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The topic of this assignment is Business Environment. Therefore this assignment explains you about the business surrounding, an organizations purposes, parties that influence to the organization and the consequences that business organizations face when they campaigning in the market through the task 01, 02, 03 and 04. To cover this all things this assignment uses GSK pharmaceutical company that operates in UK.
In the task one it explains you the different types of organizations that in the market, stake holders of an organization and the purpose of the business organization. To explain those things this assignment uses GSK Company stake holders and its vision statement, mission statement, values, market share and market growth.
It explains you about the different economic systems in the market with examples and the fiscal and monetary policy that affects the business organizations in the task two. Also it explains how these policies affect organizations through the GSK Company. In the task three it explains about the four market models.
Finally in the task five all the topics are explain about the international trade and the pros and cons that business organizations are face due to international trade and how the EU affect on businesses that operate in UK.
TABLE OF CONTENTS
The purpose of this assignment is to understand you about the business environment. Therefore this assignment included organizational purposes of a business, the nature of the national environment in which businesses operate, behavior of organizations in their market, and finally how do they face on international trade to understand you about the business environment.
To explain all these points this assignment uses GlaxoSmithKline PLC which currently operated in the UK and several other countries. It's a British multinational, pharmaceuticals, biotechnology, vaccines, and consumer healthcare company. It's headquartered in London, UK. It was the fourth largest pharmaceutical company in the world with 2009 prescription drug sales. It was founded in 2000 by the combination of Glaxo Wellcome PLC and Smith Kline Beecham PLC.
By using this company this assignment shows the business organization's purpose like vision, mission, aims, and goals. Also this assignment shows you about the nature and background of a business like stakeholders, government policies that businesses face and the market type that organizations are engaged. And finally this assignment shows you about the international trade of UK businesses.
Task No: 01
Different types of organization that exists in the market.
An organization is a group of people working together to achieve a common goal/goals. There are different types of organization that exists in the market. They are,
Sole Trade ship
Companies limited by guarantee
Sole Trade ship
The company has no partners or owned by only a one person and runs by his own capital called as Sole Trade ship. This type of companies is identificated as the non legal personality companies. The features of a sole trader ship are,
Owned by a one person.
The owner runs the company with his own capital.
The owner takes the business decisions.
Registration is not compulsory.
Auditing is not compulsory.
A business relationship exists between two or more people towards a common view of profit. Features of the partnership organizations are,
Owns by two or more people.
Registration is not compulsory.
Auditing is not compulsory.
Partners run the company with their own capital.
The main rules and regulations apply to the partnership are,
Partnership ordinance of1890.
Prevention of frauds ordinance of 1840.
Business names ordinance of 1918.
Other laws and regulations.
A short term relationship exists between few persons in order to accomplish a specific task. Generally they don't use a business name. The joint venture is dissolved when the specific task is accomplished. This is a short term business type.
In Sri Lanka institution registered under the companies Act No.7 in 2007 is considered as incorporated companies. This type of companies is divided into five. They are,
Limited liability for debt.
Owners are known as members.
Flexible profit distribution.
Business cannot be an LLC.
Selling shares to the public.
Companies limited by Guarantee
Liability of members is limited.
Doesn't have shareholders or share capital.
Provide a clear legal identity.
Members are not the owners but can make decisions.
Liabilities of shareholders or members are unlimited.
Rare type of companies.
May or may not have share capital.
Annual accounts are not compulsory.
A company registered on "Insolvency act 1986 section 74& 75".
Build or registered in a foreign country.
Treat as no resident of the jurisdiction.
Higher fees to incorporate.
This type of companies exists in one country and register to do business in another country.
A type of organization is owned and managed by the government. This type of organizations can have directors up to 5. There is unlimited number of shareholders in the public sector. There are some different types of organizations in this sector. They are,
Stakeholders of the GSK and their responsibilities.
A stakeholder is an individual or an organization which has an interest in a business organization. They may have a financial relationship with the business or own a share in the business or be affected by the way business processed. There are internal and external stakeholders in a company. Stakeholders for GlaxoSmithKline include the following: Employees; stockholders; credits; suppliers; customers (both prescribing physicians andÂ end users)
Employees are the main stakeholders of the company without their performance an organization cannot success. Examples for employees in GSK are corporate management, research scientists, and manufacturing personnel. They affect GSK by providing labor, scientific innovations, and managerial decisions to the organizations with an expectation of fair consideration for their efforts. Their responsibilities are,
Work hard and deploy their abilities to the organization.
Be loyal to the organization.
Make correct decisions for the organization. (Managers)
Spread the goodwill of the organization.
