Business Environment Assignment 2 BTEC Nguyen Huu Phong 2017 Bài Assignment 2 trong môn Business Environment tại University of Greenwich Viet Nam, đây là một trong những môn rất quan trọng và cần thiết cho những người muốn theo nghành businness cụ thể là human resource management như mình. Bài assignment này được mình làm tại trường. Các bạn có thể xem và tham khảo nhưng lưu ý đừng copy vì nó đã được check turnitin, mình xin nhắc là chỉ dùng để tham khảo.
Contents I/ Introduction II/ Content Task 3.1 Explain how market structures determine the pricing and output decision of businesses Task 3.2 Illustrate the way in which market forces 11 shape organizational responses using a range of examples Task 3.3 Judge how the business and cultural 15 environments shape the behavior of a selected organization Internal environment External environment Task 4.1 Discuss the significance of international trade 24 to a business organization Task 4.2 Analyze the impact of global factors 37 on a Vietnamese business organization Task 4.3 Evaluate the impacts of one of the policies 42 of the Asia on Vietnamese business organization III/ Conclusion 51 References 52 I/ Introduction Intimex Group According to Intimex (2016) Intimex Joint Stock Company or as known as Intimex Group was officially established in 2006 after being equitized from a state-owned company founded in 1995 - Ho Chi Minh Branch of Intimex Import - Export Company Since 2011, the company’s name changed to Intimex Group Joint Stock Company After 10 years, Intimex Group has developed significantly and become one of the most prestigious brands in Vietnam specializing in: agricultural products processing and exportation (green coffee beans, pepper, rice, cashew nuts, etc.); frozen food and steel importation and distribution; supermarket and trade center services; construction materials manufacturing Intimex Group also expanded our trading worldwide to most of the world’s big markets, including Europe, America, USA, Africa, Australia, Middle East, China, Japan, Korea, India, and ASEAN By analyzing and discussing about Intimex Group, this report is going to figure out how the business environment affects a company’s decisions of producing goods and pricing strategies II/ Content 3.1 Explain how market structures determine the pricing and output decision of businesses The market structures are the terms describe the producer behavior and supplier behavior The economists based on the level of competitive or the level of monopoly to separate the market into structures: Perfect competition, monopolistic competition, oligopoly and monopoly Each different structure will assesses the status of the target markets base on the different criteria, it could be about the number of supplier and consumer in the market, the hindering of entry or exit in the market, the direction of price decision to optimize profits, output decision, the power market, shot-run and longrun equilibrium Table 3.1 Characteristics of four types of market structures Number of Perfect Monopolistic Oligopoly Monopoly competition competition Many Many Few One Freely Easy Difficult Very difficult firms Barriers to entry or exit Price decision or impossible Not important Very important Lower normal Not important Same Sam and Same and No substitutes different different Yes High to maximize profit Product Market power None Absolute Price taker Short-run MR = MC MR = MC MR = MC MR = MC P = ATC P = ATC Nash Positive Profit = zero equilibrium equilibrium Long-run equilibrium (Sources: Author) Perfect competition Perfect competition is the term describe the market has many competitors, freely in entry or exit the market and not have the market power Because of many consumers and many suppliers and the indifferences between the goods offered, so consumers and suppliers are price taker – takes the prices as given The products in perfect competition also are the agriculture goods In the perfect competition has MR (Marginal revenue) = P (Price) = D (Demand) We can also base on the change of MR and MC (Marginal cost) to decide increase or reduce Q (Quantity) If MR > MC, we should increase Q to raise profit because each item can get more profit than the cost If MR < MC, we should reduce Q to raise profit because if we produce more goods it would be loss in MC of each one If MC = MR, the business shouldn’t change Q because the profit get maximize at this point If we change Q when MC = MR, it would be lower profit (Sources: Lecture) Another example: (Sources: Lecture) You can see at the chart above, when P1 move the P2 then the MR will change to MR2, and MC is also the same, Q1 will move to Q2 to get the MC = MR In business, some different stages company has to decide to shutdown or exit the market Shutdown is the short-run decision not to produce anything because of market conditions, but still pay for FC (Fixed cost) Exit is long-run decision to leave the market when business see that’s hard or impossible to get profit from this market in the period of time, and don’t have to pay any cost So when we should shutdown or exit the market? We have the cost of shutting down is revenue loss = TR, and benefit of shutting down is savings cost = VC (but still pay FC) So we should shutdown if TR < VC, then se divide both of them by Q: TR/Q < VC/Q The last result is P < AVC (Average variable cost) when we should shutdown When we should exit the market? We have the cost of exiting the market is revenue loss = TR, and benefit of exiting the market is cost savings = TC (includes the FC in long run) So If TR < VC, then we divide both sides by Q, we have P < ATC (Average total cost) is the time we should exit the market, and enter the market when P > ATC The short-run equilibrium of business in perfect competition is get the MR = MC to maximize the profits When the process of entry or exit is complete-remaining firms earn zero