Hnd Judge How the Business and Cultural Environments

HND Business Birmingham Metropolitan College Mathew Boulton C angstrom unitus Riddle of the solar day A woman shoots her husband. Then she holds him under water for over 5 minutes. Fin all toldy, she hangs him. But 5 minutes afterwards they both go extinct together and enjoy a wonderful dinner together. How atomic number 50 this be? 3. 3 judge how the business and cultural environments shape the behaviour of a selected organisation This builds to answer Judge how Lloyds TSB has been behaviour has been affected by political, sparing, social, technical, legal, and environmental pressures.Industrial concentration Over the last 100 eld the coat of secures has primarily been increasing. 50 years ago in the UK most shops were mystically own and supplied the local ara, however over time boastfullyr shops pass water rick more than(prenominal)(prenominal)(prenominal) and more important. Tesco for typeface is a enormous employer in the UK and this instant serves millions of customers with an estimated wiz in e echt seven pounds spent on retail being spent in Tesco, it has now all-embracing salubrious beyond the UK and is operating in galore(postnominal) an(prenominal) disparate companies.In 2002 Walmart was the biggest earning firm in the world, with an yearbook revenue of $219 billion. This was a higher figure than the GDP of umteen countries. As a everyday rule different industries ar dominated by a pocket-sizeer number or larger firms. This snub is referred to as industrial concentration. How has industrial concentration been achieved? It has happened in a number of different ways, primarily many of the firms give up naturally coded in surface, e. g. opened more and more stores, or built bigger and bigger factories.However it has in addition been achieved through and through unifications, where firms combine themselves together And By takeover where one firm forget cloud out a nonher firm Why evoke in size? One of the stu dy reasons or advantages of growing in size is to achieve economies of scale. Merger as a method of step-up Mergers go game firms a great advantage because over night they give the sack grow substantially, they can become more secure, gain great economies of scale and throw greater diversity. Case study Barclays In 2003 Barclays imprecate was run acrossing for a major European lodge to merge with.It fathered looking at nuclear fusions for three main reasons Barclays had previously been a target for a takeover, by being a larger organisation it is a lot harder to become a target for takeover The bigger it becomes the greater the economies of scale it could gain It allowed Barclays access to European marketplaces, far more easily than setting up its own branches abroad. Merging gave Barclays overnight access to a large customer base that was already established, additionally it gave Barclays technical experience of Europe.What economies of scale do you think Barclays gaine d from expanding abroad? . Vertical mergers Vertical mergers are mergers of firms in the comparable chain of drudgery, for voice a brewer merging with a farmer (producing the raw ingredients hops) or a brewer merging with a pub. twain of these are examples of vertical mergers because they are in the alike(p) chain of crossingion e. g. eer The brewer merging with the farmer would be a vertical rearwards merger, because the brewer is merging with someone at an earlier stage in the production chain. From the farmers point of view merging with the brewer would be a forward vertical merger, because he is merging with someone at a later stage of production. Motives for vertically backward mergers Firms can gain a number of advantages by vertically merging backwards these office complicate Economies of scale Guaranteed supply Not supplying competitors without knowledge (might wet non supplying any competitors) Motives for vertically forward mergersMost manufacturers never sell conveyly to the commonplace, they rely on retailers to do it for them, by merging with a retailer request for your product is guaranteed. You can s make it your competitors products being stocked (or despotic them, e. g. charging a higher de barrierine for them Key factors in a merger Both firms must recover they are gaining from it, they must both feel they are gaining more dictation Horizontal mergers A plane is where firms at the same stage of production merge. These firms ordinarily produce the same goods and are usually at least to some extent in direct competition with for apiece one other.Motives for horizontal mergers Greater efficiency, for example getting relinquish of duplicated management roles Greater use of staff, under-utilised staff might be apply at another(prenominal) plant or location Greater control of the market Greater feature buying power, therefore gain economies through bulk buying. Job saving, redundancies almost always follow mergers, and th is creates cost nest egg for the new organisation