Business Environment Assignment

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BTEC EDEXCEL HND DIPLOMA IN (MANAGEMENT & HUMAN RESOURCE)

OFFERED BY INTERNATIONAL COLLEGE OF BUSINESS AND TECHNOLOGY

Ancoombra Tea Factory

Unit 1: Business Environment

F.K.Mohamed Firnaz

BM K 23

ICBT Kandy Campus

Assessor: Mrs.Lasanthi Gunasekara

Submission: 08/08/2012

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Acknowledgement

 I would like to thank Ancoombra Tea Factory Proprietor Mr.Ziyaudeen who helped me to complete the Assignment Successfully.

 I would like to thank my lecturer Mrs.Lasanthi Gunasekara.

 Also I would like to thank all my friends and classmate who supported me in different way to complete the Assignment successfully.

 Also I would like thanks all those who have support me to make this assignment to complete successfully.

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Executive Summary

The Ancoombra Tea Factory is a Private Limited Company which is owned by Mr.Meezan Hadjiyar. It was started in 1946 in a small town in Ankumbura which is located in the Central province of Sri Lanka.

The important Stakeholders of the company are Owner, Employees, Supplier, Customer, Government and neighbors. All the stakeholders’ contribution to the organization is high. Ancoombra Tea Factory mainly considers on customer satisfaction of the products and won many awards.

The main responsibility of the organizations is on Social, Environmental, Managerial, and Employee. There are three types of Economic systems, which are Command Economy, Free market Economy and Mixed Economy. The basic Economic Problem is What to Produce, How to Produce, To Whom to produce and how these basic economic problems are solved.

The UK National Fiscal and Monetary Policy and the Key Forces, UK Budget Deficit, Inflation Rate and Interest rate. How Fiscal and monetary policy impact on the business.

UK Competition Policy and pillars of it and the impact on Competition Policy on the Tea factory. International Trade and its impacts on the tea business in UK and how the European Union Policies effect the business.

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Figures:

Page Number

Stakeholders Map 12 Demand and Supply Curve 16

UK Budget Dificit 23

Inflation Rate 23

UK Recent Interest Rate 24

Tables:

Objectives of Stakeholders 13

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Introduction

The Ancoombra Tea factory is located in the small town of Ankumbura, in the Central province. It was started in 1946 by the late Meezan Hadjiyar. The company has reputation as one of the largest and best mid grown Tea factories in the Central region.

The factory is aided and abetted with the latest state of the art machinery and is one of the few factories nationwide that takes pride in having fully Automated Orthodox tea processing systems as well as the C.T.C (Cut, Twist & Curl) method of tea manufacture.

The Ancoombra tea factory Produce black tea of the finest Aroma & flavor to cater to many different categories of consumers all over the island.

Has won many prestigious awards such as. The 5’S’ and 2 Star awards for best maintenance, the H.A.C.C.P health certification for maintaining the most hygienic standards of tea production and last but not least, the ‘Entrepreneur of the year’ National award

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Section 1:

LO 1.1

Types of Organizations Available in Sri Lanka

Categories of Organization 1. Characteristics 2. Size 3. Legal Form Characteristics 1. According to Ownership 2. According to Control 3. According to Activity According to Ownership  Private Sector

Examples: Dialog, Etisalat, Airtel

 Public Sector

Examples: Ceylon Electricity Board, Ceylon Water Board According to Control

 By the Owners

Example: Sidhalepa

 By People Working

Example: Nawaloka Hospitals PLC

 Indirectly by the Government

Example: Golden Key, Sri Lanka Airlines, St/Anthonys College

 Directly by the Government

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According to Activity

 Service

Example: Bank of Ceylon, Seylan Bank, Peoples Bank, Sampath Bank etc.

