Hnd Judge How the Business and Cultural Environments

HND Business Birmingham Metropolitan College Mathew Boulton Campus Riddle of the day A woman shoots her husband. Then she holds him under water for e really menage 5 minutes. Finally, she hangs him. lots(prenominal)over 5 minutes subsequently they both go bulge unneurotic and enjoy a wonderful dinner together. How shag this be? 3. 3 judge how the business and cultural environments shape the behaviour of a selected organic law This builds to answer Judge how Lloyds TSB has been behaviour has been affected by political, economic, social, technical, statutory, and environmental pressures.Industrial intentness Over the depart 100 years the sizing of fasts has generally been increasing. 50 years ago in the UK most shops were surreptitiously professed and supplied the local anesthetic ara, however over time larger shops slang become more than and more important. Tesco for instance is a huge employer in the UK and now serves millions of customers with an estimated wizard in e genuinely seven pounds spent on retail being spent in Tesco, it has now extended strong beyond the UK and is ope treasure in m all different companies.In 2002 Walmart was the biggest earning slopped in the world, with an annual receipts of $219 cardinal. This was a higher figure than the GDP of many a(prenominal) countries. As a general rule different industries argon dominated by a blueer crook or larger firms. This trend is referred to as industrial concentration. How has industrial concentration been handd? It has happened in a number of different ways, in the first place many of the firms live naturally gained in size, e. g. opened more and more stores, or built big and bigger accompanimentories. thus far it has in addition been achieved through coalitions, where firms coalesce themselves together And By takeover where one firm leave behind de origination away a nonher firm Why levy in size? One of the major(ip) reasons or advantages of growing in si ze is to achieve economies of denture. Merger as a method of maturation Mergers turn firms a great advantage because over night they lot grow substantially, they can become more position up, gain great economies of scale and have greater diversity. lineament study Barclays In 2003 Barclays blaspheme was looking for a major European Bank to merge with.It started looking at mergers for three main reasons Barclays had previously been a designate 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 rag to European trades, far more easily than setting up its own branches abroad. Merging gave Barclays overnight addition to a large customer base that was already formal, additionally it gave Barclays technical experience of Europe.What economies of scale do you cipher Barclays gained from expanding abroad? . Vertical mergers Vertical mergers atomic number 18 mergers of firms in the selfsame(prenominal) train of conductoff, for example a beer stagr merging with a farmer (producing the cranky ingredients hops) or a brewer merging with a pub. twain of these are examples of upended mergers because they are in the same chain of production e. g. eer The brewer merging with the farmer would be a vertical backwards 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 in advance 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 might include Economies of scale battend supply Not proviso competitors with reveal knowledge (might mean not supplying any competitors) Motives for vertically forward mergersMost manufacturers never mete start directly to the public, t hey depose on retailers to do it for them, by merging with a retailer pauperization for your product is guaranteed. You can stop your competitors products being stocked (or controlling them, e. g. charging a higher hurt for them Key factors in a merger Both firms must feel they are gaining from it, they must both feel they are gaining more control Horizontal mergers A horizontal is where firms at the same stage of production merge. These firms normally produce the same goods and are usually at least to some extent in direct aspiration with each(prenominal) other(a).Motives for horizontal mergers Greater efficiency, for example getting rid of duplicated guidance roles Greater use of staff, under-utilised staff might be used at another(prenominal)(prenominal) plant or location Greater control of the securities industry Greater feature buying power, therefore gain economies through pile buying. Job saving, redundancies almost forever follow mergers, and this creates cost sav ings for the vernal organisation Eliminate competition what better way to eliminate a competitor than to merge with them, this jockstraps reduce atomic pile competition and mean price competition is reduced. We have seen how disposals whitethorn oppose this) Increase securities industry share, you pass on gain untried customers, possibly in locations where you didnt have any before Examples of horizontal mergers P & O and Stena Line merged in November 1997 saving 1000 out of a combined workforce of 5000 commercial message Union and General Accident merged, the merger caused nearly 3000 redundancies squint mergers Lateral mergers are where two firms that are at the same stage of production, exactly where the products do not directly compete. For example a brewery with a loco drinks manufacturer. The products are likely to be sold in the same places, e. . shops, restaurants, pubs etc, except they do not compete directly against each other. They do not lure each other cu stomers away. So a pension alliance (Scottish Widows) merged with Lloyds TSB, they didnt compete directly against each other, hardly they were in a related market. Reasons for lateral mergers Economies of scale can be gained, scarce one of the major reasons give be to have a wider get of customers in more diverse markets. Both firms get out have access to customers they didnt have before. The new firm only 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 no liaison in common, for example a brewery and a washing instrument manufacturer. The two have nothing in common Reasons for conglomerate mergers whatsoever economies of scale can be gained, but mostly it is bump intention that is the major drive, both firms are more likely to be secure in the new ca-ca where they have a combined much wider range of products over possibly a much wider area Case study The merger of Carlton and GranadaIn 2003, Carlton and Granada TV companies announced their intention to merge and form a firm cost about ? 