Business Environment Analysis Report

This assignment involves analyzing the impact of internal and external factors on business operations. The report discusses various methods for conducting business environment analysis, such as SWOT and PESTLE analysis, to gather information about market conditions and form effective strategies.

Business and Business
Environment

Table of Contents
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
P1 Types and purpose of Public, Private and Voluntary organisation and how they are legally
formed.........................................................................................................................................3
P2 Size and scope of different types of organisation chosen......................................................6
Task 2...............................................................................................................................................7
P3 Interrelation between different organisational departments and their link to objectives.......7
Task 3...............................................................................................................................................9
P4 Positive and negative impacts the macro environment has upon business operations..........9
Task 4.............................................................................................................................................10
P5 Internal and external analysis of organisation.....................................................................10
P6 How strengths and weaknesses interrelate with external macro factors..............................12
CONCLUSION .............................................................................................................................12
References......................................................................................................................................14

Introduction
Nearly all the business in the world depends upon the business environment in which
they are working. It is defined as the area in which the business operations are carried out
according to pre set organisational goals. This is the most useful factor in order to achieve all the
business goals and objectives in a planed manner (Virglerová, Dobeš and Vojtovič 2016). There
are some component in the environment which can affect the functioning of the organisation and
also provide vast of opportunities to expand its business. The factors are having direct
implications on the functions of the organisation, which consist of employees, customers and the
stakeholders. The organisation should choose the most suitable environment in which activities
can operate so that firms can earn higher profits and can enhance their turnover. There are
various types of organisation which have their own aim and objectives for running the business.
The two organisation chosen to analyse the study business environment are IKEA and Nestle.
IKEA is a private multinational organisation which is engaged in the business of buying and
selling of ready to assemble furniture. The objective of two companies are to earn the maximum
profit and increase the company market share. This report is based on nature, size and scope of
organisation which are working in various environment, in the report relation among various
organisational functions while the objectives of the business will also be evaluated. Lastly the
positive and negative impacts of business activities will be considered.
Task 1
P1 Types and purpose of Public, Private and Voluntary organisation and how they are legally
formed.
Business is normally categorised into two types which are private and public
organisation. Nowadays organisation are operating with their predetermined business aims and
objectives which are advantageous for them so that they can build a strong position in the
market. The major aim of the firms are to earn higher profits by fulfilling the needs and wants of
customer's. The firms are having different legal structure in order to accomplish a strong market
hold and earn high profits. The government has made some laws and regulations by which the
organisations are categorized according to their business activity and formations. The owner of
the business should be aware about all the legal formalities that should be followed to while
incorporating the firm.
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Different types of organisation with their legal structure are described below:
 Private organisation: They are the non-governmental organisation which are in the
controlled by private players in the industry. The organisation is closely-held and
managed by two or more than two directors. Companies have to follow different
regulations made by the government to operate the business in UK (Savrul, Incekara and
Sener 2014). In private organisation owners have unlimited liability. The main objective
of the organisation is to earn maximum profit. The private organisation aims to expand
their business operations. They contribute to the economic development and providing
employment to the unemployed which is hug burden on any country. As in the case of
IKEA they are operating in the UK market as one of the leader and their purpose is to
grow the current business around the globe. They are mainly focused towards offering
quality products to the customer's. They are following the culture so as to provide
environment friendly products to their customer's.
Legal structure of private organisation
 Partnership: it is a type of organisation where the two or more than two
person come together to incorporate a business with the objective of earning
profits. This type of organisation has to be registered in the partnership act and
has to follow all the rules and regulations prescribed in it. The partner
formulate the partnership deed which contains all the rules and objectives
specified by them through which the operation of business is done.
 Sole proprietorship: In this structure of organisation there is the single owner
who is running the business to earn the profit. These are basically the small
business organisation which have a limitation on capital. The legal structure of
this business organisation contains that they should be registered under a
particular act or should have a license to operate. They should specify the
objective of the business which they are doing.
 Companies: This type of organisation is incorporated legally by making them
register under the companies act. Two or more than two person known as the
promoters of the company can incorporate the company by investing the
capital and making it register. The companies objectives and rules are written
in MOA and AOA which signed by the promoters and has to followed by
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them. They can also raise their capital internally through issue of shares to
their members.
Advantages and Disadvantages of private organisation
Advantages Disadvantages
The directors or the owner of the business in
case of companies have limited liability.
