Business And Business Environment

118321 BUSINESS AND BUSINESS ENVIRONMENT

A business environment refers to the factors, which affect its operations. Many factors

affect the operations of a business and hence may affect its profitability levels as well as its

growth. Baron, (2012), explains that two environments affect the activities of the organization.

They are the internal and the external environments. The internal environments are comprised of

factors that a company can be able to control while the external factors consist of elements that

are beyond the control of the business. The internal environment may be comprised of

management styles and policies, the objectives of the business, the skills and other qualifications

of the personnel in the business. The external environment may be comprised: politics,

economic, technological advancement, demographic, social and cultural elements. Both

environments determine the success of the business and the management should always have

insights focusing on each of the environments and how it can affect the business (Palmer &

Hartley, 2011).

P1: Explain different types and purposes of organizations; public, private and

voluntary sectors and legal structures

There are three types of organizations that exist according to the industry in which an

organization operates in (Weatherley & Otter, 2014). They can be organizations either in public,

private or the voluntary (nonprofit sectors). Public organizations are enterprises that are mainly

created by the government with the aim of producing public goods or offering services to its

citizens (Meyer & Leixnering, 2015). Most of the times, public enterprises are mainly started

through legislation. Such companies obtain their funds from the government or the fees, levies,

and revenues they raise form their operational activities (Worthington & Britton, 2014). Private

organizations are enterprises that are started by an individual or a group of an individual for their

interests. Most of the private organizations are launched with the aim of making profits, and their

legal structure is defined by the government, depending on the manner in which the business is

formed (Mazzucato, 2015). Private organizations are funded by their owners.

The legal structure of a private organization falls under the following four classifications.

A sole proprietor, partnership or a private company. A sole proprietor is a type of a business that

owned by an individual (Palmer & Hartley, 2011). A partnership is a type of a company owned

by two up to a maximum of twenty people, apart from partnerships that offer professional

services whose maximum limit of the members is fifty (Royer, Bijman & Abebe, 2017). A sole

proprietor and partnership have unlimited liabilities, and therefore their owners may be held

personally responsible for the debts of the business. A cooperative is a type of business whose

minimum membership is ten people and whose primary purpose is to achieve a common

objective together (Weatherley & Otter, 2014). A private company has limited liability, and

therefore its owners cannot be held personally responsible for the debts of the business.

Voluntary organizations, also called nonprofit agencies are enterprises that are set up to

engage in charity or community work in the society (Hopkins, 2017). They hardly make profits.

Their principal sources of funds are the donors and fundraising activities that they carry on

certain occasions. Governments of the jurisdictions in which they operate classify them as

charitable organizations working to assist for the betterment of the society.

P2: Explain the size and scope of a range of different types of organizations

The size of an organization is defined by the market size it controls, its share capital, and

the extent to which it has its presence in a particular region or globally (Baron, 2012). The scope

of the organization is determined by the amount the products offers. An organization is

considered to be large if it has employees whose number is two hundred and fifty or higher than

that. Such a firm that has the most significant market share is usually considered as the industry

leader and can command a lot of influence in the prices of the products on other businesses

selling similar commodities in the industry (Niresh & Thirunavukkarasu, 2014). Where the

number of employees in the business is unknown, a company can still be considered to be large,

if its annual turnover is equal to, or greater than twenty-three million pounds or dollars.

A firm is said to be medium-sized if its number of employees is between fifty and two

hundred and forty-nine. Where the number of employees is not known, a firm can still be

considered to be medium sized if its annual turnover is falling within the estimated range of

between £/$5.6 million to $/£ 22.8 million (Worthington & Britton, 2014). An organization is

considered to be small in size if it produces it has some employees falling in the range of one to

forty-nine employees. If the number of employees is not known, a firm whose annual turnover is

below 5.6 million pounds or dollars is considered to be a small size organization (Palmer &

Hartley, 2011).

Large size organizations usually have a broader scope of operation (Niresh &

Thirunavukkarasu, 2014). Most of them are multinational corporations such as the Barclays bank

and Samsung. The firms may be operating in more than one country, and where such businesses

have not started, it is usually stated in their mission statement that they aspire to be international

firms shortly. The large organizations are subdivided into departments with distinct and clear

roles, and in each division, every job has a designation for purposes of performing a specific task

only. Such firms, even though they may not be market leaders, their actions in the industry are

closely monitored by other companies in the sector (Baron, 2012). The activities of such

organizations about the supply and demand of their services can lead to a change in the

equilibrium prices of the commodities. Such businesses play a significant role in the pricing

strategies adopted by the companies in the industry. A large firm may also be dealing with a

more than one type of a product or diversified products.