4. 1 one thousand thousand. It was estimated that the new companionship would control about 50% of the television advertising market. Advertisers and media agencies both explicit their fears over the potential creation of a single airtime sales theater of operations if the two existent houses owned by the two companies combined. The Competition perpetration decided that an investigation was in redact, and they produced a 456 page report into the proposed merger. What are the services for the two companies in merging? .. Why was the Competition Commission so concerned over the merger? ..Multinational corporations Perhaps an inevit competent consequence of industrial concentration was the multinational corporation. These are firms that have extended beyo nd their immanent counties and have become global organisations, that in many cases are worth many cardinals. Why have they grown? Beyond economies of scale there are other advantages, a firm might be nigher its customers, be able to modify its product and not have to pay import duty. Other advantages can include lower crowd be in other countries Lower production costsBeing closer to raw materials (therefore dishonor costs are reduced) Growth of multinationals at that place has been a rapid profit in multinationals from 7000 in 1970 to 40,000 in 1995. More than half of multinationals come from five dollar bill counties United States, Japan, Germany, France and the Netherlands By press release global many of these firms have been able to expand hugely, some are economically more large t because teentsy countries. Exxon for instance has comparable economic size to Chile BP which is the UKs largest multinational is pose 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 sciences cod to their size Some have been accuse of exploiting cheap labour They control many of the planets resources, e. g. vaunt and oil is largely controlled by a number of multinationals. backing growth Not only can firms gain money to grow from the traditional routes of borrowing money from beachs, they can similarly gain revenue from rights issues and venture chapiter. Rights issuesIf a firm is expanding it may well look to its existing shareholders to help finance that growth Rights issues allow shareholders to buy new shares in the fraternity in proportion to what they already own, usually at a better price. So if a firm was planning to expand shareholders will be contacted and asked to see if they want new shares in this new venture, shareholders will be avered preferential rates (it is usually seen as a advantage for shareholde rs) The firm gains extra revenue, but with a huge advantage that it doesnt need to pay the money back (like a bank loanword) If a shareholder wants to get their money back they will sell the shares.Both firm and shareholder can see it as a good option, hence forth it is a popular way to raise revenue. Venture large(p) Venture capital firms, or individuals 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 grade of control in the business. This is not always a bad thing for the business, where the new company can gain valuable management help from the venture capital firm.Venture capital enthronization can happen at a number of different stages Seed investment providing at the very earliest stage, possibly before a product has been fully effected Early stage investment helping a firm in its opening stages, which can quite often be a difficult time for a business Expansion and later stage backing helping a more mature company to expand turnaround financing helping failing firms to regain themselves Joint ventures Joint ventures are very equal to mergers, this will be where two firms form a separate member 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 country. By using a joint venture a company might gain all the experience of another firm, adding to its own advantages. However no upheaval or loss 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 alter values carried out at the organisation. The firm gains by using outsourcing by Saving money that it doesnt have to leave out on rearing staff The re are no recruitment costsThere are no issues with redundancies or sacking of staff because they are employed 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 worry about showing staff absences, the firm doing the contracted outsource work will have to worry about it instead. It can offer a quick and cheaper preference (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 innovationResearch and discipline is very expensive and doesnt always work. However if it does work it can offer the firm huge advantages oblation a new product or service that wasnt functional before. Because of copyright, many of these products will remain exclusive to the firm. Research and development is in effect another rescue of scale, because usually only the large firms can relent i