Eliminate competition what better way to r individually a competitor than to merge with them, this helps reduce down competition and mean price competition is reduced. We hold back seen how regimes whitethorn oppose this) Increase market carry on, you pull up stakes gain new customers, possibly in locations where you didnt affirm any before Examples of horizontal mergers P & O and Stena pull in merged in November 1997 saving 1000 out of a combined contri moreovereforce of 5000 Commercial Union and General Accident merged, the merger caused closely 3000 redundancies Lateral mergers Lateral mergers are where cardinal firms that are at the same stage of production, but where the products do not directly compete. For example a brewery with a soft drinks manufacturer. The products are in all prob readiness to be sold in the same places, e. . shops, restaurants, pubs etc, but they do not compete directly against each other. They do not lure each other customers away. So a pension company (Scottish Widows) merged with Lloyds TSB, they didnt compete directly against each other, but they were in a related market. Reasons for lateral mergers Economies of scale can be gained, but one of the major reasons give be to have a wider range of customers in more diverse markets. Both firms ordain have access to customers they didnt have before. The new firm solitary(prenominal) when gains in customers from the combined companies E. Lloyds TSB could access customers from Scottish Widows, and Scottish Widows had access to a lot more customers than it had before at Lloyds TSB. Conglomerate mergers This is a merger where the two firms have nothing in crude, for example a brewery and a washing machine manufacturer. The two have nothing in common Reasons for conglomerate mergers almost economies of scale can be gained, but for the most air division it is luck bearing that is the major drive, both firms are more likely to be secure in the new form where they have a combined ofttimes wider range of products over possibly a such(prenominal)(prenominal) wider area Case study The merger of Carlton and GranadaIn 2003, Carlton and Granada TV companies announced their aspiration to merge and form a firm worth near ? 4. 1 billion. It was estimated that the new company would control about 50% of the television advertize market. Advertisers and media agencies both expressed their fears over the potential creation of a angiotensin-converting enzyme airtime sales house if the two existing houses owned by the two companies combined. The rival Commission decided that an investigation was in order, and they produced a 456 page report into the proposed merger. What are the benefits for the two companies in merging? .. Why was the Competition Commission so concerned over the merger? ..Multinational corporations Perhaps an inescapable consequence of industrial concentration was the multinational co rporation. These are firms that have extended beyond their native counties and have become global organisations, that in many cases are worth many billions. Why have they grown? beyond economies of scale there are other advantages, a firm might be nearer its customers, be able to modify its product and not have to give way import duty. Other advantages can hold get off force back be in other countries Lower production costBeing snuggled to raw materials (therefore transport costs are reduced) Growth of multinationals There has been a rapid increase in multinationals from 7000 in 1970 to 40,000 in 1995. More than fractional of multinationals come from five counties United States, Japan, Germany, France and the Netherlands By going global many of these firms have been able to expand hugely, some are scotchalally more significant consequently small countries. Exxon for instance has comparable economic size to Chile BP which is the UKs largest multinational is placed as being more economically significant than Cuba, or UruguayConcerns about multinationals Many people are concerned over multinationals, concerns include Power they have over many political sympathiess due to their size Some have been accused of exploiting cheap labour They control many of the planets resources, e. g. gas and oil is largely controlled by a number of multinationals. Financing growth Not only can firms gain money to grow from the traditional routes of borrowing money from affirms, they can in like manner gain revenue from unspoileds issues and contingency ceiling. Rights issuesIf a firm is expanding it whitethorn well look to its existing shareholders to help finance that growth Rights issues allow shareholders to buy new shares in the company in proportion to what they already own, usually at a better price. So if a firm was intend to expand shareholders leave alone be contacted and asked to see if they pauperism new shares in this new venture, shareholders go out b e offered preferential rates (it is usually seen as a reward for shareholders) The firm gains extra revenue, but with a huge