Business Environment Impacts on Production and Profitability of the Company

In this report discuss on different topics like the supply and demand curve, price elasticity, internal auditing and PESTLE of the selected organisation. Along with this, there are consisting of external audits which involve SWOT Analysis that enable to understanding of the strengths, opportunities, weaknesses and threats of the business.

MAIN BODY

Overview of Company

Alcatel Lucent Nokia is a French company that operates 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 acquired the company and merged with the network of Nokia division. The company has been dealing in different areas such as mobile, fixed, IP technologies, converged networking hardware, software and services with different operations across 130 countries.

1. Business Environment and Microeconomic Concepts and Models

The business environment is a set of internal and external activities which is defined as how to environment fluctuates due to different activities. It consists of government activities, suppliers, workers, technological modification, requirement of customers, changes in the economy, market aspects etc (Darlington, 2017). Cultural trends require strategic planning and analysis of competitive activities that show an impact on the procedure of business in enormous ways.

Demand: It is an economic principle where consumers demand particular products and services from the company. To fulfil the requirement of existing products and services known as the demand in terms of economics. As per the demand for the product customer willingly pays the amount in favour of the item bought. The link between the quality of the product and price is shown by the curve which changes as per the demand of the product and changes of product price. It is an effective economic principle that defines that when the price of a product increases so demand for products goes down and when the price of the product decreases the demand for the commodity increases. So both have negative relations and both factors impact the price for a longer period of time (Cardoso, 2017).

As per the above curve, it is understood that the quality of a commodity bought at an effective price is known as the demand curve. This graph shows that price and goods have a negative relation. If the price increases quality goes down and if the price decreases quality demand increases.

Supply: It is part of the economic principle where the amount of goods is commercially available. The term of supply is defined as when customers demand the products and the company supply on time that particular products. In essence, value and amount create where involve positive relationship because when the price increases supply increases and price decreases supply decreases (Kalitanyi, 2019).

The curve of supply is helpful in defining the link between the price of goods and the quantity of supplies in the market in a certain period of time. Due to increased price so present a positive impact and movement in the supply curve as each firm dealer wants to supply the maximum quantity to earn better benefits. The above graph it understands that there is a good relationship between quantity and goods. As per the increase, the price was from 2 to 3 so the quality supplied also climbed from 30 to 40.

Elasticity: In economic terms, 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 a commodity is higher than 1 so demand of the market impacts 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 change and the price of other goods. In the case of extra commodity demand, the elasticity factor regarding cross-price presents an adverse effect. To calculate this apply the particular formula such as:

Cross Price Elasticity of Demand = (Q1X – Q0X) / (Q1X + Q0X) ÷ (P1Y – P0Y) / (P1Y + P0Y)

Price elasticity: It is the most essential factors that use for measurement and present good relation between changes in price and quantity 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 understood that when the price increases at a particular point like 50p to 60p see the impact in decreasing quantity like from 100 to 50. The main example of elastic goods is luxury goods and substitutes in the marketplace.

Income elasticity: It is a kind of elasticity which presents the relation between the income level of an individual and the quantity demanded (Cook, 2017). In the general sense when customer has enough income so according to they purchase the products from the market. Formula to calculate it:

Income Elasticity = % Change in the demanded quantity / % Change in Income

As per the above graph, it is analysed that increasing the income of customers changes the quantity which presents the income elasticity of demand. Like Q denotes quantity DD denotes income elasticity and Y presents the income level.

Oligopoly: It is a framework of the competitive environment that is related to the small organisation, none of which can keep the others from having a significant 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 an oligopoly because other companies provide the same products with the same features. So provides competition to other companies required to focus on the design of products and their features that are different from others.

Internal audit: It is helpful to analyse 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 improvements as per the current situation. There are discussed different elements such as:

• Productivity: In most organisations, an operational manager is responsible for arranging all the productivity and defining all the elements in a different manner. In this mainly focus on the large production, size, several standards, diverse operations etc. Moreover, to measure the efficiency of the benchmarking management tool that supports different productivity at several divisions to compare with other organisations but in similar industries (Kasemsap, 2015). There are defined requirements of the productive measurement such as:
• Revenue for every foot
• Production of goods per unit of time
• Milestone per time
• Business strategy diagram: Every business wants to increase its performance as well as profit so they want to prepare an effective market strategy (Fell, Li and Paul, 2014). In Alcatel Lucent Nokia, the manager applies different types of business strategies such as marketing mix, online trading and E-commerce. The company follow the modified SEO software which is able to compete with the other company and attract customer regarding their product. The manager of Alcatel Lucent Nokia developed their own site in an effective manner where clients search for the product. The company uses a different method to sell mobile phones and other products. The company use B2B e-commerce applied top sell various products to other companies.

The above diagram presents the business that has utilised the particular business strategy to generate income that helps to raise profitability as well as productivity in a positive manner. The company has been provided with different types of products to attract the company (Pantea, 2015).

