Business Environment

Qualification: Pearson BTEC Level 5 HND Diploma Business (Management) Unit Number and Title
Unit 4: Business Environment
Assessment Deadline:
1st Formative submission date: 07/10/2015 Task 1A and 2
2nd Formative submission date: 14/10/2015 Task 3
3rdFormative submission date: 07/11/2015 Task 1B,1C 1D, 1E, 1F, 1G, 1H
Final submission date:
Lecturer/Assessor:
John Opoku
Date issued:18/09/2015
Module Leader: John Opoku

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LEARNING OUTCOMES AND EVALUATION SHEET
(NOTE: These are not the Task to be tackled)
Outcomes Assessment requirements
LO1 Understand the
organisational purposes of
businesses 1.1 identify the purposes of different types of organisation
1.2 describe the extent to which an organisation meets the objectives of different stakeholders
1.3 explain the responsibilities of an organisation and strategies employed to meet them

LO2 Understand the nature of the
national environment in
which businesses operate
2.1 explain how economic systems attempt to allocate resources effectively
2.2 assess the impact of fiscal and monetary policy on business organisations and their activities
2.3 evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organisation

LO3 Understand the behaviour of
organisations in their market
environment 3.1 explain how market structures determine the pricing and output decisions of businesses
3.2 illustrate the way in which market forces shape organisational responses using a range of examples
3.3 judge how the business and cultural environments shape the behaviour of a selected organisation

LO4 Be able to assess the
significance of the global factors that shape national business activities 4.1 discuss the significance of international trade to

UK business organisations
4.2 analyse the impact of global factors on UK business organisations
4.3 evaluate the impact of policies of the European Union on UK business organisations.
PASS Demonstrated understanding & ability to address the issues in the task. Have read the case study and have, gathered further

information and ideas on GlaxoSmithKline (GS) and AstraZeneca (AZ)to addressing the issues in the task.
All Assessment criteria LO1 to LO4 are achieved.
Merit descriptors Indicative characteristics Contextualised Indicative characteristics
M1 Identify and apply strategies to find appropriate solutions an effective approach to study and research has been applied

Has demonstrated the ability to analyze the issues using more than one variables. For instance, using more external environmental

factors to analyze the case effectively.
M2 Select/design and apply appropriate methods/ techniques a range of sources of information has been used Has

applied relevant theories and techniques in solving the problems effectively, Thus, theories concerning demand and supply, market

structures and economic systems must be applied effectively.

M3 Present and communicate appropriate findings
the appropriate structure and approach has been used Has adopted an appropriate structure and approach and have presented logical

and coherent argument.
Applied Harvard referencing
Distinction Descriptors Indicative characteristics Contextualized Indicative characteristics
D1 Use critical reflection to evaluate own work and justify valid conclusions
conclusions have been arrived at through synthesis of ideas and have been justified Has arrived at conclusion through the

compilation of ideas into one coherent whole, which combines the diverse views and organizes them to show the relationship and

differences and has justified it.

D2 Take responsibility for managing and organising activities autonomy/independence has been demonstrated

Work is well organised and managed. Arguments are logical and coherent.
D3 Demonstrate convergent/ lateral/creative thinking
effective thinking has taken place in unfamiliar contexts
Has demonstrated innovative and creative thinking. Has conducted extensive research on GS & AZ and other tasks and has analyzed

it critically, logically and coherently.
Has applied Harvard referencing effectively.

Assignment title Business Environment
Purpose of Assignment: Nowadays organisations are facing intense competition and therefore, there is a need to understand the internal

and external environment in which they operate so that the can have better strategies to compete.
Scenario:

Case Study
The Business Environment of the Pharmaceutical Companies;GlaxoSmithKline (GS) and AstraZeneca (AZ)
The origins of the modern pharmaceutical industry can be traced to the late 19th century, when dyestuffs were found to have antiseptic

properties. Penicillin was major discovery and during the 40s and 50s R and D became firmly established within the sector. The

industry expanded rapidly in the 1960s benefiting from new discoveries with permanent patent protection. Regulatory controls were

light and health care spending boomed as economies prospered.
Industry revolution
Of late, the industry is characterised by a highly risky and lengthy research and development (R&D) process, and intense competition

for intellectual property, stringent government regulation and powerful purchaser pressures.
Decision making is currently in the hands of medical practitioners, whereas patients (the final consumers) and payers, governments and

insurance companies have little knowledge or influence. As a result, medical practitioners are insensitive to price but susceptible to

the efforts of sales practitioners.
Two important developments brought a major change to the industry. First, the thalidomide tragedy (where an anti-emetic given for

morning sickness caused birth defects) led to much tighter regulatory controls on clinical trials. Second, legislation was enacted to

set a fixed period on patent protection- typically 20 years for initial filing. This led to the appearance of generic medicines, which

has exactly the same active ingredients as the original brand, and compete on price.
The dramatic impact of generic entry is illustrated by Allegra, a treatment for a hay fever, which lost 84% of US sales in just 12

weeks following patent expiry in 2006. Generics had a major impact on the industry providing incentives for innovation and a race to

market, since the time during which R&D cost could be recouped.
Government price controls create another challenge for the industry in the form of ‘the principles of parallel trade’. The principles

of free movement of goods across the single European market means that distributors are free to source drugs in low price markets and

ship them to high price markets, pocketing the difference. Parallel trade is common in Asia and there is a latent problem in the

crucial US market due to price differentials with Canada. Canada has a stringent and inflexible pricing and reimbursement criteria. In

contrast the US has no formal price controls and price increases are customary.
In the late 2006, industry commentator IMS Health released its latest forecast, predicting pharmaceutical market growth at a 10 year

low. IMS suggested that the industry was facing a new economic reality, one in which growth is shifting from mature markets to emerging

ones; new product adoption is not keeping pace with the loss of patent protection. Speciality and niche products are playing a larger

role and regulators, payers and consumers are more carefully weighing the risk/benefit factors of pharmaceuticals.
Industry Players
Thus, there are five broad types of industry players: Ethical, generic, biotech, Over the counter (OTC) and vaccine companies. Each

requires very different strategic capability. Producers of branded prescription drugs require strong R&D, global sales and marketing

infrastructure. Generic companies focus on speed to market and manufacturing cost leaderships. Biotech’s need to create and requires

intellectual property in specialised research fields, attract funding and make successful deals.
Branded OTC drugs demand direct to consumer marketing capabilities. Because of the different skills and cost structures involved,

Multinationals which owned generics, OTC vaccine businesses usually operate them separately, even using another company name.

Similarly, those that have acquired bio techs often leave them to operate fairly autonomously.
Key Markets
The majority of the global pharmaceutical sales originate in the USA, Japan, the EU, China and Mexico with 10 key countries

contributing over 80% of the global market.
The pharmaceutical market growth is aligned with GDP growth. The USA is the largest market accounting for two-thirds of the sales of

drugs launched since 2001 compared with just a quarter from the EU.
Recession and impacts
The industry experienced significant turbulence in in the 1990s and 2009.
Economic recession caused tax revenue to fall, while cost of treating the world’s most rapidly ageing population rose. This resulted in

unprecedented price cuts, changes to health care funding and the introduction to stringent price controls limiting market growth to an

average below 3% during these periods mentioned above.
Industry consolidation
While the pharmaceutical market remained relatively fragmented, with very large numbers of domestic and regional players, it was

consolidating at the global level. (This means while operating on their own locally, they merged with other companies abroad). The

leading global corporation Pfizer, held 8.4% of market share in 2005 while the top 10 players accounted for nearly half of the global

sales.
The exhibit below shows how the industry response to the need for critical mass was a wave of mergers and acquisitions.
Mergers resulted in the formation of Novartis, Sanofi Aventis, AstraZeneca, GlaxoSmithKline while Pfizer acquired Mozanto (Warner

Lambert) and then Pharmacia. Pfizer overtook Merck, which followed organic growth strategy.
A key reason for the mergers and acquisitions was to combine a company with strong pipeline but weak sales and marketing with its

converse. For example, the acquisition of warner Lambert gave Pfizer full marketing rights to the cholesterol lowering agent, which