advantage that it doesnt need to pay the money back (like a bank loan) If a shareholder wants to get their money back they volition sell the shares.Both firm and shareholder can see it as a good option, hence forth it is a popular way to intensify revenue. gage capital Venture capital firms, or exclusives will look to see if they can get a good bargain. This is very much want the Dragons on Dragons Den aim to do. Venture capital firms will inject money into the firm, but often will gain a significant share of the business as part of the deal. They may well want to have directors positions and may also want some kind of control in the business. This is not always a bad thing for the business, where the new company can gain priceless management help from the venture capital firm.Venture capital enthronement can happen at a number of different stages Seed enthronisation providing at the very earliest stage, possibly before a product has been fully realised Early stage enthronization helping a firm in its opening stages, which can quite often be a difficult time for a business Expansion and later stage support helping a more mature company to expand Turn more or less financing helping failing firms to regain themselves mutual ventures Joint ventures are very similar to mergers, this will be where two firms form a separate division or new company.It will be financed and staffed by both companies, it might be used for instance for one firm trying to break into a new market, or a new state. By using a joint venture a company might gain all the experience of another firm, adding to its own advantages. However no upheaval or press release of staff. Outsourcing This is where an individual or another firm carries out some of the operation of the business, for example carries out the cleaning portions carried out at the organisation. Th e firm gains by using outsourcing by Saving money that it doesnt have to return on training staff There are no recruitment costsThere are no issues with redundancies or sacking of staff because they are utilise by another company The firm can start a new service very quickly by using outsourcing By outsourcing it may be easier to get the experts needed. The firm wont have to concern about covering staff absences, the firm doing the contracted outsource work will have to engage about it instead. It can offer a quick and cheaper alternative (because there are no recruitment costs etc) to employing staff at the firm It is very good if the service is only needed in the short term. Technology and innovation look for and teaching is very pricy and doesnt always work. However if it does work it can offer the firm huge advantages offering a new product or service that wasnt available before. Because of copyright, many of these products will remain exclusive to the firm. Research and development is effectively another economy of scale, because usually only the large firms can afford it, and can afford it when it goes wrong. It is usually just major corporations that carry out look for and development. Top 11 research and development companies 2002 1 Ford 2 General motors Siemens 4 Daimler Chrysler 5 Pfizer 6 IBM 7 Ericsson 8 Motorola 9 Matsushita Electric 10 cisco 11 GlaxSmithKline Looking at the above firms, what are the main areas that research and development is carried out for? . Why do you think these areas have a lot of research and development carried out in them? Labour market trends A very important consideration for businesses is the state of the labour market. A higher rate of unemployment gives a firm an advantage to pick sufficient workers from a wider pool. The bigger the choice the easier it is for them to get the right member of staff, and importantly without increasing wages. As the pool of workers reduces down so it is harder to get the rig ht worker.On a similar basis the skills of the workforce are also very important, many positions in firms may have significant training. Proportion of managers with efficiencys 2003 all Men Women Degree or equivalent 48% 55% 39% Higher education 38% 44% 33% A aim equivalent 23% 25% 18% GCSE or equivalent A C 17% 22% 13% Looking at the above figures what doe it suggest is the trend between managerial position and qualification Generally the UK government realises the need of UK business for a more apt workforce. This was behind the labour parties policy of encouraging higher education amongst the commonwealth and encouraging modern apprenticeships. However this has still not been enough. Many firms have looked outside of the UK for skilled workers at a lower cost. Additionally with the growth of communications technology it is easier for firms to employ members of staff in other countries. curse word of Lloyds TSB Lloyds Banking Group plc is a fiscal work group found in UK.It was initially known as Lloyds TSB Group plc and covers 40 countries in the world. However, its first-string market is UK and it operates in three verticals namely, retail banking, entirelysale and international banking and restitution and investments. The Lloyds Banking Group plc acquired the Halifax Bank of Scotland plc or the HBOS on January 16th this year (Company visibility par. 1) The subprime crisis which started in the US had its effect on those countries whose financial companies were participating in the US based hazardy financial instruments.UK was one of those countries and approximately around November 2007 the banking welkin saw the unfurling of a major crisis (Caine). $323 billion was the amount of agree assets write-down and recognise loss in the worlds top 100 banks till May 2008. Amongst these, UK banks were also present HBOS had a loss of $5. 