 Product

Example: Nestle, Keels

According to Profit & Non Profit Orientation

 Profit making

Example: Private Organizations

 Non Profit

Example: Rotary Club, Mawbima Lanka, Samadhi Community Development Foundation

According to Legal Status

 Limited Companies

Example: Colombo Exchange

 Partnership Companies

Example: Perera & Sons

 Sole Trade

Example: Mangala Tax

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According to Size

 Number of Staff

Example: Sri Lanka telecom, CIC Holding  Number of branches

Example: National Saving bank, Sampath Bank  Sales revenues each year

Example: John keels  Market Share

Example: Unilever Sri Lanka, Hamas Holdings

Size

1. Small business

 Owns and Runs by one or a few

 Sell Goods and Services Locally

 Employee less than 50 People Example: Orchid

2. Medium Business

 Operates Locally or internationally

 Employee Between 50-250 People Example: Singer PLC

3. Large Business

 Has Household names, easily recognized logos

 Factories, offices & outlets are located in other locations

 More than 250 employees

 National & multinational Business

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Legal Form

1. Sole Trader

 Single individuals

 Usually small Scale

 Baring the profit or losses

Example: Wayamba Traders 2. Partnership

 Two or More persons associated

 One stage beyond the sole trader

 Each Partner Contributed an agreed amount of capital

 Agreed method of profit sharing, salaries & interest

 Must be dissolved whenever more than 50% of the partnership interest change hands

Example: Apparel industry of Sri Lanka

3. Public Limited Company

 Listed in the Stock market & name should be include letters PLC

 Owned by a wide range of investors

Example: John Keels, ODEL, Dialog

4. Private Limited Company

 Shares are only transferable directly

 No Privilege to sell shares in the stock market

 Name Should be included Ltd, or Limited

 Owned by Limited Number of investors Example: Atlas, MAS Holdings

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Ancoombra Tea factory

Can Classify Ancoombra Tea factory into 3 categories 1. Characteristic –

 Private Sector Business

 Control Characteristic and company was controlled Mr. Ihithisham.  Profit making Organization

2. Size –

 Large Business

 Have branches in Hatale, Nagala in Sri Lanka  Large Number of Employees and Staff

3. Legal Form –

 Private Limited company  Own by a Single Owner

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LO 1.2

Stakeholder Map

High Owner Government Bank Supplier Customer Power Competitor Employees Neighbors Low

Low Interest High

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Table No.1 Objectives of Stakeholders

Stakeholders

Objectives

Owner

Owner should have good relationship with the stakeholders. His expectations are future profit potential of investments, current financial performance and the stability and the strengths of the capital structure. He expects the profitability from the business.

Supplier Instant payment, satisfaction, development purchasing.

Government Fulfill legal requirements and make way to produce best quality

Bank To Provide loans and get interest

Customer Get high quality tea with an affordable cost

Competitor How the company produce and marketing techniques used

Employees To fair return to their work

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Table No.2 Importance of Dealing with Stakeholders

Stakeholders

Why they are dealing

Owner To make sure all managerial activities are carried out in a correct way

Government To make sure that they follow all legal requirement which will not harm the consumers

Bank To Provide loans and get interest and make good financial status to the organization

Supplier Build the satisfaction and make good relationship with them to attain good supplies.

Customer To get valued product for the money

Competitor To overtake and improve their business

Employees Process of producing high quality tea

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Needs of Employees

Ancoombra Tea Factory provides these important factors to the employees  Respect

 Trust

 Open Communication  Clear Communication  Appreciation

 Chance to make own decision  Opportunities to grow

 Free Health checkup once in a month  Promotion

 Motivation  Transfer

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Customer Expectations and Satisfaction

Ancoombra tea factory was started in 1946 and till it growing and growing. Their green leaf processing capacity exceeds 52,000kg per day and it shows customers were satisfied if they are not satisfied they can’t be in this field for more than 66 years.

Ancoombra tea factory won Prestigious 5 `S` Award (Given by Japan) 1. Seiri – Organization

2. Seiton – Orderliness 3. Seiso – Cleanliness

4. Seiketsu – Standardized cleanup 5. Shitsuke – Discipline

5’C’ is meant by 5 Pillars of an organization. This Award proves that Physical Environment in Ancoombra is tidy and very well organized.