economic profit is the time we get the long-run equilibrium When P = ATC, business get zero economic profit The MC will intersects ATC at the minimum ATC So the longrun equilibrium in perfect competition is P = ATC Monopoly A monopoly is a company that is the sole seller of a target product without any substitutes A monopoly firm, has market power, is the price maker which can directly influence the price of product in the market In monopoly market, business very difficult or impossible to entry or exit because it’s have no substitutes There’s also the government business in monopoly like electricity And monopoly gets the maximize profits as the same of perfect competition: MR = MC Because of the price maker, monopolist can change the prices effectly to get the maximize profits When monopolist want to increasing Q has effects on revenue: Output effect (higher output raises on revenue) and price effect (lower price reduces revenue) For the practical examples in life, when you produce more goods to the market it become more easy to get one, so you have to reduce the prices of product to stimulate the demands of consumption MR could be negative if the price effect overwhelms the output effect Because of the pricing advantages, monopolist also set the highest price that consumers are willing to pay for the quantity they want to provide With the way the bridge slopes down, each level of the production associated with a single price, normally the monopolist always want to sell at high prices and large output However, because of the way the bridge slopes down, necessary home exclusively determine the price the higher the lower output and sales just want to sell more products, the price is low Monopolist cannot increases the price and does not reduce output Therefore, the shape of the road slopes down requirements limiting the power of the monopolies The monolist’s profit equal has been calculate by: ( P – ATC ) * Q Short-run equilibrium is to charges the same price (Pm) to all buyers (Sources: Lecture) Monopolistic competition Monopolistic competition is the market in which each business supply to the market a type of product, or a brand has the different in quality, packaging or reputation and each business exclusive with its brand In monopolistic competition, there are many sellers and buyers, and have many substitutes Power market has been limited, and no barriers to entry or exit the market The principal items in this market are daily products such as shampoo, toothpaste, student products, drug, films Every business has a little market powers, can control the price of their products, showing that the supply line down towards to the right The demand line in monopolistic competition has the different with the monopoly is the elasticity at the different point in demand line There are many small businesses in competitive markets monopolies and business products are products have the ability to replace highly, but not completely replace so the product demand line of the monopolistic competition more elastic to the monopoly, but is not completely elastic like perfect competition Because of the product differences, so there can’t be only one price for all the products It’s a group of price in monopolistic competition, but the distance of each price not really high The long-run equilibrium in monopolistic competition is get the point that P = ATC and profit = zero then business get the markup (Sources: Lecture) Oligopoly In Oligopoly, there are only a few seller offer similar or identical products, and difficult to entry or exit the oligopoly market because there’s not many substitutes The most important in oligopoly is the pricing strategy in which the business catches the pricing trend of another and set the strategy to get the best profit with any pricing decisions of competitors Nash equilibrium defines as a situation economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen For example to support the Nash equilibrium called the “fare wars” game We have players American Airlines and United Airlines, there is a choice to cut fares by 50% or leave fares alone There are case can happend If both airlines cut fares, each airline’s profit = $400 million If neither airline cuts fares, each airline’s profit = $600 million If only one airline cuts its fares, its profit = $800 million the other airline’s profits = $200 million Let’s see the Nash equilibrium in this situation (Sources: Lecture) In the case of American Airlines, we can see that it will get the best profit no matter what’s the competitor choosen is cut fares And it’s the same with United Airlines when they decides to cut fares So in this case, Nash equilibrium is both firm will cut fares Intimex is the ex-import raw agriculture goods corporation, so the market structure of Intimex is perfect competition Because of the freely to entry and exit market, so the market competitors changed rapidly, it can affect to the pricing and production of business Intimex should regularly updated the information about the entry and exit of the target product market and the demands of consumption to set the price and production decision effectively Otherwise, Intimex should consider the profitable of the target product then decides to keep producing or shutdown or exit the target product market Based on the MR and MC of the target market to set the right strategy, If MR > MC, then decides to increase the quantity production of target market to get more profit If MR < MC, then decides to reduces the quantity to minimize the loss of MC And set the reasonable strategy to get MR = MC to maximize the profit 10 world economy, which directly affects every countries business including Vietnam In other words, IMF is like a government of world economy and it works like a real government in controlling a nation’s economy Economic relations between nations The freely open market