Understanding The Organizational Purposes Of Businesses

Published Date: 02 Nov 2017

Introduction

Throughout this document will the company Best Bake Bakery be named, as the company that I will highlight.

Background

Best Bake Bakery is a Partnership Organization based in South Africa, that is also a generation business, focused on bringing their business into the 21st century concerning technology available today, that could also help with not only over-head costs, but also with the longevity of their business in today’s competitive and thriving market.

Section headings

Section 1:

Understanding the organizational purposes of businesses

Different types of organizations

Why are there different types of organizations? The reason for so many different types of organizations is so that the needs of stakeholders, owners as well as customers can be met. Whether it is in production or delivering a service to the community, this all being done in an accordance with the law.

Sole Trader

A sole trader is an individual with a unique idea/concept to start a business venture.

Purpose of a sole trader is also to see a need in their community and to fulfill that need with their own skills and ingenuity. As we see today that the economy is piggybacking on the small businesses, because most business consist of small business enterprises (such as sole traders).

As mentioned in an article in Forbes online by article writer, Rebecca O. Bagley: "According to Entrepreneur Magazine there are between 25 million and 27 million small businesses in the U.S. that account for 60 to 80 percent of all U.S. jobs. And, a recent study by Paychex, says that small businesses produce 13 times more patents that larger firms." [i] 

As this describes the point I was making, it only highlights the impact and the crucial importance of small business ventures in our economy today.

Partnership

The business that will be constantly used as a reference in all document to follow, will be a partnership business, which we shall name Best Bake Bakery (which will simply be referred to as BBB). BBB was a generation business with employees being with the company for years. This company also provided a service to the community e.g. Job creation and community uplifting projects. BBB also advocated learning opportunities for the employees and skill advancement. [1] 

Companies and Corporations

Companies & corporations is a collection of people and legal personalities united to bring their collective resources, talents and skills to achieve their set forth specific, declared goals.

The main purpose of a company to cr4eate profit with investors or shareholders within the company (who invested in said company) money (return on their investment).

How Best Bake Bakery Meet the Objectives of Their Different Stakeholders

The Objective of Best Bake Bakery (BBB)?

BBB’s objective (since it was a generation-business), was not only to built on the previous generation successes, but also create a sustainable future for their children’s children, and to better business in general than previous generations past. They want to build a business with a consistency unlike their competitors, as the economy today is very treachery and unpredictable.

The main objectives for modern day BBB, was:

Going Green In General

To achieve this goal, they had the following commitments to sustainability in place:

To source locally whenever possible

To derive electricity from solar generated projects, in so doing minimizing the carbon footprint in their local environment

To recycle their oil used

Attaining A Higher Standard For Customer Satisfaction

To achieve this goal, they had the following practices and developments in planning:

Use raw materials of the highest standard and quality

Provide the best quality end products to the customer

Provide excellent and professional service through personal contact and interest

Maintaining The Retaining Of Staff

They had the following implementations in place for retaining of staff:

Personal relationship with personnel and having an open-door policy

Training programs for skill development and learning

Work incentives for work diligence, performance, and excellence

They had excellent packages offered to staff, which included pension, medical aid and a funeral fund.

Who are the Stakeholders at BBB?

The owners of BBB were the stakeholders, which was a father and son business. Through their objectives, as outlined above, they are investing in a better future for not only their business, but also their future generations, as costs in general is climbing higher, they are sourcing and searching for alternative means of energy efficient ways to produce, market and distribute their baking goods to their clients and general consumer.

Responsibilities of Best Bake Bakery (BBB) and the Strategies Employed to Meet them

Firstly, we will look at what Best Bake Bakery listed as their Social Responsibilities:

Number one is their social responsibility toward their employees. With this in mind, they will actively work toward better skill development and communication between management and employees, and employee and customer.

The reason why BBB stake such great importance on Skill Development, because better skills equal better performance, better performance, better product, better product, increase in sales, increase in sales, increase in profit, increase in profit.