As compared to government organisation
they have lack of resources available to do
the business.
The owner of the business have absolute
control over the operations of the business and
outsiders does affect the decisions taken.
Time taken for formation of private
organisation is little more and the rules and
regulation governing them are little rigid.
 Public organisation: these are the ones which are owned and controlled by public. The
owners of this type of business are mainly government and public. In public organisation
the share holding is 51% and the rest is in the hand of share holders (Pearson, 2017).
These organisation has the responsibilities towards the society and has to provide the
dividend to the shareholders on time. The models of public organisation are National
banks, hospitals, schools etc.
Legal structure
 Government controlled organisation: This type of organisation is owned and
controlled by government. In this organisation the decision making power is in
the hand of government of the state.
 Public controlled organisation: Under this the ownership of the organisation is in
the hand of the public. The decision making power lies in the hand of public and
no other person without the consent of members can implement the decision.
Advantages and Disadvantages of Public organisation
Advantages Disadvantages
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They are having the power to expand their
business as the holders are the public who
can provide them with unlimited capital.
For each and every decision to be taken the
consent of the members is required which is a
lengthy and time consuming act.
 Voluntary organisation: They are the voluntary organisation working for the betterment
of the society. They provide service free of cost to all the customer that they have. The
main of the firm is to develop the society in order to ensure growth and making a healthy
environment (Onetti, Jones and McDougall-Covin 2012 ). These organisation are requires
to take approvals from UK government to fulfil their objectives.
Oxfam a charitable organisation and was developed in the year 1942, offers services to
all the customers in order to ensure development of the whole society. The purpose is to raise the
living standard of the people and to organise development programme on regular basis.
Advantages and Disadvantages of Voluntary organisation
Advantages Disadvantages
This helps in meeting the social and cultural
needs of the society.
Sometimes they are having so many
governmental regulations because of which
they are not able to fulfil their objectives.
P2 Size and scope of different types of organisation chosen
There are various differences in the vision, mission and objectives of the business so the
most important factor for the business is linked with analysing the factors which are affects the
business. The plans in the business organisation should developed in the way that they help the
organisation to achieve its goals and objectives. The size and scope of the business is decided
according to the requirements.
IKEA size: This is the private organisation based in SWEDEN. The organisation
objective is to design and sell furniture and home appliances. It is one of the leading furniture
retailer in the world. The size involves the employees that it has. As the company has a
workforce of 150000 workers and the sales turnover is around 28.7 billion Euros (Wikipedia,
2018). The company has 389 stores globally functioning day and night and providing the
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customer satisfaction to the fullest. The firm is earning high profits which are beneficial for them
to enhance their overall sales index.
IKEA scope: scope of any company defines the future objectives of them. IKEA scope
includes the plan of expansion and growth. They want to grow the current customer base that
they have. The management of the company also want to adopt the new technology for
production of their products. They want that their customer to be fully satisfied and want to
provide best quality furniture in the world they also want that price of the product that they offer
should be effective so that they can capture the large market share.
IKEA vision: this is termed as long term objective of the business organisation. The main
of the company is to satisfy the different needs and wants of the customer's.
Nestle
Nestle Size: it is one of the largest manufacturer of chocolates in the world. The company
has created a strong strong brand image at the market place thus they can easily expand their
business. The company is working since 1886 and has build a strong customer base. The
company is ranked on 64th position among global 500 companies. The revenue of the company is
around 89.79 billion and the total assets that it holds is 130,380 million (Wikipedia,2018). The
company employees around 323,000 employees with them.
Nestle scope: The scope of nestle includes innovating new products for the satisfaction of
the customer's. They are already dealing in Baby food, medicines, food processing industry .
The main scope of the company is to make the product that they offer more prone to customer
satisfaction. The firm is also dealing in snacks, pet food, frozen food and milk products.
Task 2
P3 Interrelation between different organisational departments and their link to objectives.
Their are various business structure according to which the company perform various
task and through which the existence of the company comes into force. IKEA is a furniture retail
manufacturer which sells the ready to assemble furniture (Klem 2013). The different business
functions for IKEA are Designing, production, sales, marketing and billing. Business can be
incorporated in different organisational functions but to run the business in a smooth way correct
organisational structures has to be planed. Countries covered by IKEA are Europe, Asia, North
America, South America, Africa and Oceania.