economy helps countries to cooperate and effectively invest in attractive business environment The economic relations between nations is important since companies can operate in many different locations and create jobs to more people Take Vietnam and America as an example Thanks to the good economic relation between nations, Intimex has an opportunity to exports goods like coffee, soy bean, rice,… to America It is the way to boost up Vietnam economy, since Vietnam is still a developing country and needs relations with other countries like America The number of countries that Intimex has been exporting goods to is an evidence of how economic relations between nations would affect a company business On the other hand, North Korea is a country with closed economy: self-produced and self-demand There is no economic relations between North Korea and other countries, which is a huge barrier to North Korea’s economy development Like this report had discussed, without international trade, a country can be left behind Global human resource-nature and quality of skills, mobility of labor In this current world situation, there is more and more high educated workers and skill workers required to be adapted with modern jobs Those workers who lack of skills and quality would not meet the requirements of companies The main duty of Intimex is to train employees skills to work more effective and productive Global technology and quality standards 40 Technology now takes a vital role in the entire world not only in people living but also in business High technology helps business to run smoother, more convenient and productive Consequently, the quality standards are pushed to a new stage due to the improvement of technology Intimex in this case should update the latest technology to effectively produce coffee to export plus maintaining the quality standards that satisfy customers Global demographic patterns (Source: Worldometers, 2016) As the image above shown, the current world population is estimated about more than billions of people Just in this year 2016, the births are more than 138 million while the deaths are only more than 58 million There were more than 80 million people were born in 2016, which will become a new generation of labor force in the next 20 years from 41 now on From this calculation, it can be said that the global demographic is young and potential in the near future Since there will be a huge labor force, the wage of employees may decreases, which directly affects the input costs of Intimex 4.3 Evaluate the impacts of one of the policies of the Asia on Vietnamese business organization WTO The World Trade Organization (WTO) was established on January 1995 and is based in Gevene, Switzerland The task of the WTO is monitoring of trade agreements between Member countries together under the trade rules The aim of the WTO is to help producers of goods and services, export, import of the products of business enterprises The WTO's agreement was signed by most of the world's trading Nations and create the legal basis for international trade This will bind the Governments to keep their trade policies within a limit already negotiating WTO will help global trade more freedom, convenience and transparency as well as limiting the negative impact of not wanting to trade development This organization inherit and develop the rules and enforcement practices of the General Agreement on tariffs and trade-GATT 1947 and is a direct result of the Uruguay Round of negotiations (covering areas of trade in goods, services, investment and intellectual property) As of 2014, the WTO had to 160 member countries and territories Vietnam joined the WTO on 11 December 2007 Organizational structure of the WTO 42 Organizational structure of the WTO include: Ministerial Conference: including Secretary of Commerce-economy representing all the Member States; Meeting biennially to decide the important issues of the WTO; General Council: composed of representatives of all the members; perform the functions of the ministerial meeting between the two States Conference of the Agency; The General Assembly also act as dispute resolution body (DSB) and the Agency reviewing the trade policies; The Council for trade in goods, trade in services, intellectual property issues related to trade; The Commission, the Working Group: Is the body established to support the activities of the General Assembly in each sector; all WTO members are able to send representatives to join the Agency; In addition, the Secretariat: the secretariat consists of the Director General of the WTO, 3rd Vice President and the Board, assisting with about 500 employees, working independently not depend on any Government 43 Agreements of WTO Most of the agreements within the framework of the WTO is a result of the 1986-1994 Uruguay Round of negotiations, signed at the Marrakesh Ministerial meeting in April 1994 First, the Marrakesh agreements included the agreement to establish the WTO and is platform agreement covering up other agreements Second, the multilateral agreements on trade in goods including the General Agreement on tariffs and Trade 1994 (GATT) and the 12 agreements covering areas such as agriculture, textiles, anti-dumping, customs valuation, down to check out the goods before delivery, anti-subsidy, medical, etc 12 agreements that include : Agreement on agriculture Agreement on The plant and animal quarantine measures Agreement on textiles Agreement on technical barriers to trade Agreement on investment measures related to trade (TRIMs) The anti-dumping agreement (enforcement of article VI of the GATT) The agreement determines the value of Customs (enforcement of article VII of the GATT 1994) Agreement on inspection of goods before shipment (PSI) Agreement on rules of origin 44 Agreement on import licensing procedures The agreement on subsidies and countervailing