The small and medium-sized (SMEs) firms may not be having a global presence, but

maybe having a regional footprint in their countries. The businesses are usually the usually

market followers and their actions in the industry in which they are operating in, may not have a

significant impact on the equilibrium price in the market (Worthington & Britton, 2014). Their

actions only trigger negligible changes in the firm. Consequently, the businesses will have to be

market followers. Most of the SMEs deal with a relatively small range of products, compared to

the large organizations. The departments in the SMEs usually are usually more minor compared

to the large firms. An office in the SMEs can handle more than one, but different roles, such as

procurement finance and human resources (Palmer & Hartley, 2011). In the particular case of

sole traders, the owner handles all the management functions and sometimes with the assistance

of the family members.

Most of the large firms are usually affected by the external environment in which they

operate, due to their multinational presence and the level of competition that may be existing in

their industry. Politics, economy, technology, legal as well as social and cultural factors usually

come into play when the large firms are making decisions since they are likely to suffer more if

there are unfavorable changes resulting from the external environment (Worthington & Britton,

2014). The SMEs are usually affected more by the internal environment in which they operate in

since most of their decisions are determined by factors such as management policies and styles,

the objectives of the firm, and the qualifications and skills of their personnel (Baron, 2012).

P3: Explain the relationship between different organizational functions of First

Group or any other organization of your choice and how they link to organizational

objectives and structure

The functions of any organization usually rotate around five core activities which include

finance, human resource, marketing, operations/production, and information technology

(Worthington & Britton, 2014). The finance department handles monetary matters and including

the accounting issues. The human resources department is usually in charge of recruiting,

disciplining, compensation and where need be, firing of the employees. The marketing

department is entrusted with the responsibility of ensuring that the firm generates more revenue

by ensuring that an organization's products are sold in large volumes. Sometimes, the marketing

department may have the role of public relations with which is entrusted with building a right

corporate image for the organization. The operations department ensure that the routine or the

daily activities of the firm are coordinated and harmonized to achieve the daily production goals

of the business. The information technology department in the company is concerned with the

data entry, custody of data, the processing of data, and the distribution of data to the relevant

parties, when a need arises (Mazzucato, 2015).

Various organizations have different structures which they arrive at to help them function

in the best way possible. The common types of organizational structures are functional,

divisional, matrix, and network and the strategic unit business unit structures (Ashkenas et al.,

2015). An organization with a functional structure is one that is organized according to the

traditional way of organizing the functions based on the skills required for each task. The

primary functions are accounting, production/operations, sales and marketing, and information

technology. The divisional structure organizes the leadership structure as per the different

projects or products that are being produced (Worthington & Britton, 2014). The matrix structure

is a form of the structure where the various workers from various departments are frequently

brought together to work on a project or for purposes of decision making. E.g., staff from

finance, procurement, sales and marketing working on a particular project. The network structure

arises when two or more organizations or departments are interdependent on one another such

that they have to work together. Strategic business units are those profit centers that may be set

up within a large corporation and is autonomous (Palmer & Hartley, 2011). They create a

discrete marketing plan, competition analysis, and marketing campaigns.

P4 Identify the positive and negative impact the macro environment has upon

business operations of any other organization of your choice.

The macro environment consists of the external factors that affect the operations of the

organization consists of the elements that affect the organization and for which the firm may not

be having control over them (Weatherley & Otter, 2014). The macro environment is defined by

politics, the economy, and level of technology, the law, and the social, cultural and demographic

environment. The macro environment may affect the business positively or negatively. The

analysis of the Coca-Cola can be used to determine the positive and negative impacts of the

macro environment on businesses.

Positive impacts on the external environment. When the population is high, it provides

customers with the business and hence the products of the business are in constant demand.

