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A/601/1540 Business And The Business Environment Unit 1 UK CBC College Level 4

1530 Downloads I Published: 27 Apr ,2020

Introduction

The business activities can take many forms and characteristics that are dependent on the external environment of the business operations the market demands and efficacy and budget. This is the main cause of there being various successful models of business operations that are prevalent in the various parts of the world with different levels of success. Thus, the size and scope of the operations of a business are based on the various business functions and external environment all of which affect the operations of the business and in turn its success to different degrees. The understanding of the various aspects of the businesses leads to the understanding of the business operations in any market environment and the specific characteristics of the businesses, along with its causation factor. Thus, this is the basic objective of the assignment, which strives to develop a complete understanding of the various business structures and models, their scope and potential, the various components of the business operations and the impact of the various factors on said operations. This is the main basis of the understanding for this assignment as this enables the understanding of the various aspects of the business and the factors affecting a business in a market environment.

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Different types, size and scope of organisations

For-profit, non-profit and non-governmental organizations

The for-profit organizations are the traditional business organizations that provide goods and services to select customers and make a profit from the customer, which is then shared among the people making up the organization (i.e. shareholders). These organizations' objectives are solely centred on the profit and the potential customers of their products or services that mark them as for-profit organizations.

The non-profit organizations are on the other hand are the type of entity set up by a group of individuals under the condition that the organization serves the society in general instead of the selected customer segment (Saunders & Lewis, 2012). Moreover, the profit or loss made by the company is not shared among the specific members of the organization like the for-profit model. The NGO is the similar type of organization that is based on the same operating principles but are not subject to any business regulations set by the government and they operate autonomously as a trust and not a corporation. Therefore, the scope of the NGO is much broader as they concern with all aspect of the society like human rights, social rights and economic issue affecting the society as a whole while the NPO operates within a set boundary in a previously outlined purpose (Sekaran & Bougie, 2016).

Small micro and medium-sized organizations

The size of the organization is another aspect of the operations that can be used to divide the organizations into various categories, which are effective as an international standard for the operations of the organizations. While the defining limits forte SME or SMDs are different under different national and international organizations this is usually measured by the number of employees in the organization and the overall profit and turnover in any economic year. However, these limits are not especially important as the SMEs outnumber the large corporations by a huge margin and thus affect the market to a huge degree through competition and innovation in their respective sectors.

Legal structures

The legal structure of the business can also be used to classify the different businesses as the sole trader, partnerships and the private limited enterprises as they each have different registrations structures under the different legal authorities. The sole trader can be defined as a company that is run by and owned by only one person. The partnerships are similar in structure but the responsibility for running the business is handled by two or more persons. In both cases, the business owners have unlimited liability (Zikmund et al., 2013).

A limited liability company, on the other hand, is recognised as a separate entity from the owners or shareholders and thus the shareholders are not personally liable for any actions of the business entity as a whole. Both the private limited and public limited companies fall under structure despite their varying sizes (Johnson, 2016).

The franchise business is the way a person and buys into an existing business and they operate as a part of the organizations in the business format which has been proven in the market and this less risky but also less unique in their operations. Therefore, this has little to do with the size of the business but the format and the business model applied.

Differences

The main difference between the small and large company organizations is the organizational structure, which is invariably more complex in the larger organizations. The larger the organization more bureaucratic their decision-making process is due to higher number of input with different values. On the other hand, the smaller companies have relatively flatter organizational structure that is based on the small number of levels in the organizations. Thus the quick decision-making and swifter adaptation to change in the market makes them more sustainable based on the competency of the management (Dekker et al., 2013).

Joint venture and licensing

The joint venture and licensing are similar to the franchise model with some specific differences where the two parties divide the operations and decision-making responsibility and when the operating party is given the right to use the business name only, mark the difference between the different business models.

The interrelationship of the various functions within an organisation

There are various parts of the operations of any organization and they all are responsible for the smooth operations of the organization to a degree. Thus, the various elements or departments of the businesses are discussed in this point to achieve the business objective discussed in the first part of the assignment where the purposes of the different organizations according to the structure are defined.

Finance- the finance dos any business handled the financial matters like the various transactions and keeping of the records of the financial information that would help in the development of the future plans as well as develop funding requirements and production of goods and services. Thus, their role in the organization can be outlined as the management of the cash flow and keeping track of the organizational assets (Scheer, 2012)..

Human resource management is the part that deals with the human element of the organization like the employees and their relative wellbeing payments and training and development to align their skills with their relative responsibility in the organizational structure. This not only keeps the employee satisfaction and remuneration but also the development advancement in the hierarchy based on the proficiency and performance (Kirchmer, 2012).

Procurement department is where the resources required for the operations of the organizations are acquired. Thus, the sourcing of the materials and other outside components needed for the operations of the organization are the responsibility of the outlined department in the organizations.

Marketing- the marketing department is concerned with the product or the service and the acceptability of the product from the market fit. Thus, the marketing department helps in the planning of the organizational steps from the development of the product and its presentation by knowledge of the customer needs.