9 billion while RBS or Royal bank of Scotland bewildered $15. 2 billion (Onaran). Due to the subprime and cre dit crisis towards the end of 2008 UK went into recession and since then the crisis has deepened. This is evident from the fact that the UGK GDP has declined further by 1. % in the finale between January- March 2009. This has also been the sharpest decline since 1979. It is being predicted that the fall in GDP would be even more than 3. 5%, which was the common idea among experts last year. The IMF has also predicted that the UK economy would decline by 4. 1% in 2009 (Monaghan par. 1, 3, 5, 13). But in comparison to other EU members the UK economy is in a slightly better condition. Yet public finances will be in a very bad condition in comparison to its EU member states. Also, the countrys government famine is predicted to be amongst the worst in EU for the next year (Giles, par. , 2, 10). big economic forecasts by different agencies have also predicted a cheerless picture for the economy in the near future. GDP growth is predicted to be less than 0. 5% in 2010 while the Retail wrong major power inflation is going to be between 2% to 2. 5%. Consumer Price Index inflation on the other hand is predicted to be at 1. 5%. Current peckering system for 2010 would be at least -? 26 billion by April (Forecasts for the UK economy 12-13). http//mb aterm typographys. om/an-analysis-of-lloyds-tsbs- oc trustworthy-strategic-position-part-i/ PESTEL compendium of the Banking Crisis and Royal Bank of Scotland POLITICAL There are numerous entities comprising RBSs political arena, including but not limited to The Bank of England (BOE), BOEs Monetary Policy Committee, chancellor of the Exchequer, Financial operate Authority (FSA), HM treasury, HM exchequers UK Debt Management Office, UK Financial service and Markets Tribunal (which provides judicial review of the FSA), and treasury Select Committee (which reviews HM exchequers activities).Each entity influences RBSs ability to compete in a highly regulated area. Each entitys influence originates from their ability to sway and/or enact legislative acts which windbag RBSs investment activities, reporting procedures, costs of capital, international participation and horizontal and/or vertical integration. The overall political mood of these government entities during the accepted banking crisis inculcates numerous feelings and perspectives, including but not limited to such attitudes as i). angst about available credit to businesses and consumers ii). repidation towards watchdog groups like rating agencies and government inspectors and iii). worry concerning free market capitalism and the nationalization of key industrial sectors. Immersed in such a political atmosphere, RBSs expectations include augmented publicly scrutiny regarding loan portfolios and lending activities, even greater banking regulation, increased political activities such as inspection parameters and stird reporting requirements. RBSs political arena is struggling to recompense constituents for the governments inability t o meanwhile off volatility despite huge expenditures of taxpayer dollars.RBS will identify trend lines in each governmental entity in order to position each entity into a governmental landscape causeing to redefine itself as a public body capable of ascertaining significant risks to the economy. By analyzing the decisions of entities like the BOE, FSA, UK Financial Services and Markets Tribunal, and Treasury Select Committee RSB may fully assess the countrys political poser, the direction being taken by the government on a per entity basis and the ramifications upon the socio-economic canvas.One political activity is the HM Treasurys establishment of the Bank Recapitalization Fund and the UK Debt Management Offices 2008 Credit Guarantee Scheme. These programs are part of the Governments attempt to stabilize the financial system and to protect and promote confidence in depositors, borrowers and other clients of RBS and other financial institutions. Under these programs the govern ment will induce the capacity to set RBSs dividend policies and bonus schemes. It will also require RBS to support lending to small businesses and home owners. Moreover, in October 2008 the HM Treasury purchased approximately ? billion in RBS preference shares1, for which RBS will have to pay approximately ? 