During the recovery and boom sessions of an economy, the business performs better due to the

tremendous prevailing economic situation (Schaltegger & Wagner, 2017). A country that has

political stability provides an environment where the business can be conducted in a peaceful

manner (Worthington & Britton, 2014). The legal environment, if it consists of favorable laws,

such laws favor the conduction of transactions with minimal regulations. Technology has

enabled many businesses to grow as they can use online platforms to advertise their products and

sell them (Palmer & Hartley, 2011). For instance, many companies can transact global

transactions through e-commerce.

Negative impacts of the macro environment on the operations of business includes

political instability, which may lead to the loss of business assets and disruption of economic

activities. The disruption of economic activities leads to poor financial performance and hence

businesses collapse (Weatherley & Otter, 2014). Some cultures may inhibit the consumption of

some products, and therefore the businesses may collapse since they are not likely to break even

due to the low demand for their products. Some of the laws may have too many formalities and

requirements that businesses must have and hence may discourage the performance the start of

companies (Palmer & Hartley, 2011). Technology has been used to bring enterprises to down

through methods such as hacking which leads to substantial financial losses.

P5 Conduct internal and external analysis of any other organizations of your choice

to identify strengths and weaknesses

The review below will focus on the Coca-Cola Company, showing its internal and

external environment and hence identify its strengths and weaknesses. The internal environment

of Coca-Cola Company comprises of the company's mission, which indicates the goals of the

organization, has well-qualified employees, a super strategy for its operations and marketing, and

visionary leaders who are always willing to take the company forward to the next level. It also

has a research and development departments that enables it to come up with products that can

counter competition from the substitute products of the rival companies.

The Coca-Cola Company is a multinational with operations in most of the countries of

the world. Therefore, it is exposed to different economic, political and socio-cultural

environments. Besides, it also has to operate under different legal frameworks owing to the

various states in which it worked in. Conducting a SWOT analysis of the Coca-Cola Company

will provide insights that will make it possible to know its strengths and weaknesses.

From the macro environment in which Coca-Cola operates the following are some of its

strengths.

i. Dominating the beverage and soft drinks industry in the countries of its operations which

enables it to operate under economies of scale, have power over buyers, and market

power, which allows it to have control over its suppliers and vendors.

ii. Diversified product portfolio, thanks to its research and development team.

iii. A strong distribution network

iv. A strong pricing and marketing strategy, owing to the qualified team of professional

marketers who assist it in determining the best prices for its products.

v. A team of dedicated and highly competent staff.

The weaknesses of Coca-Cola include:

a. Low participation in the production of healthy drinks.

b. Fluctuations in currency, which affects the exchange rate, and consequently, its

reported income.

c. Constant legal cases over management issues and the use of pesticides in its

products.

d. Inability to efficiently counter competition from its rival company, Pepsi.

The external environment may pose threats and opportunities for the for the Coca-Cola

company. The opportunities include a growing demand for its products due to the increase in the

population, and the chance to exploit the health drinks niche, which is currently, not well

ventured into. The threats it is likely to face include: increased competition from the less known

brands, high levels of inflation which will lead to increased costs of labour and raw materials,

water shortages, which will pose the challenges in entering the health drinks industry, and the

fluctuations in the exchange rates which lead to variations in its profits.

P6 Explain how strengths and weaknesses interrelate with external macro factors of

any other organization of your choice.

The strengths and the weaknesses are strongly interrelated with the external environment

in which a business operates in. To formulate the strategies and the policies of the company, the

management has to take into account the political, economic, social and cultural, technological

and the legal environment in which the company is operating (De Castro, Khavul & Bruton,

2014). Any changes that in the macro environment will have to affect the decisions taken by the

management. For instance, the changes in interest rates may affect the financing options

considered by the administration to borrow loans from the financial institutions. The

interrelationship between the strengths and the weaknesses with the external macro factors is

explained below using the case of Barclays bank for the fiscal year 2016/2017.

The political and the legal environment

Through politics, there is the formulation of policies, the laws and the regulations which

determine the manner in which the businesses operate (Dragnić, 2014). The exit of Britain from

the European Union had a lot of impact on the strengths, weaknesses, opportunities, and threats

to its business. There was also the 8% surcharge on banks' profits; there was also the introduction

of the bank levy and the regulations regarding the minimum capital requirements.

