Business & Business Environment Report

This report analyzes the business environment of Zara, a leading fashion retailer. It examines the internal and external factors that influence Zara's operations, including its organizational structure, macro-environmental factors, and SWOT analysis. The report also discusses the impact of Brexit on Zara's business in the UK.

BUSINESS & BUSINESS
ENVIRONMENT

INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 ................................................................................................................................................1
P2 ................................................................................................................................................3
TASK 2............................................................................................................................................4
P3 ................................................................................................................................................4
TASK 3............................................................................................................................................6
P4 ................................................................................................................................................6
TASK 4............................................................................................................................................8
P5 ...............................................................................................................................................8
P6 .............................................................................................................................................10
CONCLUSION..............................................................................................................................11
REFRENCES.................................................................................................................................12
.......................................................................................................................................................12

INTRODUCTION
The sum total of the factors such as individuals, institutions and forces outside the control
of business but the overall performance and the sustainability of the business affects is its
business environment.(Hilton and Platt, 2013). It helps to identify its business opportunities and
tap useful resources. Classification of the business environment are described below along with
their legal structure. There are different department in the company and working of each other is
interrelated. Macro environment factor have wide impact on the operations of business firms in
terms of positive and negative both. Internal and external factors of the environment are scanned
with the Swot analysis and Pestle model.
TASK 1
P1
Business environment involve various kind of organisations in it which are doing their
operations in present competitive trend. Moreover, every enterprise has their own goals and
objective as well as purpose for doing their activities. Business environment includes generally
three subdivision companies i.e., public limited, voluntary and private.
Private limited –A business entity which limits its owner liability to shares, limits
shareholders liability to 50 and limits shareholders from trading public shares. Example-Zara is
a private sector company which specialises in branded accessories and attires for men and
women. Purpose of private sector organisation to profit maximization by providing better
services to their customers and improve own living standard. Legal structure of private sector
organisation are as follows :-
 Sole traders - They are the individual who control and manage business at their own as
well as don’t have separate entity in the eyes of law from their company. In this owner of
business is responsible for all the losses, debt and also for the profit generated by them by
their daily operations. Partnership – It is the best way of introducing business by less amount of capital invested
because partnership firms have two or more than two person who contributes their money
for starting business. The amount invested is known as capital as well as in partnership
business each and every partner is liable for all the profit and losses.
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PLC (public limited company) – Company whose shares are freely sold and traded to
the public which should have a minimum share capital of £50,000. They motive behind running
company is not earning profit but to run effectively by fulfilling needs. For example, NICE is
government oriented company and they are rendering facilities to required person as well as
most important is that, they focus on health status of the general public (Bharadwaj and et.al.,
2013). The purpose behind providing facilities is the upliftment of United Kingdom population.
What is given below mention the introductory line.
 Central government department – In the organization of particular state is running by the
government bodies.
 Local authorities – They are the one who control and manage working of particular city
public organisation.
Voluntary Sector: These are the organisations in which social activity is undertaken by
the organisations that are non profit. For instance, Wellcome Trust comes under the
voluntary sector company of United Kingdom which is founded in 1936 by Sir Henry
Wellcome them mainly focusing on research related to biomedical science. This is the
biggest enterprise which provides services for research and it is the largest in the respective
sector. Main purpose of voluntary organisation is to provide free services to society for their
upliftment. Legal structure of voluntary sector is described below-
 Public Trust- The traditional structure of charity which is governed by the trust deed and
provides administration for the same. It is usually established by the group which doesn't
require membership structure. They have specific duties and power under trust.
 Association- It is unincorporated structure for community and voluntary organizations
where a group of people agree together to work on the specified project but not for
earning profit.
 It also includes charitable incorporated organizations, community interest company.
In international business environment private, public and voluntary each organisation
provides a major contribution. Private organisation are basically established to earn maximum
profit therefore they create roots on international boundaries by providing a major contribution in
economy development practices. On the other hand, public and voluntary sector organisation
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basically works in service areas therefore they having a major contribution in individual
development practices on global level.
P2
Organisations under the business environment are categorised as Public limited, Private limited,
Cooperatives , MNC etc. These company vary in their nature scope, size, technology.
Change in nature causes change in the vision, mission and organisational structures of the
company. These are described below-
Private limited company- This company besides providing services to the general
public works with the motive of earning more profit. It limits owners liability to shares and
restricts shareholders liability to 50. Zara structure is described as follows-
 Origin- It was founded in 1975 by Amancio Ortega and Rosalia Mera. It specialises in
clothing and accessories related products.
 Products-It deals in clothing for women, men , children of high standard to meet the
needs.
 Market share- It has opened around 7475 stores around the world according to the data
of 2016 to capture larger market.
 Vision and Mission- To provide customers a wide range of choices of clothing and
fashion top satisfy their needs compared to other fashion retail companies.
 Objective- It wants to become one of the leading international brands in clothes and
accessories.
 Organisation structure- It follows modern organisational structure where employees and
supervisors work collectively to satisfy customer needs.
Public limited company(PLC)- These companies are run by the government whose shares are
freely sold and traded in the market with minimum share capital . These companies work for
providing standard services to the customer which increases their standard of living rather than
for earning profit. Example of Nice a public sector enterprise is discussed as follows-
 Origin- It was founded in 1986 headquartered in Ra'anana, Israel.
 Products and services- The main services provided by them are software to the
companies, it helps in IT consulting and video analytics for the company.
 Market share- It has extended its partnership with teklec in united states to provide
services to the general public
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 Vision- To become leading corporation through its performance by providing services
rather than profit.
 Mission- To become customised as per the requirements of the public to satisfy needs and
become innovative in nature.
 Structure- Organisational structure of Nice is matrix in nature in which employees have
dual relationship with their managers. They report to the functional as well as the product
manager.
Voluntary sector- These sector comprises of the organisations whose main purpose is to
serve the society without earning profit without intervention of the government. Profit earned is
invested itself into the community or the organisation itself. Welcome trust is doing medical
research to serve its employees to improve their health in the best possible manner. These sector
uses the appropriate resources and talent to achieve its objective.
 Vision- To provide upgraded services in the health improvement areas of human beings
and animals.
 Mission-To provide efficient services and to do research in biomedical sciences.
TASK 2
P3
It is a blueprint in which organisation shows interrelation of each and every department in
the company. In general internal structure of the organisation is explained with the help of the
diagram-
4