Pfizer built into the world’s bestselling drug with sales of 12bn in 2005. Another argument for increasing size was to leverage

investment in ‘technology platforms’.
Companies had to invest in expensive new R &D capabilities to keep pace with industry leaders in speed to market.
Below are the Leading global pharmaceutical companies:
Sales 2013 Billions
Pfizer (USA)
$52.67bn
GlaxoSmithKline (UK) $41.43
Merck (USA)
$44.09bn
AstraZeneca (UK Sweden) $25.69bn
Novartis (Switzerland) $57.9bn
http://www.pharmaceutical-technology.com
Globalisation or US dominance
A number of factors have contributed towards the industry globalisation.
Chief is the international convergence of medical science and practice under the influence of modern communication technology and

increased travel and information exchange. The harmonisation of the regulatory process internationally. In Europe the European

medicines Evaluations agency was established to enable more rapid regulatory approvals through the centralised procedure, which grants

approval in all member states simultaneously.
This offers great benefits in terms of reduced costs, accelerated time to market, but also increased risk as more is at stake on one

decision.
There is also a move towards global regulatory harmonisation through the international conference harmonisation.

References:
Johnson, G., Scholes, K., and Whittington, R. (2010), Exploring Corporate Strategy, Pearson Education
http://www.pharmaceutical-technology.com
http://www.abpi.org.uk/industry-info/knowledge-hub/global-industry/
http://www.bbc.co.uk/news/business
www.abpi.org.uk/
http://www.bbc.co.uk/news/business
Solve the following issues/problems using the information provided on GlaxoSmithKline (UK) and Astra Zeneca (UK) economy above.
NB. Some of the Task requires you to conduct your own research.
Task One
(These tasks relate toGlaxoSmithKline (GS) and Astra Zeneca (AZ)
(1A)
(AC 1.1). Identify the purposes of GlaxoSmithKline(GS) theNational health service of UK(NHS), the Red cross and any cooperative

society in UK that you are familiar with.
(AC1.2)Describe the extent to which GS meets the objectives of its key stakeholders.
(AC1.3) Explain the responsibilities GS has towards its key stakeholders and the strategies employed to meet them (Your answers should

include at least one of each of the contractual, legal, and socialresponsibilities)
(1B)
(AC 2.2) Taking into consideration the recessionthat faced UKin 2009.Assess the impact of the UK government’s fiscal and monetary

policies on the activities of GS andAZ.

(1C)
(AC 2.3).With reference to the Enterprise Act 2002 and article 101 and 102 of the EU legislation, evaluate how the UK/EU competition

and regulatory policies can or have impacted on the activities of the GS.
(1D)
(AC 3.2).Using a range of examples, illustrate how the forces of demand and supply affects the pricing and sales decisions of GS.
(1E)
(AC 3.3).(a) With the aid of the management tool called PEST/PESTEL judge how the business environment impacts /affect the behavior of

GS
(AC 3.3) (b)Judge how the cultural environment determines the behavior of GS
(1F)
(AC 4.1)Discuss the significance of international trade to GS and AZ.
(1G)
(AC 4.2.)GS and AZare multinational companies operating in many parts of the world. Analyze how global factors can affect their

activities(You may use the management tool called PEST/PESTEL to help you answer this question)
(1H)
(AC 4.3)Evaluate how the policies of the European Union, including the ones mentioned below, can or have impacted on the activities of

GS and AZ.
• The reductions in the obstacles of cross border trade and agreement:-
Closer approximation of excise duties and other fiscal barriers e.g. Vat.
The removal of legal obstacles to trade (discrimination and purchasing policies)
• The harmonization or approximation of technical and safety standards on large number of products.