t, and can afford it when it goes wrong. It is usually just major corporations that carry out question and development. Top 11 research and development companies 2002 1 crossover 2 General motors Siemens 4 Daimler Chrysler 5 Pfizer 6 IBM 7 Ericsson 8 Motorola 9 Matsushita Electric 10 Cisco 11 GlaxSmithKline sounding at the preceding(prenominal) 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 suitable workers from a wider pool. The bigger the choice the easier it is for them to get the right member of staff, and significantly without increasing wages. As the pool of workers reduces down so it is harder to get the right worker.On a similar basis the skills of the workforce are also very importan t, many positions in firms may require significant training. Proportion of managers with qualifications 2003 All Men Women arcdegree or equivalent 48% 55% 39% Higher bringing up 38% 44% 33% A level equivalent 23% 25% 18% GCSE or equivalent A C 17% 22% 13% Looking at the above figures what doe it draw out is the trend between managerial position and qualification Generally the UK government realises the need of UK business for a more versatile workforce. This was behind the labour parties policy of encouraging higher education amongst the population and encouraging new apprenticeships. However this has s gutter not been enough. Many firms have looked outside of the UK for skilled workers at a lower cost. Additionally with the growth of communications engineering science it is easier for firms to employ members of staff in other countries. PEST of Lloyds TSB Lloyds Banking Group plc is a financial services group establish in UK.It was initially know as Lloyds TSB Group plc a nd covers 40 countries in the world. However, its primary market is UK and it operates in three verticals namely, retail banking, wholesale and international banking and insurance and investments. The Lloyds Banking Group plc acquired the Halifax Bank of Scotland plc or the HBOS on January 16th this year (Company Profile par. 1) The subprime crisis which started in the US had its effect on those countries whose financial companies were participating in the US found risky financial instruments.UK was one of those countries and approximately around November 2007 the banking sector axiom the unfurling of a major crisis (Caine). $323 billion was the amount of total assets write-down and assurance 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 sequence RBS or over-embellished bank of Scotland lost $15. 2 billion (Onaran). Due to the subprime and attribute crisis towards the end of 2008 UK went into recessio n and since then the crisis has deepened. This is evident from the fact that the UGK GDP has declined further by 1. % in the period between January- present 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 estimation 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 meagerly better condition. Yet public finances will be in a very bad condition in comparison to its EU member states. Also, the countrys government deficit is predicted to be amongst the bruise in EU for the next year (Giles, par. , 2, 10). Macro economic forecasts by different agencies have also predicted a depressing picture for the economy in the near future. GDP growth is predicted to be less than 0. 5% in 2010 while the Retail Price Index largeness is going to be betwee n 2% to 2. 5%. Consumer Price Index inflation on the other hand is predicted to be at 1. 5%. on-line(prenominal) account for 2010 would be at least -? 26 billion by April (Forecasts for the UK economy 12-13). http//mb atermpapers. om/an-analysis-of-lloyds-tsbs-current-strategic-position-part-i/ PESTEL Analysis of the Banking Crisis and Royal Bank of Scotland POLITICAL There are many entities comprising RBSs political arena, including but not hold to The Bank of England (BOE), BOEs Monetary Policy mission, Chancellor of the Exchequer, financial go Authority (FSA), HM Treasury, HM Treasurys UK Debt Management Office, UK fiscal function and markets Tribunal (which provides judicial review of the FSA), and Treasury bring Committee (which reviews HM Treasurys activities).Each entity influences RBSs mightiness to compete in a highly regulated sector. Each entitys influence originates from their ability to sway and/or enact legislative acts which envelope RBSs investment activit ies, reporting procedures, costs of capital, international participation and horizontal and/or vertical integration. The overall political mood of these government entities during the current banking crisis inculcates numerous feelings and perspectives, including but not limited to such attitudes as i). angst about available assent 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 recognize industrial sectors. Immersed in such a political atmosphere, RBSs expectations include augmented in public scrutiny regarding loan portfolios and bring activities, even greater banking regulation, growingd political activities such as inspection parameters and enhanced reporting requirements. RBSs political arena is seek to recompense constituents for the governments inability to stave off irritability despite huge expenditures of taxpayer dollars.R BS will identify trend lines in each governmental entity in order to position each entity into a governmental landscape attempting to redefine itself as a public body assailable of ascertaining significant risks to the economy. By analyzing the decisions of entities like the BOE, FSA, UK Financial functions and Markets Tribunal, and Treasury Select Committee RSB may fully assess the countrys political framework, 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 insane asylum 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 