(Source: Organisational Chart of Company, 2013)
5
Illustration 1: Organisational Chart

Moreover, all the organisation has various divisions and all these are interlinked with several
purpose of the organisation. Work done by all the departments is highly dependent on one other
as production is interlinked with finance etc. Same as, Zara have different departments to handle
tasks which is linked with goals and objective of respective organisation. Finance department: It is the major support of finance of company because without
financial support no company can do their day to day activities as well as survive in
market for long time. Finance department of Zara is interrelated with the activities of
company other department such as production is the section which cannot work without
funds because for their daily basis activity there is requirement of raw material which is
purchased through funds provided by finance department. Proper management of
financial resources in the company results in achieving goals and objective in proper
manner as well as result in generating more revenue. Human resource department: It is the most important part of the organisation because it
manages staff members in the company and if there is need of more employees then they
conduct recruitment process and hire new also for vacant position (Werbach and Hunter,
2012). In Zara company human resource division is related with the work of each and
every part because it manages human resource and helps other departments for the proper
execution of work. Proper management of human resource and their skills help company
in accomplishing their objectives in better manner.
 Marketing department: This section assists Zara in doing promotional activities of their
products and services within market area. Along with this, main work done by this
department is conduct market survey also for determining current trends, customer’s
needs as well as wants. Marketing department is interlinked with the production and sales
department to meet the needs of the customer. With the assistance of marketing
department Zara can sale their products more and more which result in achieving
objectives of the business.
TASK 3
P4
Macro environmental factors is the largest which gives wide impact on working of the
company and for analysing these it is important for organisation to do PESTEL.
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PESTEL – It is an strategic marketing tool used to analysis the environmental factors
that affects the business operations. Zara conducted pestle analysis to increase its capabilities.
Political Factors – It consists of the rules and regulations of the government as well as
the policies which creates various legal problems for the business to operate.
 Negative effect – Zara is expanding its operations oversees which will effect its working
because of the legal policies framed by the countries accordingly. When working in other
countries it have to work distinctly to meet the policy needs. It should properly analyse
the environment before the permanent settlement. Positive effect – In some countries there are rarely some of the political factors which
affects its operations such as European countries don't modify its policies on regular basis
which helps Zara to carry business smoothly.
Economic Factors – This factor mainly relates to unemployment rates, changes in
interest rates, growing rates of economy, increase in exchange rates which affects the operations
of the business.
 Negative effect –Changes in economic factors greatly effects working of Zara because
as per the changes they have to modify their existing strategies as well as policies. Positive impact – Increase in the export will definitely help Zara to increase its
production process and to earn huge profit. Zara will be able to export its products to
another countries in order to gain awareness about its brand and helps people to target
Zara when purchasing the product.
Social Factors – These factors determine the changing demand of the customer because
of the change in the taste, fashion of changing environment and competitor moves. Zara should
analyse these factors to attract more customers.
 Negative impact – There is heavy demand in fashion accessories and clothing business
which resulted Zara to provide fashionable clothes to its customers to influence them to
buy. Positive impact –The main advantage is that if Zara supplies standard products according
to the environment which helps them to gain competitive advantage. Every customer
differ in taste and preferences comopany should modify it according to the customer
needs.
7