600m per annum. The government also underwrote a ? 15 billion share issue for Royal Bank of Scotland as a result of which the government gained a 58 percent stake in the company. The performance of RBSs Corporate and Global Banking divisions in an atmosphere inundated with public and undercover institutions who failed to ascertain an accurate picture of the credit markets and banking intentness may be expected to benefit from funds made available from HM Treasurys programs.Regarding the FSA, it has been perceived by some to be comparatively powerless and ineffective. FSA behavior is often criticized as being reactive rather than proactive. Some banking experts assert the FSA has allowed irresponsible banking and the FSAs ineptitude may have precipitated the credit crunch. Indeed, the public acquisition of Northern Rock in mid-February 2008, and the takeover of HBOS by Lloyds TSB are key indicators that the FSA may have failed to oversee with insight and expertise.Once young activity is that in September 2008, the FSA announced a ban on short selling to reduce volatility in difficult markets, including financial institutions. Another recent activity is the FSAs Consultation paper entitle Financial Services Compensation Scheme reform. Published in January 2009, the paper recommends that a potential seven-day time limit, after the collapse of their account providers, for paying out to depositors could be imposed on the Financial Services Compensation Service (FSCS) in future.FSA also recommended a simplification for the eligibility parameters for depositors and for the processes of account providers transferring their customers information on the FSC S. ECONOMIC The economic state of the nation will propel RBS towards activities based on reduced GNP growth, reduced demand for credit, decreases in consumer confidence and reductions in revenue sourced from interest rate spreads. However, clients in RBSs riches Management division may realize spacious term gains if the market is currently near the bottom and grows in the future.With historic lows in interest rates and a monetary policy make full the banking sector, RBS may capitalize upon low costs of capital and potential increases in the demand for credit. However, due to the economic climate, RBS is expected to be substantially risk antipathetical and may avoid the tried and true real dry land market. Large and small businesses seeking working capital, companies seeking merger financing and product development financing are potential opportunities for RBS given the current real country climate.RBSs may be expected excogitate strategic merger opportunities, gravitate towar ds a greater risk averse position, raise capital through selling assets and increase the quality of its capital base. RBS may sell assets like its 10% stake in Bank of China2. The RBS has also placed t its near-1,000 pub estate up for sale, as it looks to improve its balance sheet with cash holdings3. RBS is also hover to curl around 3,000 jobs from its Global Markets investment banking division. 4 Moreover, RBS will compete in an economic climate experiencing increases in unemployment. The companys layoffs are indicative of the financial sector reducing payrolls in order to streamline operations and enhance profitability. However, the economys overall increases in unemployment may facilitate a corresponding increase in small business start ups such that RBS may make loans to unemployed workers attempting to start their own firms.Per the aforementioned real estate situation, housing prices experienced a plunge of approximately 16 per cent last year, the biggest annual drop on reco rd and RBS is poised for another turbulent year in real estate investment activities. The fall during 2008 established a current average house price at ? 153,048, down ? 20,000 since December 20075. However, in a discounted real estate market, RBS may facilitate real estate investors seeking long term gains and may also conduct businesses unrelated to real estate i. e. manufacturing, technological, agricultural, and health care.SOCIAL Social aspects of the credit crisis include, but are not limited to race attitudes, consumer confidence, and worries regarding pensions. Career attitudes may be improved if RBS campaigns for unemployed workers to attempt to start their own small business. Consumer confidence may increase if RBS markets the low costs of capital for borrowers. And worries regarding pensions may be relieved by RBSs Wealth Management division and subsequent campaigns emphasizing investments in staple sectors, emergent markets and firms experience above average growth.T ECHNOLOGICAL The aforementioned FSAs Consultation paper entitled Financial Services Compensation Scheme reform also recommends Britains banks spend approximately ? 