Ancoombra tea factory finds out it and produce high quality tea by plucking fresh tea from their fields and also manufacturing process carried out in the same company. So it enables to produce high quality tea with high technology machines with an affordable price. Suppliers sell to consumers at a low price than the competitor because Ancoombra sells at a very low cost to suppliers because their manufacturing charge and labour is very low. So it makes consumers to satisfactory because Customer expects tea for affordable price and the quality for the money they pay.

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LO 3.2

Demand and Supply Curve

Figure No.2 Demand and Supply Curve

 In Ancoombra tea factory can see positive shift in Demand 1 and Demand 2 resulting increase in price also increase in quantity as well, this happens very rarely in any

organization and this tells the quality and the trust of the consumers for the tea from this organization.

Porters 5 Forces

1. Threat of Suppliers –

 Labour, Machinery, Transporters and Tea Plantations 2. Threat of Buyers –

 Nature of Product, Initial Buyers and Final Buyers

3. Threat of Substitute –

 Biggest threat to package industry is loose tea industry and Beverages 4. Entry and Exit Barriers –

 Barriers for tea factories, plantation, distributors and packages and consumers

5. Degree of Rivalry

 There are varieties of tea available in market and almost all the same in quality wise so if another company reduces the price consumer will switch it to other substitute because switching cost is low.

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Sales Figures of Ancoombra Tea Factory

Sales for January 2012 Tea Kg Per day = 200

Tea for Month = 200kg x 30 days = 6000Kgs per Month Sales for February 2012

Tea Kg Per day = 162

Tea for Month = 162kg x 30 days = 4860Kgs per Month Sales for March 2012

Tea for Month = 189kg x 30 days = 5670Kgs per Month Sales for April 2012

Tea for Month = 212kg x 30 days = 6360Kgs per Month Sales for May 2012

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LO 1.3

Organization Responsibility

Social

Social Responsibility means an act to benefit society to large extent.

Ancoombra tea factory as proved that they values social responsibility and also they won H.A.C.C.P health certification for maintaining the most hygienic standards of tea production.

Environmental

Environmental Responsibility means the way waste is treated and disposed properly.

Ancoombra tea factory uses fully Automated Orthodox tea processing systems as well as the C.T.C (Cut, Twist & Curl) method of tea manufacture. There is an old saying “seeing is

believing” and Ancoombra welcomes all to visit and witness wondrous process of manufacturing finest blend of tea.

Managerial

They follow moral principles and values that govern of a group or person with respect right or wrong. Ancoombra tea factory has won ‘Entrepreneur of the year’ National award in 2007 so it tells that best managerial activities carried out in the organization.

Employee

Ancoombra tea factory gives equal opportunities to all employees without discriminating. Also take care or employees well-being. They make employees to work for minimum hours (8hours). They also give promotion to skillful employees and motivate new/training employees so they feel good to work. Also create a safe and healthy place for work with all necessary requirements applicable for safety and health situations.

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Section 2

LO 2.1

Economic Problems

Economic Systems:

1. Command Economy 2. Free Market Economy 3. Mixed Economy

1. Command Economy

 Fully owned and control by Government

 Collective Decision Making

 Government decides answer for all three economic problems

 Benefit goes to members only

 Central planning committees

2. Free Market Economy

 Called as Capitalism

 Owned by Private Sector

 Ability to pay, supply & demand influence the decision making

 Less Government intervention

 Countries which practice this system are United Kingdom, United States of America and Germany (but can’t find 100% Free market Economy in the world)

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3. Mixed Economy

 Public Ownership

 Free enterprise sector

 Both Public and Private sector involved

Basic Economic Problems 1. What to produce 2. How to produce 3. To whom to produce

1. What to Produce:

 It is depend on what customer wants to buy and the affordability cost they can pay to own the product. Produce goods with the minimum resources available and making maximum output of it.

2. How to Produce:

 Using the most appropriate production method by considering what types of technologies needed to be use. Choice about who will produce & what mix of resources use. Depend on the cost of resources and efficiencies of resource utilization.

3. To whom to produce:

 Deciding on whom the product is produce and will be distributed. What type of Social class and groups targeted.