Number two on their social responsibility list is the community. With this in mind, they looked to a school with students that are disabled and have to ask government and local businesses for aid. They deliver free products (in the form of baked goods) to this school, as working towards their social responsibility. They also want to establish a small garden the students can work themselves in the near future, which can provide fresh produce for the students and local community as a profit to the school.

The Strategies to Employ Said Responsibility(s):

Towards their Employees:

Monthly skill development training;

Weekly recap of responsibilities and feedback from customers and workplace and business in general;

Daily staff meetings.

Towards the School:

Providing staff over weekends to help with the development of the community garden;

To help educate and train the students and school body how to take care of their vegetable plantations, and planting more (and general gardening skills);

Providing fresh-baked goods on a daily basis for their school’s feeding scheme.

Secondly, we’ll look at the Management Responsibilities they’ve listed:

As BBB is a family owned business, family comes first. But as business is the main income for said family, they have to balance the two in a serene way. As written in the Family Business Magazine, by Sylvia Sheppard: "One of the most significant challenges facing multigenerational business-owning families is the transition from generation to generation. If the business is to survive as a viable enterprise in a competitive marketplace and remain family-owned, the family must not only engage and educate succeeding generations, but also encourage an entrepreneurial mindset.

Family businesses can have a significant advantage over non-family businesses if they use their next generation as a barometer of change, and as a window into a new reality that the previous generation might not fully understand. If the family has done its job of preparing children for ownership and leadership, this next generation will act as the innovation engine for the company.

Yet keeping the family engaged, educated and entrepreneurial gets harder as the family grows and disperses. Without engagement, the entrepreneurial energy of the next generation dissipates or is redirected into non-family business opportunities. Or, in many cases, a lack of engagement leads to the sale of the family business. The role of the family, often through its governance system, is to harness that energy and direct it inward -- to the family business." [ii] 

The Strategies to Employ Said Responsibility(s):

This being said, BBB is actively involved in preparing the younger generation by involving them in day-to-day processes of development and management, through doing chores of the working shifts, and assisting the floor managers in their duties, as well as helping in front to meet the customers and building accord with them as well. They also attend meetings as only a listening party as to accurately understand the dynamics of what such a business entails.

Lastly, BBB Health and Safety Responsibilities:

Improving employee and contractor safety through training, Best Practice and Team Leadership. By accomplishing this, they intend to train them to:

To take reasonable care of their own health and safety;

To take reasonable care not to put other people - fellow employees and members of the public - at risk by what you do or don't do in the course of your work;

For employees not to interfere with or misuse anything that's been provided for their health, safety or welfare

To co-operate with their employer, making sure they get proper training and they understand and follow the company's (Best Bake Bakery) health and safety policies

To report any injuries, strains or illnesses they may suffer as a result of doing their job, their employer may need to change the way they work.

Having the correct procedures and structures in place not only to prevent injury, but also to handle work-related injuries should it occur.

The Strategies to Employ Said Responsibility(s):

Having the Health and Safety Inspector visit regularly;

Ensuring they stay updated to the latest Company Health and Safety Policies;

Have a Health and Safety Manager do daily inspections of the employees health and the safety of the machinery and general workplace safety.

Section 2:

Understanding the Nature of the National Environment in Which Businesses Operate

How Economic Systems attempt to Allocate Resources Effectively

An economic system is a result of individuals and groups with their various processes of putting together and motivating labor, production, and circulating of products and/or services produced. These individuals (sole traders, consumers, producers), and groups (political parties, corporate, firms, families, etc.) and the government coming together and interacting in a legal and social society.

There are three different kinds of economic systems which are adopted in basic or some form in all countries. They are:

* Free market;

* Command economy;

* and Mixed Market.

A Free Market Economic System

The government involvement and/or intervention is kept at a minimum level or none at all in a Free Market System, and all the economics resources comes under the private sectors.

Prices and availability will determine how much of goods and/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.

When viewing the free market system as a whole, it raises the various unresolved questions like who will produce the goods and/or services and infrastructures for the country to meet the needs of public demand. Everyone is motivated by pure self interest. Consumers maximize welfare, firms maximize profits and private individuals aim to maximize rents, wages interest and profit. Companies can produce whatever they want, without having to answer to anyone.

