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BAIHH 2 Business and the Business Environment

1037 Downloads I Published: 28 Mar ,2020

Introduction

Business environment includes all the internal as well as external forces that influence functions and operations of an organization. It consists of customers, management, business regulations, supply and demand and employees (Asif, Garvare and Ahmad, 2011). It is essential for management to evaluate all such factors that can enhance business sustainability aspects. Assessment of these factors helps in framing effective policies and strategies as well as implementation of those. In the present assignment, chosen company is Waitrose which is one of the largest British supermarket chain headquartered in Bracknell, England. The report includes different types of organizations including public-private and voluntary sectors as well as their size, purposes, legal structures and scope. Apart from this relationship between several organizational functions and their objectives are defined. Along with this positive negative influence of external forces of business environment on operations of firm is include in the project. At last, strengths and weaknesses are determined by conducting SWOT analysis and their interrelationship with macro factors is defined.

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Task 1

P1 Explain different types and purpose of organization

There are different type of firms which are working in business environment. These includes private, public and voluntary organization. Each one has their different legal structures and purposes which distinguish them from others. There are various laws and regulations made by government that needs to be followed by every business enterprise in order to un their operations successfully. It helps in proper implementation of activities in different areas. Different types of organizations and their purposes are defined below:

Public sector: Government of respective country is responsible for Regulation and controls of such firms (Cavusgil and et. al., 2014). Their purpose is not to earn profit but to work for the Welfare of society. Educational sector, Electricity Board, Healthcare institutions etc. are run under public sector companies. National Health Services is a Healthcare organization funded publicly. It is located in England, UK. It render Healthcare services to local population of country.

Purpose of National Health Services:

  • Render basic medical facilities to domestic population as well as visitors of country.
  • To introduce innovation in care services on regular basis.
  • Contribute in healthy life of patients.

Central government: Whole Nation is regulated by central government. Printing currency and collecting tax is the major aim of is legal authority.

State government: Central Government support all the functions of state government. Their main aim is to control activities of different public sectors to ensure that better services are provided to society.

Local government: This government works for the development of particular City or town. It works only at local level.

  1. Private sector: Private individuals are operate these organizations and manage its all activities. Government interference in private sector is very less or no involvement. Major aim of such Enterprise is to generate high profits and revenues. These sector contributes a lot in economic growth of country. In UK about 89% of contribution is given by such companies in GDP. Their aim is to establish and expand their market in different countries. Nestle is a private sector company which deals in food products. It is a largest firm in world measure by revenues. It offers ice cream, chocolates, coffee, medical food, dairy products, tea, maggi, bottled water, confectionery, frozen food, breakfast cereals, pet food and baby food to customers.

Purpose of Nestle:

  • Main purpose of organization is to generate higher profits and revenues by providing good quality of products and services to consumers.
  • To improve life standard of people and contribute in there healthy life.

Partnership: When two or more people start a business collectively then it refers to partnership business. All the partners are signed a written document known as partnership deed. It is a legal proof of ownership (Bhaduri and Ha-Brookshire, 2011). No one is solely responsible for profit and loss of the firm. These are equally shared among all the partners.

Sole proprietorship: A single individual is run the business and they are only person responsible for all the profits and losses of firm. These businesses require less amount of capital to establish and run operations of business. Decision making is very quick in such organization as it is operated by single individual only.

Limited companies: There are two types of Limited companies. One is limited by shares and another is limited by guarantee.

Voluntary sector: These are non-profit firms operated by single body. Main purpose of voluntary sector organization is society welfare. They are not working for earning profits. Oxfam is come under this sector and work for reducing poverty from world. For running their operations, they take assistance of volunteers. The company also provide food facility to poor people (Chetwood and et. Al, 2014).

Purpose of Oxfam:

  • To remove poverty from world
  • Provide basic necessity to people for their survival.

 P2 Size and scope of different type of organization 

 

Public

Private

Voluntary

Size

  • The company must have at least one director in every branch of the company.
  • The company needs to get themselves registered under London Stock Exchange

Private firms are having minimum one shareholder but they can offer large share to public.

Such type of organization can start working without shareholder or director. It can be run by group of volunteer only.

Scope

Their scope is quite extensive as they work toward the betterment of the country and its local residents.

The scope of private sector is also very vast as they only aims at diversifying its business operations in other countries as well.

The scope of voluntary enterprises is not much massive but still they aims at making country better a place to live.