Information and knowledge management-the information and knowledge management is an important part of the IT functions as the organization's knowledge base are managed and the various information needed by the company to make the decision in the specific market is based on the department. The department develops knowledge and facilitates the use of the said knowledge in the organizational decision-making.

Control or higher management is the core of all organizational activity as the higher level organization divisions outlining the course of the organization is done through the higher management where the various aspects of the organizational management decision regarding operations are judged based on their competency and achievements to determine the business strategy for the company (Chang, 2016).

In the manufacturing operations, there is clear interrelations of the various departments and their responsibilities in the operation of the organization as a whole. Therefore, the marketing and the higher management functions are intrinsically related to the product design, which is based on the research done by the marketing department, and the finance is required for the manufacturing cost calculation and marketing cost and the estimation of the profit based on sale price of the product. The procurement is responsible for sourcing the raw materials and equipment needed for the production while the inventory department stores them systematically in the warehouses. The product reaches the customer population through the supply chain and the human resource exclusively management the human elements in the organizations as a division of responsibility and remunerations. There are some operations like the supply chain management and the inventory management that are unique to the manufacturing operations as the service operations do not need these elements in the organizations as their product is not tangible. Therefore, all part of the organization has a role in the successful operations and each has their specific responsibility in the operations that need to be maintained, this gives each part of the operation an unique and important role in the organizational operations (Harmon, 2014).

While the departments are based on specialization in the organizations, the staff can be put in groups in either a bureaucratic structure or a matrix structure. The bureaucratic structure is based on the inflexible position where the staffs work for a department exclusively and any responsibility is handled by the department as a whole. On the other hand, the matrix structure is much more flexible and this arranges and assigns staff from the different department's collaboration to achieve collective objectives. Thus, both the structure has their specific merits and demerits in different business situations.

Macro environment influence in organizations

The macro environment is the external environment that defines the characteristics of the whole economy that the reorganizations are a part of and is influenced by. The use of the macro environmental forces that affect the business area therefore away from developing the understanding of the various factors affecting the business operations externally. The overall political situation, economic condition, legal constraints affect the operations of different businesses differently and thus the use of the environmental analysis is a common factor in the determining the various forces affecting the businesses. The PESTLE analysis is probably the most common and widely used analysis model used for the understanding the external environment which outlines the political, economic, social, technological, legal and environmental factors affecting the business environment which makes this cover all major aspects of the external environment (Birnleitner, 2014). The simplicity of the analysis and its span makes it most complete analysis of the external environment from a generalist perspective and the various factor identified in the PESTLE are discussed below in light of the manufacturing sector in the UK.

Political factors

The political factors and political decisions regarding the country are often significant indicators of the stability of the business sector in the country as the various factors like political stability, governmental institutions and policies regarding business promote business growth. The impact of the Brexit is evident in the UK manufacturing as it was the political decision of the UK leaving the European Union that affected the business sector so severely. This is one example of the many aspects how the political stability can affect the stability of the businesses as a macro-environmental factor. The various policies of the government regarding regulation and aiding the various business sectors are also effective factors that make the impact of the political leadership evident on the business operations and in turn on their profitability.

Economic factors

The various economic factors like the GDP, inflation, interest rates, affect the business environment of the country significantly as the various rates like the GDP and inflation affect the availability of funding for the various business ventures and the growth of the operation of the businesses. The unemployment rate, therefore, is an indicator of the availability of skilled labour forces and the wage rate that affects the operations of the company (Mhlanga & Steyn, 2017). It is also evident in the various multinational companies shifting their manufacturing facilities to the developing countries because of the lower wage rates and the availability of cheap labour. The various tax policies and the economic development facilities that give specific benefits like the SEZs also affect the operations of the manufacturing sectors in the developed countries like the UK.

Social factors

The social factors are also a large part of the business development potential in a country as the various positions of the industry in the country are dependent on the society's perception of the specific industries and their offerings. While the various companies and their offerings need to be socially acceptable and popular to have business success, the related prestige and prospect of working for a popular company or sector is also part of the social factor that affects the success of the industry in a specific location. As the operations of the company are determined by the social understanding of the role of the company and its impact on the society or the overall development of the manufacturing sectors is deponent on the way the society views the contribution of the sector on the country as a whole.

Technological factors

The technological factors like these of the technology or the development of industry-specific equipment of the process modification are all part of this factor as the overall technological development of the local determines all of these factors. The technology not only determines the efficacy of the organizational operations but also the processes for manufacturing which makes this cost efficient or in some cases an absolute necessity (Moro Visconti, 2016). While the technological development is an indicator of economic prosperity, it is also true in reverse as the technological development is the factor that prompts the economic development by inflecting the efficient operations of the goods and service proves in the various industries. The various international quality indicators like ISO, IEC and WSSN are also dependent on the technological development for their implementation in the relevant sector, which makes the scope of export an effective part of the impact of the technological factor in the manufacturing.

Therefore, the availability of infrastructure to support the growth of a business is very much depend on the technological factors that make this one of the important factors of the external environment for the business potential development in any country. This is also true for the UK as the country has highly developed technology and this affects the infrastructure development and business growth significantly.