A Command Economy

Micro and Macro: The Economic Divide

Also known as a Centrally Planned Economic System, or State Controlled Economy System, refers that government/state allocates the economic resources; government makes all the planning regarding the economical activities.

Private sectors are kept at arm’s length in involvement of any economical accumulation. In these systems basically unemployment problems will not be faced since government plan all the economical activities and resources will be allocated based needs of its people and different industries inputs.

The government plans at three levels:

Micro Level

At micro level they decide how much of a product should be produced, and if they know how much they need to produce, they know how much input volumes are required.

Macro Economic Level

It studies such things as employment, gross domestic product, and inflation—the stuff of news stories and government policy debates. Ex: whether prices need to be increased or decreased according to supply and demand. Government studies the role it plays in contributing overall economic growth of fighting inflation.

Mixed Market Economy

Mixed Market Economy System is where government and private sector are married in union to form. The system where both capitalism and socialism economic system are included, this is known as a mixed economic system.

In this globalizing world (and with economic fragility as it is) most of the countries are obtaining this economic system, as it’s the most feasible option to markets today. 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 the whole country.

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.

Best Bake Bakery, which is situated in South Africa, is also under this economic system, for example: the import price versus the local produce directly influences the price of raw materials used within the bakery. This then have an effect on the end product price and quality, and also the volumes that will be sold because of the influence of price on sales.

2.2 Impact of fiscal and monetary policy on business organizations and their activities.

If you look at Fiscal, it is in essence Government spending policies, which influence macroeconomic conditions. These policies affect interest rates, tax rates, and general planned government spending, in an effort to control a country’s economy.

These viselike policies are limiting unrestricted expenditure. Ex-Governments use fiscal policy to encourage healthy behavior and/or spending conditions. The instruments of government for this intend are taxes and subsidies, and execute provision of certain health services for free or at subsidized rates.

Examples of fiscal policies for health are taxes on tobacco and alcohol, subsidies on certain foods, and tax incentives for health care purchases.

Monetary policies are the actions of a central/main bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the vault (bank reserves).

The Reserve Bank of South Africa had this as their opening message: "In South Africa the primary objective of Monetary Policy is to achieve and maintain price stability in the interest of sustainable and balanced economic development and growth. Price stability reduces uncertainty in the economy and, therefore, provides a favourable environment for growth and employment creation. Furthermore, low inflation contributes to the protection of the purchasing power of all South Africans, particularly the poor who have no means of defending themselves against continually rising prices. The Bank has full operational autonomy. Monetary policy is set by the Bank’s Monetary Policy Committee (MPC), which conducts monetary policy within a flexible inflation-targeting framework. This allows for inflation to be out of the target range as a result of first-round effects of a supply shock and for the Bank to determine the appropriate time horizon for restoring inflation to within the target range. This flexibility does not relieve the Bank of its responsibility with respect to returning inflation to within the target range but allows for interest rate smoothing over the cycle, which may mitigate any output variability from the monetary policy response to the shock." [iii] 

2.3 The Impact of Competition Policy and Other Regulatory Mechanisms on the Activities of a Selected Organization.

If you look at the Competition policy they aim to ensure the following:

That there is an effective competition when it comes to pricing between suppliers.

Wider consumer choices on products and services.

Innovation which promotes efficiency.

If you have a look at the competition policy in the UK and the EU, you will see the following key pillars:

Market Liberalization: This involves introducing fresh competition in previously monopolistic sectors, example fuel supply and energy supply.

Unjust Trading & Cartels: The extradition of agreements that seek to restrict competition, including price-fixing and other abuses by firms/companies who hold a preponderant market position.

Merger Control: This involves the investigation of mergers and take-over’s between firms and/or companies. This could be between two or more large companies merging and dominating marker share.

State Aid Control: Competition policy analyses examples of state aid measures to ensure that such measures do not warp competition in the Single Market.