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Solving Basic Economic Problems

1. Free market economy and problem solving.

Free market economy is called as capitalism. For this free market government intervention is very low. All decisions are taken by the market mechanism. In this free market economy all firms are trying to maximize their profit. Customers are trying to buy goods with more benefits for least price and workers are trying to maximize their wages.

What to produce?

When firms are deciding what to produce they are trying to select products which help to earn highest profit. Firms are only trying to maximize their profit. This decision is mainly depending on this factor.

How to produce?

After selecting a product which helps to gain maximum profit firms is trying to decide the way they are going to produce it. To produce that product firms are trying to select the cheapest way. Because of this firms are used to select dense resources to produce that product. Not only are the dense resources firms trying to find workers who can hire cheaply.

Whom to produce?

Once a firm targets a market it has to select the product according to the same. Always the firms’ aim is to maximize their profits. Therefore the firms will mainly targets on the consumers who have more purchasing power & it helps when pricing the product.

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2. Command economy and problem solving

This economy is called as planned economy or Socialism. The command economy is totally controlled by the government and the decisions are taken by the central planning committee.

When control planning committees are taking this decision they are trying to ensure the welfare of the society. So the central planning committees are trying to produce products which are not harmful to the society.

How to produce?

After selecting a product central planning committees are trying to select a process which is not harmful to the society. Therefore to take this decision central planning committees are

concerning about factors such as, unemployment of the society, capital density and the welfare of the society. Central planning committees will help to reduce unemployment by taking decisions to use those people in production process.

After selecting a product the production process central planning committee will decide the targeted group. In this central planning committee will concern about the whole society as well as the equal distribution between the social classes.

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3. Mixed Economy and problem solving

This market is a combination of the market economy and command economy. It will help to secure the social security and the competitiveness of the market. In this market there are enterprise sector, public ownership and welfare sector. In this market government intervention are in three types,

 Provision or prohibition.

 Subsidy or taxation.

 Regulations.

In this market private sector is taking decisions to produce products which can give highest profit and which can meet customer needs and wants to fulfill their demand. But the production should follow government rules and regulations.

Government is taking decisions to produce products which can secure the social welfare (mainly the service sector).

How to produce?

In this element private sector is taking the cheapest way to produce a product. Private sector is using dense resources and cheapest methods to produce a product to reduce the cost.

Government is taking care of the social welfare and they will concern about the capital density and other social factors to decide the production process. Government will select the process which is help to secure the social the social welfare, reduce the unemployment and the environmental protection.

When selecting a target group private sector will select the higher income group of the society. Mostly private sector is only concerning about the highest profit.

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LO 2.2

UK National Fiscal and Monetary Policy

Fiscal Policy

Fiscal policy is modification of spending government or taxation to help macro-economic objectives by changing level of aggregate demand. Also can’t change after approved by the government and it also give better support to government

Can divide Fiscal Policy into two

1. Discretionary policy – Policies which are decided and implemented 2. Automatic stabilization - where economy can be stabilized by processes

Key Forces of Fiscal Policy

 Government plan what it wants to spend

 How much need to raise in income or by borrowings

 What form and how much from taxes

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Monetary Policy

Monetary Policy is referred to Central bank. They maintain value and supply of money. In order to control inflation, stabilize currency. Monetary Policy is one way that government can impact on the economy by impacting the effective cost of money, the Central Bank can affect the money that is spent by consumers and businesses.

Figure No.3 UK Budget Deficit

This graph shows how the UK's budget deficit has fluctuated as a percentage of the country's economic output (GDP)

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UK interest rates

Figure No.5 UK Recent Interest Rate

In recent years. Interest rates have been adjusted to reflect changing inflationary pressure, and general macro-economic conditions.

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Impact on Business

Fiscal Policy

Fiscal policy will impact on Taxation. Government main income revenue is by tax. This might put a block to the new investors as well as the old business organization. Tax is a main income for government and all the organizations should pay taxes on their revenues.

Increase Tax Reduce Inflation

Monetary Policy

Monetary Policy is there to support Fiscal policy and to manage demand.

