the company through change in the attitude towards authority, demand of consumers change due to requirement of new features in the mobile phones (Lewandowski, 2016). Alcatel Nokia supplies their products in the market with some changes in the features as per the market demand. It will further increase the brand value as well as profit margin of the company and helps in achieving organizational goals and objectives.
- Technological Factors: Change in the organization is very important because it support the company to maximise their production through generating high demand with the help of attracting new customers. Alcatel Nokia continuously modifies their products through adding some features which create more value for the customer. Company modify various features such as increase the battery backup, improve camera quality, storage capacity etc. Currently Alcatel Nokia has growing market that is opportunity as well as threat for the company because other mobile phone companies also build effective strategies to give tough competition. Use of technology will provide the growth as well as helps in maiming productivity as well as profitability of the company.
- Environmental Factors: This factor directly impacts the operational activities of the company which include the risk related to the environment. So it is important for the organizations to follow every environmental rules & regulation which helps in performing task and survive in the market for longer period. In context of Alcatel Nokia, they have to perform according to environmental standards as per the local or national level (Maak, Pless and Voegtlin, 2016). Per capital or national Carbon emission helps in better prediction of the environment policy. Change in the climate also affect the supply chain management of the company which further impact the production as well as profitability of the company. Before making any strategy, manager of Alcatel Nokia need to analyse these factors or build policies accordingly.
- Legal Factors: This factor consist various laws & regulations regarding the nature of business. Company have to follow the standard rules & legislation which is important to implement otherwise government will interfere or oppose the fine and other penalty. Alcatel Nokia has to build strong security in order to secure the customer related data which is very important (Zondo, 2016). By change information is leaked then it will impact the overall reputation of the company and further reduce their products demand in the market. They need to follow all the rules and regulation telecommunication and make sure to protect their right which is most important.
2. External Audit
- Alcatel Nokia is the most popular company which create brand values, earning high margins compared to its competitors.
- Company follow premium pricing policy which generate higher profit margin (Pantea, 2015).
- Company have strong consumer base which maximise the demand as well as revenue of the company.
- Alcatel Nokia follows the standard competitive approach which provides competitive advantage. Along with this, they used latest technology to attract consumers.
- Alcatel Nokia has weak supply chain management which impact the distribution of goods. Company should improve their supply chain managements in order to reduce the storage cost of their products.
- Company also provide cheap price product which impact their image and high class people avoid to purchase because these mobile phones can be purchased by any one.
- Alcatel Nokia need to updated with latest technology otherwise they are unable to survive in the market.
- Through implementing latest technology in their mobile phones company able to expand their business in any country.
- Alcatel Nokia needs to modify their distribution strategy in order to boost the demand which further maximise the revenue of the company.
- They should focus on their marketing strategies to expand their product reach all over the country.
- Company have to modify their existing product in order to make their products in demand among the customers.
- Huge competition in the telecommunication sector becomes huge threat for the Alcatel Nokia Company. There are some competitors such as Samsung, Apple, and Lenovo.
- There are various external factors which create various challenges and it will occur due to privatisation of organizations.
- Due to increase in labour costs also increase the overall product cost which reduce the profit margin of the company. (Geppert and Pastuh, 2017).
3. Limitation of Micro Economics
Economic concept help the organization to enhance their knowledge as well as behaviour regarding specific consumers where they need to formulate strategies for the improvement called Macroeconomics (Jenkins and Williamson, 2015). In order to maximise their product demand among the organizations, they need to established strong distribution channel for better connection. There are some limitation of Micro economic which affect the company and these are mentioned below:
Lower Prices of goods: In the business environment all the competition firms are agreed to remain at top cut prices then other firms will take the advantage (Schaltegger and Burritt, 2017). Alcatel Nokia Company continuously changes their product price in order to attach with consumers and it will be done as per the market requirements. Company need to modify their products as per the requirement of consumers which helps in maximising demand which further increase the profit margin as well (Malik, 2015).
Breach of a contract: When organization working at global level, they need to follow some rules because they are bound in a contract with the local organization for that particular location. If Alcatel Nokia breaches any contract, then they have to face legal complications which influence the brand image of the company as well as overall profit margin of the company.
Ignorance of governance rule: In case of ignoring any rule of the government Alcatel Nokia have to face various complications so they need to follow in well manner. Each and every country has specific laws which required following for the permission of operational activities. Ignorance of government rules will generate various issues which affect the company in terms of profitability through bearing heavy plenty.
Potential Benefits for the Company:
- Alcatel Nokia has loyal customers because of their quality of products which they offer to the consumers and make them loyal for the life time period.
- Because of new features in the products helps the consumers to satisfy their needs as well as desires which maximise the sales and revenue if the company.
- In order to maximise the sales of Alcatel Nokia, company target various segment through reducing price of products (Fenwick and Wrbka, 2016).
- Alcatel Nokia should be more focus on innovation which attract the larger number od consumers of maximise the productivity of profit margin.
- Development in product will reduce the critical impact on profits of the company.
- With the help of effective distribution network organization able to collaborate with other retailers to maximise the coverage of customer from the market (Nuhu, Baird and Bala Appuhamilage, 2017).
From the above discussion it has been concluded that business environments impact the production as well as profitability of the company. There are various factors which impact the demand and supply of the company. It is important for the organization to analyse all the external as well as internal factors which impact the decision making process of the organizations. With the help of PESTEL or SWOT analysis, management able to analyses those factors which positively as well as negatively impact the organizations effective plans to remove threats.
Also read:- Business External and Micro Economic Environment
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