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These departmental structures which are implemented in big organisation like IKEA are
 Functional structure
IKEA works on the policy of superior and subordinate relationship. These functions explains
the roles and jobs of various employees working in separate departments. This helps the
workforce to concentrate on their assigned job and has a clear mind of responsibility to work
 Divisional structure
Merits: As the company has different products to offer so the company has to operate separate
divisions to make their product available to the customer. Each and every department has
different lines such as research and development, marketing , sales and finance (Hilton and Platt
2013). There are various grounds on which departments are formed like function, product, place
and project.
Demerits: various employees are performing the same task for different departments which has
increased the redundancy of work.
 Matrix structure
Merits: This functions enables greater flexibility of working in the organisation through which
large organisation such as IKEA works this enables the organisation to work throughout the
globe. In this type of structure each employee works under the department which are marketing,
designing, etc. but they can be assigned with another role under separate department so as to
achieve the common goal of the organisation.
Demerits: The path of leaders in the organisation is little rigid as it is a matrix structure. The line
of leadership is not defined and this results in high administrative cost. Further there can be
confusion between the manager and the subordinate as its is a cloudy formation.
 Hybrid organisational structure
Merits: This type of structure helps the organisation in making coordination among the
employees and the management. As different departments are organised and coordinated this
results in overall achievement of the organisational goals.
Demerits: It enables the possibility of conflicts which further increase the administrative cost
and the response to the situations is very slow.
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Task 3
P4 Positive and negative impacts the macro environment has upon business operations
Source: PESTEL ANALYSIS 2018.
Every organisation which provides their products and services in many countries have to
suffer the impact of macro-environmental factors. This is the factor which affect the purpose of
the organisation operation effectively (Hair et. al., 2015). The managers of the organisation
needs to exercise the regular check over the external factors of the business. For this the
management has to use various tools to effectively succeed all the external factors of the
business. The most effective tool used by the organisation is PESTLE analysis. Positive and
negative effects of different external factors are defined below:
Political: It is the factor that effects the business operations of the company. This defines
the political scenario in the country. The policy created by the government affects the busienss in
both positive as well as negative way. For instance if the government make the policy in which
the tax rate are increased for the furniture products then it may result in decrease in the demand
of IKEA. While on the contrary if the tax rate is decreased then it will result in increase the
demand for the product that they are selling. This will result in increasing the profitability of the
business.
Economic: For any business to be successful the most important factor is economy. Here
the performance of IKEA depends on the fact that how will the economy perform on the coming
year this will result in making long term policies for attaining the overall objective of the
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Image 1 : Pestel Analysis

business (Bah and Fang, 2015). For example if the economy is facing the problem of inflation
the purchasing power of the customer will decrease resulting in reduction of demand of the
product . While if there is reduction in import rate it will help IKEA to buy the raw materials at a
relatively low cost and will help the company in selling the product at lower cost.
Social: The business is affected by the change in the customers preference and how the
society sees the product . There are various social environment which includes cultural trends,
demographic, population analysis etc. The company has to analyse the customer wants and the
way he wants the product to be developed. For instance the demand of the product may rise if
the company starts to manufacture the products fulfilling the requirements of customer's.
Technological: various organisation face the market favourably and unfavourably
depending on the sudden change in technological factors. The organisation should regularly
make the efforts to adopt the technology that will avoid the market failure and make the firm
more productive. For example if IKEA uses the innovative technique and make new products
that suits the demand of the customer with the help of technology then it may result in decrease
of cost of manufacturing and will help the company to obtain competitive advantages. While on
the other hand if company fails to change according to the environment then it will result in
decrease in demand of their product.
Legal: Their are certain laws and regulation made by the government of the country that
every organisation has to follow while operating their business. (Deasy et. al., 2016). For
example if the government changes the labour laws, consumer laws, safety and standard laws
then the organisation has to follow these laws in order to operate in the country.
Environment: Every organisation should prevent the excessive use of environmental
factors for the smooth running of their business. Recently the many organisation has been closed
down because they were not following the environmental laws. For instance IKEA has to close
down one of the busienss because they were causing harm to the society and the environment. So
if the company wants to run for longer term than they have to check the environmental factors on
the regular basis.