Monetary Policy will affect the business in following ways:

 Control by money supply

 Control over credit

 Exchange rate

 Interest rate

 Business cycle

 Spending

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LO 2.3

UK Competition policy and Regulatory bodies

Competition Policy

Competition policy means the activities carried out two or more business in order to capture a certain market. Competition is must because it will help businesses to produce quality products and maximize the benefits to consumers.

It will ensure following factors:

 Lower Prices

 New Innovation

 Improved Service

 Great Efficiency

 Great Quality

Pillars of Competition Policy

 Merger Control - Rule adopted to prevent anti-competitive behavior

 Market liberalization – Enables new competitors and provide best for consumers

 State Aid Control - Is ensure government intervention do not affect the competition

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Impact of Competition Policy of Selected organization

Competitive Advantage

A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices.

Competitive Commission

It’s an independent body that makes healthy competition is carried out in the market by business firms. Also ensuring Business firms are benefited as well as consumers.

Role of Regulatory Bodies

Government

Government is the only body who has power of influencing and implementing regulations on Prices. On goods and services such as Water board but before implementing they should inform to the public through parliament

Generalized system of preferences

GSP is the system of preferential trading through which the European Union extends preferential access to its markets for imports from developing countries.

The New “GSP+", system allows duty-free access to the EU for approximately 7,200 products from small and vulnerable developing countries. Sri Lanka was accommodated under GSP+ as a special case to enable recovery of development of the economy after the Tsunami Disaster.

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Central bank of Sri Lanka

CBSL is responsible for regulating financial system of the country, Their 2 main objectives are 1. Maintaining economic and price stability

2. Maintaining financial system stability

CBSL handles Sri Lanka’s foreign exchange management functions on behalf of government

Staff regulatory body

Consider about salary, age limit, leaves, EPT and ETF Benefits to employees

Health and safety regulatory bodies Promote health care programs for employees

Standard regulatory bodies

The Standards will be given to the business such as ISO 14001 for Waste Management System, ISO 14001:2004 for environment management. And also some certificates such as SLS, CODEX.

Consumer based regulatory bodies

This consider about packaging system by mentioning Expiry date, Manufacture date and Price.

Influence of Regulatory Bodies

Regulatory bodies play a major role in a countries economic system. The regulations were implemented for the betterment for business organizations and consumers but it can go in either way. A firm should cross all the barriers come from external environment and should make use of the scarce resources.

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LO 4.1

International Trade

Trading Between two or more countries is known as International Trade. Also known as trading transactions between people leaving in different countries

Advantages

 A Country may import a product which is not available or cannot be produced

 Utilization of resources

 Benefits to Customer

 Utilization of surplus produce Disadvantages

 Over Specialization

 Import of harmful goods

 It may lead to war

 One country gain other country loses

How UK Business is affected by International Trade

The international trade, the economies will grow faster because of foreign investment. The companies can target lot customers by expand their business into other countries. International trade can bring new technologies into the country by having economies open. Country offers the most attractive investment opportunities. UK business organization if they don’t involve in this international business they can only sell and trade their product and might loss customers from other countries. Because of the different geographic location all the countries are depend on other countries products. As a result the economic will be important.

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LO 4.3

Impact of Policies in European Union

The European Union (EU) is an economic and political partnership between 27 democratic European countries. With a population of almost 500 million, the EU generates an estimated 30% share of the nominal gross world product. The EU has developed a single market through a standardized system of laws which apply in all member states, ensuring the freedom of

movement of people, goods, services and capital. It maintains common policies on trade,

agriculture, fisheries, and regional development. A common currency, the euro, has been adopted by sixteen member states. It has developed a limited role in foreign policy, having representation at the WTO, G8 summits, and at the UN.

Impact of European Union in UK Business

EU mainly include manufacturing sector to boost enterprises EU economy. Estimates show that small- and medium-sized enterprises (SMEs) have raised. 6% of the EU GDP.