 Difference between micro medium large and small scale organization:

Small

Medium

Large

Micro

The main aim of this type of enterprises it to provide economic variety of goods which can help in raising the purchasing power of employees.

This operates at comparatively higher scale. Quality of products is raised to provide better satisfaction levels to customers.

This is an entirely different scale of business in which investment in great amount is done. Those areas which are crucial and need high allocation of resources fall under this category.

This is the smallest scale at which the business operates. Finance is invested at a very low range and basic businessmen activities are carried out in this section for instance street shops.

Task 2

P3 Relationship between different organizational function and how they link to business objectives

Waitrose is a leading chain of British supermarket that provide groceries to large number of customers. The companies having 352 branches the UK and also exporting their products to other 58 countries. The company is serving large customer and ranked as 6th largest grocery retailers in the UK (Crane and Matten, 2013). They are effectively fulfilling the demand of customer by evaluating the requirement of changing environment which makes an impact on the overall effectiveness of company’s profitability. The company is mainly emphasized on innovating its business activities that is mainly influenced by different factors and these aspect signifies the business objectives and structure of the company. Organizational function of the company find as the factor that are mainly involved from producing to selling a particular product of the company also include various actions and also possess great impact on firm's profitability. The link between organizational objective and function is important and make influence on the overall effectiveness of the company as this function also affect overall performance and accomplishment of business goals and objectives in an effective manner. The functions of the company are focused to attain business objectives that ultimately assist in growth and development of company.  There are different departments in the referred enterprise which has their different functions and are indirectly associated with the marketing department too. Though their operations are separate they can not be considered isolated as in the wider organization context they are interlinked and are discussed in the following matter:

Finance department: it is the most crucial department of an enterprise as cash is an important resource which has to be used with maximum care. Marketing department forecast eh future needs of cash for the finance section so that accordingly arrangements are made in advance. This way risk of non availability of funds is avoided that can effect growth of buisiness to a great extent.

Marketing department: With the help of their sales department, Company can easily figure out the likes and dislikes of target customer and also determine actually consumer needs or wants. Sales manager further pass this information to the production department that produce new or modify existing product as per the client's requirement. This will lead to achieve company's objectives in a cost effective manner and also assistant increasing the sales figure of the company which help them in gaining high competitive advantage in overseas market (Gharajedaghi, 2011). Currently the companies following effective in strategic management in their business that leads its function the direction to accomplish the business goals and objectives. Another objective of Waitrose is to make strong customer base and this can only be possible if company start operating their business activities in other international countries as well. This department use information provided by the sales department to take its different sales related decisions.

H.R. Department: Human resource is required at different stages of work and in order to maintain continuous flow of work it is required that availability of human resource is maintained. Same is done by forecasting the future needs by the hr department. Thereafter assistance from the marketing division is taken to invite different candidates to apply for the job.

 Task 3

P4 Identify positive and negative impact of macro-environment using PESTLE Analysis

The external environment for the organization can be divided into two sections which is micro and macro. In the micro environment effect of suppliers customers etc is determined which can be examined using different tools and techniques. Another is the macro environment that includes the political, social, environmental, legal and other elements. The effect of these can be done using the pestle analysis. PESTLE Analysis is a framework mainly undertaken by marketers to measure and monitor the impact of external marketing environment on an organization. This tool is often used by companies so as track the environment in which they are current operating or planning to launch new product, service or process. PESTLE stands for political, economic, socio-cultural, technological, legal and environmental factors. Following are the analysis of each macro-environment in terms of Waitrose are discussed below:

Political: This factor determine the extent to which Government is allowed to impact the functioning and performance of a company. Waitrose mainly faced two political environment one in South Africa and other is in United Kingdom. Though the government was stable in both South Africa and UK, but there was still different in many ways which in turn develop drivers of change. The company chooses South Africa to outsource its citrus fruits. In addition to that, they have created a Farmer Foundation in South Africa for the welfare of farmers. The political factors plays key role in Waitrose as maximum of its seasonal products are imported, thus they have to abide by the laws and regulation of both home country and exporting country.

  • Positive Effect: The foreign trade regulation and trade policies were favorable for the success and growth of Waitrose as they believe in selling quality product to its customers with honest pricing. This led to increase customer satisfaction tremendously and brings political stability. Waitrose also play key role in creating employment opportunities for farmers of South Africa and local residents of UK.
  • Negative Effect: Political instability can negatively impact Waitrose overall business operation and performance. Any adherence to law can badly affect firm’s goodwill.