1bn on upgrades for information technology systems. The proposed IT investment facilitates a banks capacity to produce a mention of all customers deposits deep down 48 hours of the institution failing. This may support the FSCSs ability to ensure that bank customers get their money back within seven days.Such a system may also limit the risk of a collapse of confidence from spreading. Furthermore, technological variables like software platforms based on data mining, neural networks, risk analysis and algorithms scanning financial criteria may offer RBS the tools necessary to optimize networks, maximize knowledge procural and minimize data absence such that assets, liabilities, expenses and revenue streams are analyzed, assessed and describe upon in order to alert management on significant substitutes and/or potential problems. LEGALRBS confronts numerous legal issues, including but not limited to securities law, bank note regulation, separation of lawful matters centered on England and Scotland, country circumstantial regulatory committees and a trade structures negotiated separate from England. RBS is poised to capitalize on the Scottish reputation for developing a wealthy nation such that, the concomitance of national legal frameworks may expedite innovation, facilitate the discovery of economic tools and promote a banking sector that leads the international economy into a more efficient, less volatile and improved transparency framework.By immersing itself in the legal framework of both regions, RBS may reap insight into the legislation the behind municipal economy and participation in an international marketplace. ENVIROMENTAL Several groups assert that RBS is one of the worlds top financing sources for oil and gas extraction. Allegations that RBS is reinforcement oil and gas extraction i n politically and environmentally cranky regions and further entrenching dependence on oil and gas. These believes have resulted in campaigns against RBS Protests have taken place at some RBS and Natwest branches in the UK.RBS supplies financial services to firms constructing coal-fired power stations and developing new coal mines at sites all over the world. RBS is accused of helping billions of pounds over the last two years to E. ON, and other companies emphasizing coal. On 17 January 2008 environmental groups wrote to RBS hoping to resolve environmental problems associated with the ABN AMRO-financed Sakhalin II project (RBS, Fortis and Banco Santander acquired ABN AMRO in 2007).RBSS green holdings may alleviate these antagonistic positions while also offering investment returns in industries experiencing relatively positive growth rates. As alternative energy becomes a executable source for transportation and electricity, RBS may identify and locate potential businesses (wheth er small businesses or conglomerates) that offer above average yields. Further, RBS may spearhead the banking industrys emphasis on alternative energy in a marketplace poised to replace oil even during a banking crisis.Industrial Analysis Current Market Forces in Banking Sector There are some(prenominal) forces operating in the banking sector. A few of these are related to the current crisis and others are constant parts of the banking sector. Such forces include, but are not limited to i). a demand for reform ii). a supply of private money (whether publicly financed or not) that has experienced a constraining raise up in risk adversity iii). a nationalization of private sectors iv). unsealed alterations of capital standards v). ossible shifts in portfolio risks vi). homeowner and depositor protection and vii). possible prioritization of small and spiritualist sized business. These demand and supply issues are drivers of change. Other drivers of change include regulatory bodies, private organizations and competitors within the banking industry. As alterations in portfolio risks shift capital, changes in specific industries may occur. For example, an influx of capital into alternative energy alongside a reduction in real estate investment may fuel energy independence.As alterations in capital standards occur, banking companies are expected to change attitudes towards riskier loans. And as small and medium sized enterprises become a priority, the may be changes in the rate of innovation, the effect of small transactions and general economic data like unemployment or personal consumption. A banking sectors industrial analysis would note that banking has existed so long that ascertaining the whole sectors position in the life cycle is rather difficult.However, the sector is experiencing a nationalization, which in turn reverts back to antiquated stages of the sectors life cycle. On the other hand, banking could be poised to expedite its position in its life c ycle due to the current economic crisis i. e. necessity is the mother of invention and the banking sector may invent methods to give suck the economy out of the current crisis MADEAN2. WORDPRESS http//madean2. wordpress. com/business/swot-pestel/ (2012) http//www. youtube. com/watch? v=1cV-R26kMrU&feature=related