Shareholders are another very important stakeholder group. The company has to keep them well informed about the financial state of the organization, so as to encourage them to keep investing in the company. Otherwise they leave the company and there won't be enough money to invest the company. Example for shareholders in GSK is institutional and private investors. They are impact on GSK by providing capital to the org in dividends and stock price appreciation. Their responsibilities are,
Be loyal to the organization.
Make correct decisions for the organization.
Spread the goodwill of the organization.
Be honest with the organization.
Customers are also a very important stakeholder in the organization. Because without their relationship company cannot exists in the market. Government hospitals, private hospitals, and pharmacists are the examples for GSK customers. Their responsibilities are,
Buy products and services from the organizations.
Give their feedback about the products.
Give their opinions to the organization.
Spread the goodwill of the organization if they provide the best quality.
Suppliers also a very useful and important group of stakeholders that helps a company to run successfully. An organization can foster and drawn the suppliers by dealing well with them. Chemical companies and packaging companies are the examples for GSK. They provide the inputs and packaging items for the organization. Their responsibilities are,
Deliver products and services on time.
Be as efficient as possible.
Doing supply well.
Be loyal to the organization.
Government has an interest about organizations doing good because they contribute to the GNP and keep employment high. To the GSK government affected through taxes and interest rates.
Provide basic infrastructure facilities.
Provide information to the organizations.
Introduce new technology for the org.
Give them tax subsidies.
The purpose of the GlaxoSmithKline.
GlaxoSmithKline's Vision Statement
We want to become the indisputable leader in our industry-not simply in terms of size, but in how we use to achieve our mission and improve the quality of human life. (www.gsk.com, 2011)
GlaxoSmithKline's Mission Statement
Our global quest is to improve the quality of human life by enabling people to do more, feel better and live longer. (www.gsk.com, 2011)
To deliver sustainable growth.
To reduce the risk.
To improve our long term financial performance. (www.gsk.com, 2011)
Grow a diversified global business.
Deliver more products of value.
Simplify the operating models. (www.gsk.com, 2011)
Our culture is summed up in the Spirit of GSK that defines the values we expect all our employees to embrace:
Respect for people.
Integrity. (www.gsk.com, 2011)
GlaxoSmithKline's Marketing Share & Growth. (Based on the Wikipedia/GSK information's, GSK annual report.)
GlaxoSmithKline is one of the largest pharmaceutical companies in the world. They own 6.9% share of the global pharmaceutical market in 2011 and they own 24% of the UK pharmaceutical industry in 2011. They have a huge market share in the UK therefore they compete in an oligopoly in the UK. In 2011 their share prices also in a good condition. It has the primary listing on the London stock exchange and it is a constituent of the FTSE 100 Index. In 2011 their share price was increased by18.7% due to increase in R&D.
Share Price (GlaxoSmithKline PLC, 2011)
2011 £ 2010 £ 2009 £
At 1st January 12.40 13.20 12.85
At 31st December 14.72 12.40 13.20
Increase/ (Decrease) 18.7% (6.1%) 2.7%
High during the year 14.74 13.40 13.34
Low during the year 11.28 10.95 9.87
(This table above sets out middle market closing prices.)
The share price of GSK was £13.89 on 2nd March 2012. GSK has a £74.8Â billion of market capitalization as of 06th July 2012 so it is the fifth-largest of any company listed on the London stock exchange.
Market Growth. (GSK Company., 2011)
In the Europe, sales are composed of large contributions from our respiratory and cardiovascular/Euro genital products and vaccines. Our European management team has remained resilient in a challenging environment. Reported turnover for 2011 was fallen by 13% to £5.8 billion, excluding revenues from pandemic products, Avandia and Valtrex, declined 4%. Continued government austerity measures impacted underlying growth in the region by approximately 5% in 2011. Our performance was underpinned by reduced operating costs of 8% compared with 2010 while continuing to invest in our products and recent launches. Despite these initiatives, operating profit fell by16% primarily due to the loss of sales of pandemic products, Avandia and Valtrex. We are continuing to scale up business around our off-patent products, and reported sales grew 13% to £1.5 billion in 2011, helped by the acquisition of Phoenix in Argentina in 2010. Our flagship heritage medicine, the antibiotic Augmenting, celebrated 30 years on the market by turning in growth of 11%.Other anti-infective and our CNS portfolio are also contributing to growth in this area. Although reported vaccine sales were down 12% to £810 million, underlying sales rose 17% to £810 million. Synflorix had a successful launch in Emerging Markets, with sales of £276 million in 2011.We have further consolidate recent acquisitions such as Nanjing MeiRuiPharma Co. Ltd in China, expanded our portfolio through in-licensing arrangements, and strengthened our business through signing innovative technology agreements. Earlier in the year we transformed the vaccine joint venture with Neptunus in China into a wholly-owned operation. We are adopting a range of flexible pricing models in Emerging Markets based on a country's ability to pay. Since we introduced our approach on flexible pricing to Avamys and Avodart in 2009, we have seen volume sales increases in our key markets of 388% and 76% respectively. The introduction of flexible pricing for Cervarix in 2010 has enabled us to deliver double the number of doses of this vaccine against cervical cancer to women throughout the region while seeing attractive returns.