PESTEL Analysis:

• Political Factors: This factor includes the various aspects which affect the production as well as the profitability of the company such as political stability, corruption, market lobbying, governance policies etc. Every organization's main objective is to maximise its profit margin and it totally depends upon 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 are 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 the increase in the foreign exchange rate moist of organizations have incurred losses and Alcatel Nokia is one of them. An increase in workforce productivity will positively impact the company and maximise the overall revenue of the organization. Before making any strategies, the managers of Alcatel Nokia need to evaluate the economic factors and analyse whether it is beneficial for the business or not. Along with this, an increase in the income of households also increased the demand for Nokia's product which is a great opportunity for the company.
• Social Factors: It include market trends, consumer behaviour or attitude, power structure etc. These factors not only affect the economy of the country but also impact the availability as well as the level of consumer demand. In the context of Alcatel Nokia, there are various factors which affect the company through changes in the attitude towards authority, and the demand of consumers due to the 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 the profit margin of the company and help in achieving organizational goals and objectives.
• Technological Factors: Change in the organization is very important because it supports the company to maximise their production by generating high demand with the help of attracting new customers. Alcatel Nokia continuously modifies its products by adding some features which create more value for the customer. The company modify various features such as increasing the battery backup, improving camera quality, storage capacity etc. Currently, Alcatel Nokia has a growing market that is an opportunity as well as a threat for the company because other mobile phone companies also build effective strategies to give tough competition. The use of technology will provide growth as well as help 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 rule & regulation which helps in performing tasks and survive in the market for a longer period. In the context of Alcatel Nokia, they have to perform according to environmental standards at the local or national level (Maak, Pless and Voegtlin, 2016). Per capita or national Carbon emission helps in better prediction of the environmental policy. Changes in the climate also affect the supply chain management of the company which further impacts the production as well as profitability of the company. Before making any strategy, the manager of Alcatel Nokia needs to analyse these factors or build policies accordingly.
• Legal Factors: This factor consists of various laws & regulations regarding the nature of business. Companies have to follow the standard rules & legislation which is important to implement otherwise government will interfere or oppose the fine and other penalties. Alcatel Nokia has to build strong security in order to secure the customer-related data which is very important (Zondo, 2016). If change information is leaked then it will impact the overall reputation of the company and further reduce their product demand in the market. They need to follow all the rules and regulations of telecommunication and make sure to protect their right which is most important.

2. External Audit

SWOT Analysis:

Strength

• Alcatel Nokia is the most popular company which creates brand values, earning high margins compared to its competitors.
• Companies follow a premium pricing policy which generates a higher profit margin (Pantea, 2015).
• The company have a strong consumer base which maximises the demand as well as revenue of the company.
• Alcatel Nokia follows the standard competitive approach which provides a competitive advantage. Along with this, they used the latest technology to attract consumers.
• Alcatel Nokia has weak supply chain management which impacts the distribution of goods. The company should improve their supply chain management in order to reduce the storage cost of their products.
• Companies also provide low-priced product which impacts their image and high-class people avoid purchasing because these mobile phones can be purchased by anyone.
• Alcatel Nokia need to be updated with the latest technology otherwise they are unable to survive in the market.

Opportunity

• By implementing the latest technology in their mobile phones, the company is able to expand its business in any country.
• Alcatel Nokia needs to modify its distribution strategy in order to boost the demand which further maximises the revenue of the company.
• They should focus on their marketing strategies to expand their product reach all over the country.
• Companies have to modify their existing product in order to make their products in demand among the customers.
• Huge competition in the telecommunication sector has become a 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 they will occur due to the privatisation of organizations.
• Due increase in labour costs also increases the overall product cost which reduces the profit margin of the company. (Geppert and Pastuh, 2017).

3. Limitation of Micro Economics

Economic concepts help the organization to enhance their knowledge as well as behaviour regarding specific consumers where they need to formulate strategies for improvement called Macroeconomics (Jenkins and Williamson, 2015). In order to maximise their product demand among the organizations, they need to establish strong distribution channels for better connections. There are some limitations of Microeconomic which affect the company and these are mentioned below:

Lower Prices of Goods: In the business environment all the competition firms agree to remain at the top and cut prices then other firms will take 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. Companies need to modify their products as per the requirements of consumers which helps in maximising demand which further increases the profit margin as well (Malik, 2015).

Breach of a contract: When an organization works at a global level, it needs to follow some rules because they are bound by 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 the 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 require the 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 the quality of products they offer to the consumers and make them loyal for a lifetime period.
• Because of new features in the products help the consumers to satisfy their needs as well as desires which maximises the sales and revenue of the company.
• In order to maximise the sales of Alcatel Nokia, the company targets various segments by reducing the price of products (Fenwick and Wrbka, 2016).

RECOMMENDATION

• Alcatel Nokia should be more focused on innovation which attracts a larger number of consumers and maximises the productivity of profit margin.
• Development in products will reduce the critical impact on the profits of the company.
• With the help of an effective distribution network organizations are able to collaborate with other retailers to maximise the coverage of customers from the market (Nuhu, Baird and Bala Appuhamilage, 2017).

CONCLUSION

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 organization. With the help of PESTEL or SWOT analysis, management is able to analyse those factors which positively as well as negatively impact the organization's effective plans to remove threats.

Also read:- Business External and Micro Economic Environment

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