measures Agreement on safeguard measures Beside the multilateral agreements on trade as the General Agreement on trade in services (GATS) and the agreement on the trade-related aspects of intellectual property rights (TRIPS) Next is the regulation of the trade policy review mechanism (TPRM) and finally A discussion of the rules and procedures for settling disputes (DSU) In addition, many trade agreements the parties to negotiations about the Government spending and purchase of civil aircraft The agreements of the WTO are very long and complex because that is the stipulated legal text a lot of field operations However, there are some simple and basic principles guideline of all field, and became the Foundation of the multilateral trading system, that is: - Non-discriminatory trade (via the dark hue of the national principle and the principle of national treatment) - Trade more and more freedom (in the way of negotiations) - Predictable (predict) thanks to commitment, binding, stability and transparency - Created (to promote) the increasingly competitive environment of equality - Encouraging development and economic reform (by taking the more incentive for the least developed countries) WTO opens way for Vietnam business have access to the investment capital into Vietnam Science, engineering, technology and human resources have the opportunity to interact and participate in the global labour assignment On the other hand, the 45 challenges that enterprises face when Vietnam join the WTO also is not less The WTO is the playground for the global market business should be forced to comply with the rules of the game, in which the winner is the strong business and operate more effectively The Vietnam business whether small or large also have common concerns is the risk of overtake by the foreign business had operated under the market mechanism and has a background in finance Vietnam business because of weak world anyway than business skills in the global environment, is even weaker than on human resources, skills and access to information Joining the WTO is open market Not only the business of the import and export sector to bear the pressure of foreign goods for which domestic goods will also be subject to the competition not least of this If the work is not good preparation, does not exclude the possibility of some economic sectors will be abortive before the attack of the imported goods Because Intimex is an import and export corporation that should join the WTO brings many advantages as well as challenges The advantages that have been the main domestic market access to the global market on the basis of equal competition, not be barriers of tariffs and non-tariffs Besides, the enhanced business skills in the global environment, funding, human resources is also an advantage for Intimex However, besides these advantages, Intimex is also facing a lot of difficulties from the Member countries which export domestic market, the stiff competition between the items will take place continuously An advice for Intimex is this group really need to prepare thoroughly the long-term strategy and the right thing to be able to adapt and to stand firm in the global competitive environment TPP Agreement on trans-Pacific Partnership (TPP) has the full name is the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP) Originally consisting of: Brunei, Chile, Singapore and New Zealand are the party of economic partnership agreements on trans-Pacific, was signed in 2005, and in effect in 2006 The original TPSEP agreement 46 contains a clause to join and affirmed "the commitment of the members to encourage the accession to this agreement by the other economies" This is a comprehensive agreement affecting trade in goods, rules of origin, trade remedies, sanitary and quarantine, technical barriers to trade, trade in services, intellectual property, government procurement and competition policy Among other things, it called reduced 90% of all tariffs between Member countries as of 01-01-2006, and reducing trade tariffs to zero in 2015 Scale: 12 founding countries 2005: Brunei-Chile-New Zealand-Singapore 2008: Australia-USA-Peru-Vietnam 47 2010-2012: Malaysia-Mexico-Canada 2013: Japan There are five main characteristics did TPP becomes an important Treaty of the 21st century, setting the new standards for global trade, while continuing to address the issue of the new era These characteristics include: - Comprehensive market access TPP has removed or reduced tariffs and non-tariff barriers in a significant way for the sale of goods and services, covering a vast array of commercial, including merchandise, services, investment and to create new opportunities and benefits for business, workers, and consumers of the signatories - Approach the regional commitment TPP supports the development, production, supply chain and trade seamlessly, enhancing efficiency, create and support jobs, raise living standards, boost conservation efforts, support the cross-border integration, as well as opening up the domestic market - Solve the new commercial challenge TPP promote innovation, productivity, and competitiveness thanks to the review addressed new issues, including the development of the digital economy and the role of State enterprises in the global economy - Comprehensive trade TPP includes new elements aimed at ensuring the economic background in the different development levels and the different scale businesses can all benefit from the trade The agreement includes the commitment to help the small and medium enterprises understand the Convention, seize the opportunity, and forced the Government of the country to join TPP must pay attention to their specific challenges The agreement also includes specific commitments on development and trade capacitybuilding to ensure that all parties can comply with the commitment in the Treaty and take