Economic: It is an important factor to decide company’s growth and development. Waitrose has already created its own good market value that gives them high competitive edge. At the time of recession, Waitrose offers huge discount on its products so as to attract customers even at the time of recession as well (Gilboy , 2016).

  • Positive Effect: Waitrose change their policies as per the economic condition of the country. For example: At the time of recession, they have cut down their price so as to beat the competition prevailing at the time recession as well.
  • Negative Effect: Waitrose is highly dependent upon UK market which is not good. Any change in economical condition of the county will directly affect Waitrose profitability.

Socio-Cultural: Social factors analyze the market, cultural trends, demographics, population analytics etc. The UK market was demanding for high quality and healthy food. This did impact Waitrose and as a result they effectively fulfil customer needs for the same. In-fact they were the first one to introduce organic product in the market (Kian Chong, Shafaghi and Leing Tan, 2011). Income distribution was also considered as an essential factor because the product must fit within the reach of the targeted buyers or consumers.

  • Positive Effect: In today’s era customers are becoming conscious about their health which enables Waitrose to change their approach or strategies towards food sector. Thus, company introduce organic product in the market. As a result, customer base of Waitrose becomes stronger.
  • Negative Effect: Rapid change in products might affect overall functioning of the company and also reduces much time, money and efforts.

Technological: These factors are related with advance and innovative technology that may directly impact the functioning of the industry and the market either favorably or unfavorably. With the passage of time and current market need, Waitrose has also started promoting their product their online platform. They have created their mobile application as well. 

  • Positive Effect: Waitrose has invested significant amount on energy efficiency projects so as to achieve its long term objectives in order to reduce its carbon footprint. With the help oh latest technology, they have introduced self-service checkout points that is mainly going to provide ease and convenience which in turn decrease overall labor cost.
  • Negative Effect: Huge investment required in order to embed latest technology in the company.

Legal: Legal factors that affect working condition of Waitrose includes employment law, competition law, employment law, health and safety etc. In regard to health and safety, Waitrose is providing educational facilities to people of South Africa as they majority of them lacks basic knowledge of education. This result positively in favor of Waitrose as it help in increasing its goodwill among consumers.

  • Positive Effect: Waitrose is conducting education and training classes for famers of South Africa so as to make them more effective and productive. This initiative assist in gaining firm’s goodwill in overseas market.
  • Negative Effect: Company is bound to follow laws and regulation imposed by legislation bodies. However due to non-compliance of these laws may affect negatively on firm brand image and operations as well.

Environment: These factors covers laws related with energy consumption, waste disposal and environment protection laws (Li, and et. al., 2011). As Waitrose is mainly deal into fruit and vegetable any change in environment may affect working of Waitrose. Thus, they need to keep on such laws. Moreover

  • Positive Effect: The Company is taking initiative regarding using electricity through renewable sources which comes out as an advantage for them.
  • Negative Effect: Excessive use of carbon footprints adversely affect company’s brand image negatively which may weaken its customer base

Task 4

P5 Internal and external analysis of Waitrose

Strength:

  • Waitrose is having royal warrant to supply groceries to Prince Charles, Queen Elizabeth.
  • Extensive UK market share with over 300+ stores
  • The company gained popularity for its disruptive innovation in the form of loyalty cards.
  • Gain high competitive advantage over its rivals for their advertising efforts.
  • Strong brand image and customer base.

Weakness:

  • Intense competition like price wars may adversely affects its overall profit margin.
  • Criticism against their product which may bring down its sales and profits.
  • Highly dependent on UK market.

 

Opportunities:

  • Target to capture more market share in future
  • Providing educational facilities to South African farmers comes out as their biggest opportunity in terms of building its brand image in overseas market.
  • Building upon rich image heritage
  • Success of its white based packaging

Threats:

  • Poor economic situation and political instability in UK
  • Failure to illuminate their stand on issue “free coffee” scheme.
  • Lagging behind competition both globally and locally. 

Porter Five Forces Analysis for Waitrose:

Threat of new entrants: Factors like economies of scale in context of square footage of shopping area and breadth of distribution network I considered as critical factors in UK market. There are number of large store exist in the market that can store and sell products at faster rate. In fact, brand loyalty of buyers in this particular sector is comparatively high. This is mainly because of Waitrose loyalty programs (López-Gamero, Molina-Azorín and Claver-Cortés, 2011). Any new entrant have limited excess to the distributional channel of UK as these channels are mainly controlled by already existing players in the market. However, the access can be gained only through by acquisitions and mergers. 