The economic environment

The economic environment is determined by the interest rates, the rate of inflation and the

exchange rates. When the business is financially viable, it is not easily affected by the minor

changes in the economic environment, and hence it may not change its pricing and its marketing

strategy (Wiid, Cant & Holtzhausen, 2015). The Brexit led to the depreciation of the value of the

pound against major currencies in the world, and consequently, changes in the profit of the

Barclays bank.

Social and cultural factors

These factors determine how demand for the products of the business. The social-cultural

factors usually identify the tastes and preferences of the customers (Baron, 2012). In the case of

the Barclays bank UK and the US, most of its customers are the aging population, and it implies

that there has to be changed in wealth, savings, and investment management to enable it to take

care of the pensions.

Technological factors

Technology in the modern world businesses is very critical to the success of the company.

There is the use of technology for digital marketing, data storage, transactions and payments

using the e-commerce (Palmer & Hartley, 2011). In the case of the of Barclays, there is

disruption of its digital platform including blockchain technology, biometrics, and Fin

technology all which pose threats and opportunities to the operations of the Barclays bank.

Legal factors

These are intertwined with the political elements since most of the regulations and rules

that control businesses are done by the politicians (Worthington & Britton, 2014). In the case of

Barclays bank, it is facing lawsuits from the Serious Frauds Office over a matter of its dealings

with Qatar during the climax of the 2008 financial crisis and thus posing threats to the bank.

The macro environment poses the following strengths to the Barclays bank. The bank: has

the regional presence in the UK, leads in digital banking and has a high brand reputation given

the length of the period it has been in service. It also has the leadership position in the majority

of the banking products offered in the UK. The weaknesses posed by the external environment to

the bank include African divestitures which consume its time and resources, material legal issues

and registering weak returns.

The external environment also poses threats and opportunities to Barclays. Opportunities

include: the African divestiture may turn to a core generating better returns and the fact that the

Barclays bank is already ahead of other legacy banks regarding digital banking and blockchain

technology. The threats include the 8% surcharge on the profits of the bank, the bank levy, the

regulatory pressures on the new capital requirements which it may struggle to raise, and the

Brexit which be unfavorable to Britain's banks if the EU financial regulations work against them.

REFERENCES;

Ashkenas, R., Ulrich, D., Jick, T. and Kerr, S., 2015. The boundaryless organization: Breaking

the chains of organizational structure. John Wiley & Sons.

BARON, P. (2012) Business, and its Environment. 7th Ed. London: Prentice Hall.

De Castro, J.O., Khavul, S. and Bruton, G.D., 2014. Shades of grey: how do informal firms

navigate between macro and meso institutional environments?. Strategic

Entrepreneurship Journal, 8(1), pp.75-94.

Dragnić, D., 2014. Impact of internal and external factors on the performance of fast-growing

small and medium businesses. Management: Journal of contemporary management

issues, 19(1), pp.119-159.

Hopkins, B.R., 2017. Starting and managing a nonprofit organization: A legal guide. John

Wiley & Sons.

Mazzucato, M., 2015. The entrepreneurial state: Debunking public vs. private sector myths (Vol.

1). Anthem Press.

Meyer, R. and Leixnering, S., 2015. Public sector organizations. In International encyclopedia of

the social & behavioral sciences (pp. 597-602). Elsevier Science.

Niresh, A. and Thirunavukkarasu, V., 2014. Firm size and profitability: A study of listed

manufacturing firms in Sri Lanka.

PALMER, A. and HARTLEY, B. (2011) The Business Environment. 7th Ed. Maidenhead:

McGraw-Hill.

Royer, A., Bijman, J., and Abebe, G.K., 2017. Cooperatives, partnerships, and the challenges of

quality upgrading: A case study from Ethiopia. Journal of Co-operative Organization

and Management.

Schaltegger, S. and Wagner, M. eds., 2017. Managing the business case for sustainability: The

integration of social, environmental and economic performance. Routledge.

WEATHERLEY, P. (Editor) and OTTER, D. (Editor) (2014) The Business Environment:

Themes and Issues in a Globalised World. 3rd Ed. Oxford: Oxford University Press.

Wild, J.A., Cant, M.C. and Holtzhausen, L., 2015. SWOT analysis in the small business sector of

South Africa. Corporate Ownership and Control, 13(1CONT4), pp.446-453.

WORTHINGTON, I., and BRITTON. C. (2014) The Business Environment. 7th Ed. Harlow

Pearson.

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