advantage of the benefits 48 Source: Author In addition to the WTO, the TPP is also an opportunity and favorable for Intimex Intimex is a corporation of the import-export trade agreements such as the TPP is an extremely important factor and the need for Intimex Intimex will be very beneficial for the import and export barriers for countries in the TPP The very large market such as Canada, United States of America, Japan, will be the goals that need to be oriented of Intimex when the difficulties will be reduced by TPP However, besides the challenges that Intimex faces the problem of food safety and hygiene, the quality of the goods, must be guaranteed TPP is also considered a chance after the WTO to Intimex and domestic enterprises to be integration with the world to improve skills, human resources and technical and scientific level Intimex need proper decisions, truly effective management and more to confront the challenges faced when joining the TPP America gets rid of TPP, Vietnam will be affected? 49 When Donald Trump elected at the end of the year 2016, he has made the move to change the old policy that Barack Obama has created and among them Trans-Pacific Partnership (TPP) This really is not a good news for only Vietnam but also in other member countries We can say at present if America withdrew from the TPP, the TPP as clinically dead but the flow of free trade does not therefore stop In trade relations with the United States, Vietnam is just not open more markets In relations with other countries, Vietnam has signed a series of free trade agreements (FTA) and new generation are continuing to negotiate other agreements The Americans get rid of current TPP arises out of two-sided benefit and harm First, in terms of benefits, TPP stopped helping our have more time to prepare TPP is only part of the strategy of international integration Through the negotiations, we see clearly the weaknesses you need reform, better than in the road ahead One very important thing again is the TPP has finished the negotiation itself has shaped the new standards of international trade Is a member of the TPP, Vietnam better understand the opportunities and challenges faced In terms of damages, Vietnam has invested a lot of time, effort and manpower to join TPP and what TPP brought has not been as expected Original is 24 months after the end of negotiations, countries reviewing legal, proceed to the ratification procedure, to 2018, the TPP come into implementation Several provincial ministries, when building the plan for socio-economic development are to the effect that TPP Many businesses, investors have been planned, even investing in Vietnam to catch the wave of new trade in 2018 All are recalculated, to adjust, from macro level to the micro-enterprises Although the influence from the United States of America left the TPP is not small, but that doesn't make Vietnam and domestic enterprises to stop the integration with international As a import and export business in the country, Intimex also understood what the TPP influence However, Intimex still has his own strategies and still grow despite no TPP Intimex see TPP is an opportunity, a challenge, if TPP is not there then Vietnam agreement other trade Intimex will always improve their capacity and further integration with the world 50 III/ Conclusion In conclusion, Intimex Group does hold an actual advantage position in the industry in Vietnam’s economy To be more successful in its business, which is mainly about import and export, Intimex should maintain its high quality products with reasonable prices that could meet many countries demands Intimex Group also should carefully R&D based on both world economy and Vietnam economy, since they are changing fast and somehow unpredictable By understanding all of the factors provided in this report, the company would have ability to rise up more than itself at this current time 51 References Kotler, P and Armstrong, G (2016) Principle of Marketing Global Edition 16th edn Harlow: Pearson Education Limited Focus Economics (2016) Vietnam economic data Available at: http://www.focuseconomics.com/countries/vietnam (Accessed: 28 November 2016) Indexmundi (2016) Vietnam age structure http://www.indexmundi.com/vietnam/age_structure.html Available (Accessed: 28 at: November 2016) Vietnam Customs (2016) Statistics Available at: http://www.customs.gov.vn/Lists/ThongKeHaiQuan/SoLieuThongKe.aspx?&Group=S %E1%BB%91%20li%E1%BB%87u%20th%E1%BB%91ng%20k%C3%AA (Accessed: 18 December 2016) Pricing and output decisions: Perfect competition and monopoly Available at: 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http://data.worldbank.org/topic/economy-and-growth (Accessed: 19 December 2016) World Bank (2016) World GDP Available at: http://data.worldbank.org/indicator/NY.GDP.PCAP.CD (Accessed: 19 December 2016) IMF (2016) How the IMF Promotes Global Economic Stability Available at: http://www.imf.org/en/About/Factsheets/Sheets/2016/07/27/15/22/How-the-IMFPromotes-Global-Economic-Stability (Accessed: 18 December 2016) Worldometers (2016) Current Wolrd Population Available http://www.worldometers.info/world-population/ (Accessed: 20 December 2016) 53 at: Group 2: Huynh Trang My Huyen Nguyen Huu Phong Phan Nguyen Quoc Bao Vong Sin Phong Duong Thua Phat 54 ... pyramid 22 Indexmundi, 20 16 In the report of Indexmundi (20 16) the age structure of Vietnam can be divided in details like below: 0-14 years: 23 .84% 15 -24 years: 16.69% 25 -54 years: 45 .22 % 55-64... fiscal policy The macro environment is closely linked to the general business cycle as opposed to the performance of an individual business sector In business, macro environment is divided into... Armstrong, 20 16) 20 Macro environment A macro environment is the condition that exists in the economy as a whole, rather than in a particular sector or region In general, the macro environment