Power of the supplier: Power of suppliers tends to be low in most of the part of UK as there are few number of significant operators prevailing in the market. There are certain segment where already established brand gains High competitive advantage over other retailers. As "own brands" are developing as a growing segment of the product portfolio. Many retail sector and even large suppliers started producing offering product under their own private labels. 
Power of the buyer: Buyer's power is relatively strong in the grocery retailing industry in UK where there is high concentration of buyers. Waitrose, Tesco dominate the market. For smaller retailer who have joined the buying group becomes little difficult to sustain in the market (Meiners, Ringleb and Edwards, 2014). However these groups play only a small and declining role in the UK market. The cost of switching suppliers in the market of UK is relatively low and involve negligible amount of risk. 

Threat of substitutes: The Waitrose has successfully enhanced its profit margin by increasing the ratio of non-food to food items in its superstore which enable them to gain high competitive advantage in overseas market. Any changes in public assumption for example the loss of confidence in British beef during the B.S.E beef crises or fear of the long term implication of intaking or consuming genetically modified foods. 

Competitive Rivalry: Strategies formulated by other large player exist in the market gives tough competition to prevailing retail sector that can directly affect its growth and development. In addition to that latest information technology offers then modern retailer the potential to boost up stock replenishment while decreasing the cost related with distributing products. It also laid stress on strengthening ship between the retail chain and their target customer. Players that are most innovative in embedding latest and advance technology for their business purposes tends to have a decisive advantage in the market.

P6 Inter-relation of internal factor with external factors

The entire functioning and performance of any company is affected by both internal and external factors. It depend upon the company how they deal with such kind of situation. If they are able to deal with it effectively it will going to impact in positive manner then but if somehow company becomes unable to deal with it, such factors can negatively affect their performance. Waitrose is currently exporting their product in 58 countries and having 352 branches in UK only. There is an effective influence of political environment of South Africa and UK on Waitrose which can make influence on overall implementation of activities. The main strength of given company is they are highly depended upon UK market which signifies that majority of its profits generated through UK only and this can only be possible if the political condition of that particular country is stable as compared to others (Sekaran and Bougie, 2016).  Another advantage that Waitrose gains is through their disruptive innovation in terms of “loyalty card” which denotes company is very effectively using latest and innovative technology. Another factor like legal can be related with one of company’s opportunity as they are providing educational facilities to the farmers of South Africa which signifies that they are indirectly assisting in the development of economy of South Africa and thus, making society a better place to live. On the other hand, there are certain weakness as well that adversely affect Waitrose overall business operation and activities. Political instability in UK can directly affect their overall profit margin as the company is highly dependent on UK market (Tayur, Ganeshan and Magazine, 2012).  Due to strong competition is become difficult for the company to continually change or modified their product. Moreover the company is lacking behind nationally and locally which makes them unable to beat prevailing competition exist in overseas market.

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Conclusion

According to the above mentioned report, it can be concluded that business environment plays crucial role in organizational success and growth. As the overall performance and operation of business in depend upon internal and external factors. Internal can be analyzed through SWOT analysis and external can be measured through PESTLE framework and Porter’s Five Forces Model. In order to carry out business operation in an effective and efficient manner it is primarily important for a firm to determine and analyze various aspects of both micro and macro factors. 

References

  • Asif, M., Searcy, C., Garvare, R. and Ahmad, N., 2011. Including sustainability in business excellence models. Total Quality Management & Business Excellence. 22(7).  pp.773-786.
  • Bhaduri, G. and Ha-Brookshire, J.  E., 2011. Do transparent business practices pay? Exploration of transparency and consumer purchase intention. Clothing and Textiles Research Journal. 29(2). pp.135-149.
  • Cavusgil, S. T., and et. al., 2014. International business. Pearson Australia.
  • Chetwood, M. K.,and et. Al, 2014. Transforming a legacy IT infrastructure into an on-demand operating environment. U.S. Patent 8,775,232.
  • Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.
  • Gharajedaghi, J., 2011. Systems thinking: Managing chaos and complexity: A platform for designing business architecture. Elsevier.
  • Gilboy, G. J., 2016. The myth behind China's miracle. In SEEKING CHANGES: The Economic Development in Contemporary China (pp. 1-16).
  • Kian Chong, W., Shafaghi, M. and Leing Tan, B., 2011. Development of a business-to-business critical success factors (B2B CSFs) framework for Chinese SMEs. Marketing Intelligence & Planning. 29(5).  pp.517-533.
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