Benefits

 Euro – It has reduced currency consideration faced by European Countries  Harmonized standards – technical and Safety Standards

 Movement of people – UK Citizens have right to live and spend in any European Countries Policies of EU

 Common Industrial Policy

 Common monetary Policy.

 Common agricultural Policy.

 Taxation.

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Common Industrial Policy.

 This policy helps to encourage merging industries in UK such as BBC microcomputers.

 This policy helps to expand the businesses by adding low tax rates. Influences on trade agreements and giving subsidizing.

Common monetary Policy.

 Decisions regards the monetary policy is taken by the economic and Monetary Union.

 All countries in EU are using Euro (E) as the common currency. But UK is still not using Euro (E) as the common currency.UK is using sterling pound (E) as the currency.

Because it’s not easy to convert pound to Euro. Common agricultural Policy.

 Common agricultural policy is the single largest policy across the EU

 All the agricultural products which are exporting to other European countries and which are importing from other European countries should be high quality, safe and sufficient quantities.

 Should maintain a high standard of Environment care and animal welfare. Taxation

 All members should follow the same rules when they are deciding the tax rates.

 EU is directly influencing to the VAT rates. To make a fair competitions.UK should consider these rules and regulations when deciding the tax rates. These rates will influences to the organization.

Foreign and Security policy.

 Under This policy all European countries are getting together to speak and act as one in the world.

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Recommendations and Conclusion

The Ancoombra Tea Factory has 168employees currently. But it is not enough because this is large business organization which distributes tea all over the island. Due to the lack of employees Ancoombra tea factory takes more time to place the order and it will lead to loss of market share and customers. So Ancoombra Tea Factory needs to solve this problem by recruiting more employees.

As above mentioned in the report there are some strengths, weaknesses, opportunities and threats to the organization. To achieve higher positions in the industry is to overcome on weaknesses and taking advantages from opportunities and finding solutions for threats.

To enter into the UK Ancoombra Tea factory should have better plans, should do market researches and should invest more money on the business. Before enter to the market strategic management should study about the behavior of UK market, UK policies, laws, UK’s cultural and social background, and UK’s trends about their tastes and should create better strategies to face those factors effectively.

The Ancoombra Tea Factory should to market analysis before entering UK market because it will be more effective for their long term survival in Tea Sector in UK. More researches will help the Tea factory to find the market opportunities by overcoming them effectively and efficiently the garment can compete well within the UK organizations.

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References

1. Ancoombra Tea Factory Proprietor Mr.Ziyaudeen (Telephone Number : 066 2224254) 2. Lecture Notes

3. Meezans Group Sri Lanka (Online) (cited 24th June 2012) Available From <URL: http://www.meezans.com/factory/index_anco.html >

4. Economies Online (Online) (cited 24th June 2012) Available From <URL: http://economicsonline.co.uk/ > 5. Inflation Rate (Online) (cited 24th_{June 2012) Available From <URL:}

http://economicsonline.co.uk/Global_economics/Inflation.html> 6. Interest Rate (Online) (cited 24th June 2012) Available From <URL:

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Business Environment Assignment

BTEC EDEXCEL HND DIPLOMA IN (MANAGEMENT & HUMAN RESOURCE)

OFFERED BY INTERNATIONAL COLLEGE OF BUSINESS AND TECHNOLOGY

Ancoombra Tea Factory

Unit 1: Business Environment

F.K.Mohamed Firnaz

BM K 23

ICBT Kandy Campus

Assessor: Mrs.Lasanthi Gunasekara

Submission: 08/08/2012

Acknowledgement

Executive Summary

Contents

Figures:

Page Number

Introduction

Section 1:

Types of Organizations Available in Sri Lanka

Ancoombra Tea factory

Stakeholder Map

Stakeholders

Objectives

Stakeholders

Why they are dealing

Needs of Employees

Customer Expectations and Satisfaction

Organization Responsibility

Section 2

Economic Problems

Solving Basic Economic Problems

UK National Fiscal and Monetary Policy

Impact on Business

UK Competition policy and Regulatory bodies

Impact of Competition Policy of Selected organization

International Trade

Impact of Policies in European Union

Recommendations and Conclusion

References