Technological factors – It mainly focuses in the advancement of the technology factors
which affects the business operations of Zara.
 Negative effect– Up gradation in the technology is on regular basis which affects the
company to modify its machines on regular basis to meet the needs of the customer. It is
a costly process. Positive effect – Company has to adopt some of its technology in order to gain
competitive advantage. They have opened a website of their own store which helps
customer to buy from their according to their choices.
 Legal Factors – It is mainly concerned with its laws and legislations which the company
has to undergo when operating in the business environment.
 Negative effect– Different countries work under the different laws which makes
problems for the company like Zara to operate its operations accordingly. There are
different laws for fashion industry to work according to the laws of that particular
country. Positive effect–It will provide Zara an opportunity to understand the laws of the specific
country and works with different laws to cater needs.
Environmental factors – Factors related to the environment such as global warming and
green house effect which effects the company performance and decreases its performance.
 Negative impact – Supply chain distribution channel is also greatly affected by the
natural calamities which affect the working of the organisation.
 Positive effect– In some Countries changes rapidly take place in atmosphere which
results in increasing demand of different clothes. Like this, environmental factor help in
increasing sales as well as profit (Janita and Miranda, 2013).
TASK 4
P5
Zara is the retail sector company that is famous for latest designs but for efficient
operations in the business environment there is need of analysing internal as well as external
analysis (Weiss, 2014). Analysis of these factor is only possible through SWOT because
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strength and weakness are internal. On the other hand, opportunity and threats are external.
Discussion of these are as follows :-
Strength Weakness
 It has more than around 2000 stores all
over the world and created a strong
brand portfolio.
 It is always successful when executing
new projects. It helps to generate good
returns on capital invested.
 Supply chain management is at a low
cost and its operations, manufacturing
process are vertically integrated.
 It has a strong distribution network
through which it can reach majority of
the customer (Avramenko, 2012).
 Zara is not able to tackle the challenges
which are given by the new entrants in
this segment.
 Organisational structure is not suitable
according to the present business model
thus limiting expansion in product
segments.
 There is limited level of advertising and
marketing compared to some other
brands.
 It is not able to integrate its firm with
different business culture.
 High competition for the company leads
to limited market share and high
switching cost for the customers.
Opportunity Threats
 Decrease in the price of transportation,
brings down the price of Zara products
which will attract large audience from
the market share and increase its profit
level.
 Online marketing and e-commerce is
gaining importance day by day which
can be trapped by Zara to increase its
sales.
 Lower inflation rate in the market
brings more stability for Zara to give
credit to the buyers at zero interest rate.
 Changing consumer preferences can be
a threat to Zara to manufacture its
products accordingly
 There is growing strengths of local
distributors which are sharing large
profits and threatening the market of
Zara.
 Shortage of skilled workforce in market
represents threat to Zara for earning
huge profits.
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 Advancements in the technology will
help Zara to gain market share in
different product segments.
P6
Every organisation has different strengths and weakness to avail the business opportunities
and implement strategies accordingly to gain the competitive advantage. It is the one of the
biggest multinational retail location grow their business at worldwide level and win enormous
measure of income from UK. Zara is having various strengths and its highly affected by the
Brexit law which affects the political condition of the country. It also faces difficulties which are
require to be looked by Zara and spends more of its time on working of the organisation
effectively. Whereas, internal factors are in the control and can be managed by the owner of the
business. For identification of internal elements an enterprise can do SWOT analysis. On the
other hand, for external factors PESTEL can be conducted. Strengths in Zara are its high product
lines which enables it attract large population but is affected by the external factors such as
economic and the technological factors which affect Zara business operations to work
accordingly to meet the customer needs.
In such case company should analyse its weaknesses and link it with the external
environment to implement new innovative strategies to cater needs of the customer. Company
should also focus on CSR services with the goal of serving the society at the large and creating
comforts to the society so that people can realise its brand value for the organization.
In spite of the fact that Zara is one of the renounced brand has to suffer from various
factors which lags him behind of the competition. It is essential for the Zara to continuously scan
the environment and implement the strategies to reduce the weakness which can easily manage
changes in the society and accomplish the objectives.
Zara should not feels accomplish because of its strengths as its many factors which affects
the manufacturing of its products and services. It should always think innovative to produce
products of high standard fashion which attracts customer and able to capture larger market
share. They should scan the environment to remain always ahead of their competitors.
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CONCLUSION
From the above report it has been concluded that that business environment has a very
important role for the organisations to perform its operations. Organisations should properly scan
the environment before starting its operations for the continuous performance of the task.
Moreover external and internal factors of Zara has been analysed to review the impact of macro
environment factors on the organisation. Internal factors are in the hand of the employees it can
be controlled by conducting SWOT analysis which ascertain the organisation strengths and
weakness and for external environment PESTEL analysis is being conducted. Organisations
strengths and weaknesses are also analysed by the comparing them with the macro environment
factors.
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REFRENCES
12