Main Roles of the Regulators

Regulators are the rule-enforcers and they are appointed by the government to oversee how a market works and the outcomes that result for both producers and consumers.

Opening Up Markets: The aim here is to encourage competition by removing obstacles of restriction for trade. This might be achieved by forcing the dominant firm and/or company in the industry, to allow others to use its infrastructure network. Telkom is a telecommunication company in South Africa, that now needs to share it’s infrastructure with new and upcoming companies. This is a good example of the point above made.

A key task for the regulator is to fix a fair access price for firms wanting to use the existing infrastructure. Being fair both to the existing firms and also potential challengers.

Monitoring and Regulating Prices: Regulators aim to ensure that companies do not exploit their monopoly power by charging excessive prices. They look at evidence of pricing behavior and also the rates of return on capital employed to see if there is evidence of ‘profiteering.’ Currently the competition commission in South Africa is looking at regulating prices for the telecommunication sector in South Africa, between rival companies, for e.g.: Vodacom, MTN and Cell-C.

Standards of Customer Service: Companies that fail to meet specified service standards can be fined or have their license taken away. The regulator may also require that unprofitable services are maintained in the wider public interest. Recently new laws were introduced in South Africa governing this, for e.g. the beauty and health sector can be fined if they are not clear about what goes in their products clearly, or what the services they offer fully entail.

The Adoptive Competitor: Regulation can act as a form of surrogate competition – attempting to ensure that prices, profits and service quality are similar to what could be achieved in competitive markets.

An example of the above mentioned in action so to speak was when Tiger Brands in South Africa were brought before the competition commission in regard of price fixing in the bread and milling sector, which directly affected Best Bake Bakery. They formed a cartel with a couple of other companies, who dictated the prices of bread and flour in the market for over a year.

With BBB being an industrial bakery this greatly affected their sales. The reason for this is because Tiger Brands and their affiliated companies could sell their bread and flour products way below market related prices. The end result was that BBB got their raw materials at a higher price and their baked goods as a result of this were priced above what Tiger Brands’ products was selling, and the sales dropped exponentially.

Tiger Brands were fined R98million for their part in this cartel.

Section 3:

Behavior of Organizations in their Market Environments

How Market Structures Determine The Pricing And Output Decisions Of Businesses.

If there is a market (a need) for your product or service that your company offers (that can fulfill said need) then you will do well. It is all about the supply and demand of a certain product and/or service. If the demand is high, the price goes up, if the supply is higher than the demand, then the price goes down, and if there is no market for your product or service, then the business will not be making money and will have to close their doors.

If you have a look at the pricing of a product, the higher the price the less will be demanded and the lower the price the more it will be demanded.

One must also remember that should prices keep on rising, then you will start to see substitutes to the same product but at more competitive prices (example: Louis Vuitton knock-off, Chanel fakes, etc.).

An example of this happening right now in South Africa is between the soft drink companies and Coca-Cola. You now have ‘Tweeza’ and other smaller soft drink companies, making the same exact soft drinks as Coca-Cola, in different packaging and for more than half the price at which Coke is supplying their soft drinks to the market. Where customers bought one load of Coke in the past, they now buy four loads of Tweeza, same quality, different packaging at a very cheap (read affordable) price.

With the demand now for so many of this substitute brand (using the example of Coca-Cola), other companies are now also jumping on the band wagon and starting to produce their own soft drink brands. This now create a situation where they are starting to over supply the market and the prices are dropping even more, and companies have to cut each other’s throat regarding prices, just to stay up breast in the market.

These companies that are in competition with Coke, don’t even have to do advertising like Coke does, for these companies, their low prices speak for themselves - and the word-of-mouth has gone along way.

Illustrate The Way In Which Market Forces Shape Organizational Responses Using A Range Of Examples.

We are here going to look at the following four market forces.

Governments

The Government has probably the most power and influence over the free market. This with its monetary and fiscal policy that has a significant effect on the financial market. With increasing or decreasing interest rates government speed up or slow down a countries growth. This is also known as the monetary policy. If the government should decide to increase spending then it knows as fiscal policy. And this the government will use to help with unemployment to name but one. With the altering of the interest rates a government can control how much money flow in and out of a country. 