Task Two (General Does not relate to GS and AZ)
Explain the three economic systems (Free market, command and mixed) and discuss why you think one of them allocates resources more

effectively than the others (AC 2.1)
Task Three (General- Does not relate to GS and AZ)
Explain how prices and output decisions are determined in a perfect competitive market, Monopoly, monopolistic competition and

Oligopoly.
(AC 3.1)

To achieve M1 you would have to demonstrate the ability to analyses the issues using more than one variable where necessary.
To achieve M2 you would have toapply relevant theories and techniques in solving the problems effectively, Thus, theories concerning

demand and supply, market structures and economic systems must be applied effectively.
To achieve M3 you would have to use an appropriate structure, present a logical and coherent argument and apply Harvard referencing

where necessary.
To achieve D1 you would have to arrive at conclusion through the compilation of ideas into one coherent whole, which combines the

diverse views and organizes them to show the relationship and differences and has justified it.
To achieve D2 your work would have to be well organised and managed. Arguments must be logical and coherent.
To achieve D3 you would have to demonstrate innovative and creative thinking and would have conducted extensive research on GS & AZ and

other tasks and has analyzed it critically, logically, coherently and have applied Harvard referencing effectively.
Evidence checklist

Summary of evidence required by student
Task 1 Identification of the purpose and objectives of GS &NHS. Explanation of the responsibilities of A and strategies employed to

achieve them; description of the extent to which they meet these responsibilities. Impact of fiscal and monetary policies on the

activities of GS&NHS; Evaluation of how competition and regulatory policies can or have impacted on the activities of GS; Illustrations

of how the forces of demand and supply affects the pricing decisions of GS; Judge how the business & cultural environment impacts on

the activities of GS; Discuss the significance of international trade to GS& AZ; Analyse how global factors can affect GS. Evaluate how

the policies of EU can or impact on the activities of GS.

Task 2
Explain the three main economic systems and discuss why one allocates resources more effectively than the other.
Task 3 Explain how prices and output decisions are determined in the Perfect competitive market, Monopoly, Oligopoly and monopolistic

competition

Additional
Information Introduction, in-text referencing, Harvard referencing
Achievement Summary
Qualification Pearson BTEC Level 5 HND Diploma in Business
Assessor name

Unit Number and title Business Environment
Student name

Criteria Reference To achieve the criteria the evidence must show that the student is able to: Achieved?
(tick)
LO 1

1.1 Identify and compare the purposes of GS with either the NHS

1.2
Explain the responsibilities GS has towards its key stakeholders and the strategies employed to meet them
1.3 Describe the extent to which Virgin meets the objectives of its key stakeholders.

LO 2
2.1
Explain the three economic systems (Free market, command and mixed) and discuss why you think one of them allocates resources

more effectively than the others.
2.2
Assess the impact of fiscal and monetary policies on the activities of GS and the AZ
2.3
Evaluate how the UK/EU competition and regulatory policies can or have impacted on the activities of the GS.
LO 3
3.1 Explain how prices and output decisions are determined in the Perfect competitive market, Monopoly, Oligopoly and monopolistic

competition
3.2 Illustrate how the forces of demand and supply affects the pricing and sales decisions of GS.

3.3 Judge how the business/cultural environment impacts /affect the behavior of GS

LO 4
4.1 Discuss the significance of international trade to GS and AZ.

4.2
Analyze how global factors can affect the activitiesGS & AZ

4.3
Evaluate how the policies of the European Union mentioned below can or have impacted on the activities of GS and AZ.

Higher Grade achievements (where applicable)
Grade descriptor

Achieved?
(tick)
Grade descriptor
Achieved?
(tick)

M1:
Has demonstrated the ability to analyze the issues using more than one variables. For instance, using more external environmental

factors to analyze the case effectively .
Has demonstrated the ability to analyze the issues using more than one variables. For instance, using more external environmental

factors to analyze the case effectively.

M2:
Has applied relevant theories and techniques in solving the problems effectively, Thus, theories concerning demand and supply, market

structures and economic systems must be applied effectively.
Has applied relevant theories and techniques in solving the problems effectively, Thus, theories concerning demand and

supply, market structures and economic systems must be applied effectively.

M3: Has adopted an appropriate structure and approach and have presented logical and coherent argument.
Applied Harvard referencing Has adopted an appropriate structure and approach and have presented logical and coherent

argument.
Applied Harvard referencing
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