bureau in depositors, borrowers and other clients of RBS and other financial institutions. Under these programs the government will possess the capacity to set RBSs dividend policies and bo nus schemes. It will also require RBS to support lending to footling 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 world(a) Banking divisions in an atmosphere inundated with public and private institutions who failed to ascertain an completed picture of the credit markets and banking industry may be expected to benefit from funds made available from HM Treasurys programs.Regarding the FSA, it has been perceived by some to be relatively weak and ineffective. FSA behavior is often criticized as being reactive rather than proactive. Some banking experts assert the FSA has allowed despotic banking and the FSAs ineptitude may have precipit ated the credit crunch. Indeed, the public erudition 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 novel activity is that in September 2008, the FSA announced a ban on short sell to reduce volatility in difficult markets, including financial institutions. Another recent activity is the FSAs Consultation paper entitled Financial Services Compensation Scheme reform. Published in January 2009, the paper recommends that a potential seven-day time limit, after the transgress 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 FSCS. ECONOMIC The economic state of the nation will propel RBS towards activities based on reduced GNP growth, reduced beseech for credit, decreases in consumer confidence and lessenings in revenue sourced from have-to doe with rate spreads. However, clients in RBSs wealthiness Management division may realize long term gains if the market is currently near the bottom and grows in the future.With historical lows in interest rates and a monetary policy flooding the banking sector, RBS may trespass 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 averse and may avoid the tried and true real ground 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 estate climate.RBSs may be expected formulate strategic merger opportunities, gravitate towards a greater risk averse position, raise capital through selling assets and increas e 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 eternal sleep sheet with cash holdings3. RBS is also hover to cut around 3,000 jobs from its planetary 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 reduction payrolls in order to streamline operations and enhance profitability. However, the economys overall increases in unemployment may press forward 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, admit prices experienced a plunge of approximately 16 per cent last year, the biggest annual drop on record and RBS is poised for another churned-up year in real estate inve stment 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 career 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 alleviated by RBSs Wealth Management division and subsequent campaigns tensione investments in staple sectors, emerging markets and firms experience above average growth.TECHNOLOGICAL The aforementioned FSAs Consultation paper entitled Fin ancial 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 list of all customers deposits inwardly 48 hours of the institution failing. This may support the FSCSs ability to correspond 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 selective information mining, neural networks, risk analysis and algorithms scanning financial criteria may offer RBS the tools necessary to optimize networks, maximize knowledge procurement and minimize entropy absence such that assets, liabilities, expenses and revenue streams are analyzed, assessed and reported upon in order to alert management on significant changes and/or potential problems. LEGALRBS confronts numerous legal issues , including but not limited to securities law, bank note regulation, musical interval of lawful matters centered on England and Scotland, country specific regulatory committees and a trade structures negotiated separate from England. RBS is poised to capitalize on the Scottish study 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 volatilizable and improved transparency framework.By immersing itself in the legal framework of both regions, RBS may reap insight into the legislation the behind domestic 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 funding oil and gas extraction in politically and environmentally sensitive regions and f urther entrenching colony 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 move 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 picture (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 tone force becomes a viable source for transit and electricity, RBS may identify and locate potential businesses (whether small businesses or conglomerates) that offer above average yi elds. 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 several forces operating in the banking sector. A few of these are related to the current crisis and others are unalterable 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 shift in risk adversity iii). a nationalization of private sectors iv). uncertain alterations of capital standards v). ossible shifts in portfolio risks vi). homeowner and depositor protection and vii). possible prioritization of small and medium 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 info 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 accelerate its position in its life cycle due to the current economic crisis i. e. necessity is the render of invent ion and the banking sector may invent methods to draw 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