Speculation and Expectation

Speculation and expectation are intrinsically parts of the financial system. Most of the politicians, consumers and investors believe that how the economy will go in the future depends on our actions of today. The expectation that is created of future action is somewhere consumers, investors and politicians believe the economy will go in the future impacts how we act today. Expectation of future action is reliant on current acts and shapes both current and future trends. Indicators ex sentiment are used to see how certain groups are feeling about the current economy and their well being. If you analyst this in conjunction with other forms of technical and fundamental analysis it can create an expectation or bias future rates and trend direction

International Transactions

Regarding international transactions the flow of funds coming in to and going out of a country with its trading partners will greatly impact the strength of that country’s economy. County that concentrate largely on exporting their goods and services will be bringing more money in to that country. This will help stimulate the economy and the financial markets.

 

Supply and Demand

Supply and demand of a countries products or services will create a push-pull effect in the market price. Prices and rates changes constantly according to the change in supply and demand. If there is a high demand for a product or service but the supply is low then the price will rise and if demand is low but supply is high then the price of that product or service will go down.

Judge How The Business And Cultural Environments Shape The Behavior Of A Selected Organizations

There are a couple of environments that affect a business that we can look at.

The following environments examples, a business cannot change, but they can react to it.

Economical Environment (also known as Financial Environment)

In many countries, the Economic Environment is intemperately influenced by the political environment in the context of government legislation as to how businesses make money, as well as how businesses are taxed.

Some of these include:

* The financial feasibility of a country

* Rate of inflation versus deflation

* Rate of minimum wage (example: in South Africa the legislation concerning minimum wages are extremely demanding)

Political Environment (also known as Legal Environment and/or Regulatory Environment)

The Political Environment is driven by the ideology of the running party instituted in the country. The rules and regulations created by the ruling party, have a paramount influence on the cost of running a business and the way it can market and supply products and services - for example in South Africa they instituted a new consumer law, that requires businesses like Best Bake Bakery for example, to safeguard themselves from every imaginable form of legal action that may result from either selling their products, or just distributing of their products – lawyers are smiling all the way, but for small businesses, it’s cutting their life supply (so to speak).

Sociocultural Environment (also known as Linguistic Environment and/or Ethnic Environment)

Examples of influences of the social cultural environment include:

Cultural changes and the effect on national symbols, structures, etc.

Democracy vs. Theocracy

Uses of color, slogans, music, slang expressions in marketing promotions

Regulations about equality based on gender, race, etc.

Relationships between people of difference faith, ethnicity, language etc.

Business ethics is highly influenced by changes in cultural norms

Competitive Environment

The competitive environment is a very unrelenting, with so many companies trying to copy the market leaders, selling under cost and producing imitations of your products and then selling at under market related prices.

To combat this you have to follow market trends and be on the forefront in development and customer satisfaction so to keep your customers loyal and satisfied. Utilize every resource available to you; keep your eye out for new regulations that might influence your product or service so that you can do the necessary adjustments beforehand.

Technological Environment

One must understand that for if example you are doing business with an African company or country, then not all of them might be on the same technological level than you. For some in Africa the word internet is still no existing. You must have a look at a countries infrastructure which also includes roads, rail ways enc. This is very important because it will be either very cost effective if there is a good infrastructure or it can be very expensive to transport your goods in a set country. Telephone or cell phone reception (if you need an answer on a certain deal that you are busy with how long will it take to get an answer if the telecommunications is not up to date in a country).

Physical Environment (also known as Geographical Environment)

This might include travel, time zones, and effects of weather on agriculture. Here you have the effects of weather that should a snowstorm begin like what happened in Scotland couple of weeks ago then electricity, telecommunications all are down because of the weather. The will in turn disrupt the flow of communications and also the distribution of products until cleared up. Should we see drought or floods like we did in Russia then that will in turn produce fewer crops. This will lead to Russia putting a halt on exports until they have filled their own countries quota, and then they will export the excess crops should there be any.