Legal factors

The legal factor is also part of the macro environment and the most relevant is the change in the corporate regulation law or the labour laws which have a higher level of business impact of than any other legal developments (Sarwar, Ramachandran & Hosseinian-Far, 2017). The taxations law is also a significant driver of business development as the low taxation rates and the regulations attract international companies and investors in the economy, which enrich the business environment significantly.

Environmental factors

The industrial waste has been recognized as one of the main sources of the pollution with a myriad of health impacts which affects the operations of the various industries to different degrees, this not only evident in the government environmental regulations and compliance like the carbon trading but the public opinion regarding manufacturing process. Thus, the waste disposal and production process development are forced upon the manufacturing sectors by the government or public opinion that significantly affects the business growth potential (Triguero, Moreno-Mondéjar & Davia, 2013).

From the overall role of the PESTLE analysis, therefore, can be deemed an effective tool to determine the business potential for a specific country based on the various aspects of the analysis that covers almost all macroeconomic factor that affects the business development (Shatskaya, Samarina & Nekhorosheva, 2016). Therefore, the role of PESTLE analysis understanding the business environment is established by this discussion.

Internal strengths and weaknesses interrelation with external factors

The SWOT analysis is a significant tool that can be used for the development of the internal competencies of an organization and this analysis covers almost all aspect of the operation and gives a clear definition of the various characteristics of the internal operations and their impact on the company.

Strengths- the strengths of the internal structure depend upon the various characteristics of the organizations like the efficient use of resources sustainable operation and organizational policies and procedures. This not only helps outline the reasons behind the organization businesses success but also helps in the formation of strategies based on the strengths.

Weaknesses- the weaknesses of the organization is identified can be used to develop strategies to enforce these areas which can have a significant impact on the organizational development performance increase. Therefore, this is also a knowledge that can be used for the rotational development which is the main purpose of the internal analysis (Laguna & Marklund, 2013).

Opportunities- this part marks out the opportunities for development, which also factors in the external factors that might create an opportunity for development of a specific competency of the development of the whole organization through changing its structure or operational procedures (Van der Aalst, 2013).

Threats - this part like the opportunities is also helpful as any change in the external environment is bound to have an impact on the organizational operations which makes this part of the external environment and its connection to the internal operations of the organization (Van der Aalst, 2013). These threats are addressed by internal changes to mitigate the negative impact of the external environment on the business. This helps in the competitive positioning of the organization based on the external impact of the environment on the organization and utilising positive changes to the fullest while mitigating the negative ones through internal changes.

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Conclusion

This assignment helps develop an understanding of the business structures and the various external and internal factors that the business performance depends on. Thus, this is essential for the development of the understanding of the various business models and their opportunities and function in the environment.

References

  • Saunders, M. N., & Lewis, P. (2012). Doing research in business & management: An essential guide to planning your project. Pearson.
  • Sekaran, U., & Bougie, R. (2016). Research methods for business: A skill building approach. John Wiley & Sons.
  • Zikmund, W. G., Babin, B. J., Carr, J. C., & Griffin, M. (2013). Business research methods. Cengage Learning.
  • Johnson, G. (2016). Exploring strategy: text and cases. Pearson Education.
  • Triguero, A., Moreno-Mondéjar, L., & Davia, M. A. (2013). Drivers of different types of eco-innovation in European SMEs. Ecological economics, 92, 25-33.
  • Dekker, J. C., Lybaert, N., Steijvers, T., Depaire, B., & Mercken, R. (2013). Family firm types based on the professionalization construct: Exploratory research. Family Business Review, 26(1), 81-99.
  • Moro Visconti, R. (2016). Healthcare public-private partnerships in Italy: Assessing risk sharing and governance issues with PESTLE and SWOT analysis. Since empirical considerations about Italy may be globally extended, even beyond the healthcare industry, the audience of this study may conveniently widen well beyond its apparently narrow focus.
  • Birnleitner, H. (2014). Attractiveness of countries for foreign direct investments from the macro-economic perspective. Proceedings of the fikusz’14, 14.
  • Mhlanga, O., & Steyn, J. N. (2017). Impacts of the macro environment on airline operations in southern Africa.
  • Sarwar, D., Ramachandran, M., & Hosseinian-Far, A. (2017, January). Disaster Management System as an Element of Risk Management for Natural Disaster Systems Using the PESTLE Framework. In International Conference on Global Security, Safety, and Sustainability (pp. 191-204). Springer, Cham.
  • Shatskaya, E., Samarina, M., & Nekhorosheva, K. (2016). PESTEL analysis as a tool of strategic analysis in international markets. In Science and practice: a new level of integration in the modern world (pp. 47-53).
  • Scheer, A. W. (2012). Business process engineering: reference models for industrial enterprises. Springer Science & Business Media.
  • Kirchmer, M. (2012). Business process oriented implementation of standard software: how to achieve competitive advantage efficiently and effectively. Springer Science & Business Media.
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