Task No: 02
Different types of economic systems and the characteristics and examples.
Economic systems that depend on consumers and consumption choices. They are based on customers and individual.
Economic systems that centrally controlled and government makes all decisions.
Government involvements combined with Market base economy called as mixed economy.
Private sector owns most properties and resources.
The government owns most properties and resources.
Private sector and government own the property and resources.
The government's role would be limited.
Government's role is unlimited in this system.
Private sector acts in their self interest and government act for public eudemonism.
Participants act in their self interest.
Use the central economic plan to solve the basic economic problems.
Use market economy and central plan to solve the basic economic problems.
The majority of the market is monopolistic.
Private economic freedom.
Independence entrepreneur and the independence choice.
Government entrepreneur and the independence choice.
Independence entrepreneur and the Government entrepreneur are operating the economic resources.
Hungary, UK, Brazil
China, Libya, North Korea
USA, Cuba, Japan
Fiscal policy and the monetary policy.
Fiscal policy is the government's use of taxation and expenditure to affect the economy. Governments use this policy to handle taxation and government expenditure to affect the money supply. Government settles their expenditure by the earnings from taxations. The main objective of this policy is to achieve the macroeconomic goals. There are two main tools in fiscal policy. They are,
A charge that government or other authority command to an individual or a firm to pay compulsory called as taxation. This is the main revenue of a government. These taxes imposed by many administrative divisions. Taxes consist of direct taxes or indirect taxes. Government arranges these taxes on goods and services, income etc.
Expenditure, government that uses for expend for the community during the year. Defense services, public goods, and infrastructure facilities are some examples for government expenditure. Government doing these expenses using their tax revenue.
A government's program for controlling the amount of money circulating in the economy and interest rates for the purpose of raising economic growth and stability. Therefore it uses expansionary policy to increase the money supply and contraction policy to slow down the increase of the money supply of a country. The main goal of this policy is to achieve the macroeconomic goals.
Open market operations.
To manage and influence on the quantity of money and interest ratios central bank set use open market operations to buy and selling various financial instruments like treasury bills, company bond or foreign currencies.
Discount window lending.
The commercial banks and other financial institutions are borrowing reserves from the central banks at a discount rate is known as this. This rate is usually set below to the treasury bills. This enables the banks to change the credit conditions consequently affecting the money supply.
This is a reservation according to the total assets of a bank that keeps by the central bank. This tool affects on the credit making of commercial banks and thus limits the supply of money.
How Fiscal and Monetary Policy affect the GlaxoSmithKline.
Taxation by the government affects on GSK because as a UK company GSK have to pay taxes on their business. Because of taxes GSK increase their cost and therefore they have to increase the price of their products. So its effect on their revenue by lowering demands on their products.
Likewise government expenditure also affects on the UK businesses. When the UK government purchases GSK's pharmaceuticals and vaccines for government hospitals it is helping to increase their turnover. By acting such things fiscal policy affect on GSK in UK.
When the banks of UK drop the interest rates it's an advantage for GSK because they can borrow more money from banks for lower interest rate to do their research. Otherwise when the UK government expands the money supply of the UK it caused to become inflation in the UK and it's reasoned to increase GSK's cost.
Likewise monetary policy affects on GSK in many ways.
Task No: 03 (Poster).
Task No: 04
What are the pros and cons that GSK faced because of the international trade?
GSK Public Limited Company
Increase the research and development of their products.
Growth of pharmaceutical sales.
Able to make relationships with other countries.
Slow down of the economy.
Acquisition of raw materials from overseas countries which is cheapest.
Various laws and regulations. (Ex: Tax)
Influx of income from overseas profits.
Cost of exporting & Quotas on the import.
What are the barriers and opportunities that UK businesses faced when they entering into the emerging markets.
Substandard infrastructure facilities.
Political and economic strife.
Quotas. (These are limits on the quantity of product.)
Slowly developing markets.
Protect UK exporters withstand the nonpayment by their overseas customers.
By assuring bank loans for foreign customers help them to purchase goods and services that UK exporters supply.
Protect UK investors in foreign markets withstand political risks.
Rush developing economy.
Able to know the different technologies that each country uses.