Labor Environment

Labor environment can be changed by a company in a way. Example in South Africa they have very strict labor laws. Now to combat this a bit from a company’s point of view they just employ fewer workers, because depending on the amount of labor you have, certain set off rules then apply to you. You have to be up to date with labor laws of a country so not to infringe on the laborers human rights. The down side of these strict labor laws in South Africa is that with the companies rather employing fewer workers, this then causes an increase in unemployment.

Distributive Environment

You should know the history of the distribution network of a country. In South Africa because of the unions you have a work force that is so power driven that it is bad for business. You have a lot of strikes that leads to loss of production; you have vehicles set alight and roads blocked off. You should really know what is going on regarding distribution in a country and have back up plans for should this happen what will you company then do so not to stop your delivery of product and service to your customers.

Section 4:

Significance of the Global Factors that Shape National Business Activities[image]

4.1 Significance of International Trade to UK Business Organizations

With the UK being such a small country they have way less local recourses than what other larger countries may have. For this reason the UK is a larger importer than exporter. UK heavily relying up on foreign investors and foreign companies opening in the UK.

The EU is also the largest trade partner to the UK regarding exports with its largest partner being Germany. And then the USA being their biggest single export partner. The USA also account for the most foreign companies in the UK. Most of the UK’s imports come from EU countries and in second place we have the USA. There reason for so many foreign countries also investing in the UK is because of their strong currency the pound.

Because of the UK having a trade deficit, with it importing more than exporting it were still able make up the deficit because of it foreign investors. International trade also gives UK based companies the opportunity too many diversify their business so to get a bigger slice of the international trade market.

Impact Of Global Factors On UK Business Organizations

The following factors can have an effect on UK organizations and their trade partners whether it be positive or negative.

Political

Political change or uncertainty can lead to a wide range of problems for importing or exporting. This in turn could lead to insufficient products or raw materials imported to produce end product, which then will lead to higher prices on those certain goods. With war breaking out in a certain country will come a whole lot of different problems of its own. Sanctions might be imposed on that country which will stop you from doing business with that country in as a whole.

Economic

The economic factor of the trade partner must also be looked at because this will also affect the ease of trade between the two countries. Some examples are tax systems, monetary and fiscal policies, exchange rate, internal regulations and investment considerations.

Labor

Should a UK business decide to open a manufacturing plant or any other kind of business in another country they should be aware of the labor laws and regulations of that country. E.g. minimum wages, rate per hour enc. These so that they will have a happy work force from the word go. Otherwise is will cost the company a lot of money if they have to go to labor court regarding issues that they were not aware of when they started their venture.

Diversity/Religion

You must know the culture of the country that you indent to do business with. You must be aware of their religions so that you don’t offend anyone with the kind of business venture that you want to do nor trample on the Human Rights of your work force.

Impact Of Policies Of The EU On UK Business Organizations

Well the first and most obvious is EU has policies in place should any other country wanting to do business with a country in the EU must follow. The European Money Unit being the most obvious, so should you want to do business with an EU country then you must trade in the currency of the EU the Euro. With being part of the EU also meant that community law prevailed over that of domestic law. The supremacy and immediate effect of Community law exhibit major challenges to the UK and its legal system and to the doctrine of parliament sovereignty. What also happened is that when member states sign their treaties they in return limit their sovereign rights. This is so to be directly applicable and obligated national authorities to ensure compliance of domestic legislation with EU legislation. A statement by the EU has also being made where they want to start levying direct taxes. This will have a significant effect on small businesses and their cash flow. And for a small business it is all about cash flow. Without it the business close down.

You also have issues of the EU that want to introduce the working time directive and also looking at "banking union" for the EU members. The EU regulations are also directly applicable on all the EU members without having the need for national legislation to put them in place. The EU directives bind the Member States to its objectives that they must accomplish in a predetermined time frame. But they leave the planning as to how these directives must be achieved to the national authorities. These directives must be implemented in national legislation.

Conclusions

What I concluded, after in-depth analysis of Best Bake Bakery’s

List of sources and information