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Task 4
P5 Internal and external analysis of organisation
Internal and external analysis of a company can be conducted by the managers or
marketers of a company in order to analyse that what type of factors may affect the operational
effectiveness of the organisation (Craig and Campbell 2012). There is a particular technique for
such type of examination which is SWOT analysis in which all the strengths, weaknesses,
opportunities and threats of the business entity can be determined by the marketers. It help to
formulate effective strategies so that growth opportunities can be grabbed, weakness can be
converted in to strengths and all the threats can be dealt effectively. It is very important for the
businesses to have proper information of environment so that the activities can be performed
effectively. As IKEA is an International Group of leading furniture retailer in UK and it was
established in year 1943, it is very important for the company to analyse external as well as
internal environment so that all the results of the processes that are the part of organisational
operations. SWOT analysis for the company is as follows:
Strengths:
The biggest strength of IKEA is that it has clear vision that help it to be more transparent to the
customers and increase their satisfactions level by providing them such products and
services that are totally different from its competitors.
The company has a clear concept which has resulted in the enhanced performance of the
organisation and has reached to the list of top retailer of furniture.
Brand value of the company is very high currently it is at the 46th position in world in brand
value.
Financial strength of the company is very good as there are various brand loyal customers are
there that are retained by IKEA.
The products that are offered by the company are of good quality and manufactured with latest
design so that customers get attracting furniture items (Bryman, and Bell 2015).
The products that are provided by the company are cost effective and value for money as those
are manufactures with good material.
Weaknesses:
 As IKEA is a large company and operating its business in various countries that keeps it
to be in troubles like corruption that may affect its market image.
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 IKEA is focused to provide good quality items on less cost to the customers but some
times it is not possible and that time, this may leave a negative impact on the
organisation's image.
 It is not possible to follow all the standards of the countries where the business in
executed by IKEA, this affects the operational capacity and also may increase cost for the
company.
 Quality of the goods is now decreasing and the organisation is not not bale to provide the
products that are provided earlier by it.
Opportunities:
 In the market demand of eco friendly products is continuously increasing if the company
starts to offer such type of products than it may help to attain the growth in market.
 Customers are becoming cost conscious and they are willing to opt such type of products
that may fit in their budget.
Threats:
 Laws by the government of UK are changed frequently and it is not possible for the
company to adopt all the laws faster as it takes time.
 Enhanced income level of customers led them to trade higher in market chain.
 The competition in the market has become intensified and it may result in decreased sale
of IKEA.
 As IKEA is providing the products on low cost and this model has been copied by its
rivals and they are trying to capture the market share of the company.
P6 How strengths and weaknesses interrelate with external macro factors.
As the company desire to expand it s business in different countries and market that has
enabled them to stabilise their business and increase the companies brand loyalty in the market
(Boons and Lüdeke-Freund 2013). The strength of the company helps them to move in a positive
direction in the world of competition and help them to grab the class and quality products which
increases its ability to attract the maximum customer. The innovation plan of the organisation
also enables them to meet the customer satisfaction to the fullest. While on the contrary the
company has some weakness which provide them the ability to increase the business utility and
operations. As the company is supplying low quality of products then before which is making the
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customer satisfaction. The company is charging higher price for the products as compared to
there competitors. So for increasing the profitability and turnover of the business the organisation
needs to focus on weakness that they have.
CONCLUSION
From the above project report it has been concluded that business environment is set of
factors that may affect the operational efficiency and performance of organisations who are
operating the business in the market (.Bharadwaj et. al., 2013). It is essential for the companies
to analyse impact of internal and external environment in order to enhance performance of
business entity. For this purpose the organisation can conduct SWOT and PESTLE analysis so
that information of market conditions can be gathered. Both the analysis can guide managers to
form strategies that help to reduce negative impacts of internal as well as external factors.
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References
Books and Authors.
Bah, E.H. and Fang, L., 2015. Impact of the business environment on output and productivity in
Africa. Journal of Development Economics. 114. pp.159-171.
Bharadwaj et. al., 2013. Digital business strategy: toward a next generation of insights.
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the-art and steps towards a research agenda. Journal of Cleaner production. 45. pp.9-19.
Bryman, A. and Bell, E., 2015. Business research methods. Oxford University Press, USA.
Craig, T. and Campbell, D., 2012. Organisations and the business environment. Routledge.
Deasy et. al., 2016. Controlling use of a business environment on a mobile device. U.S. Patent
9,247,042.
Hair et. al., 2015. Essentials of business research methods. Routledge.
Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Klem, J.B., 2013. System and method for tracking information in a business environment. U.S.
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Onetti, A., Zucchella, A., Jones, M.V. and McDougall-Covin, P.P., 2012. Internationalization,
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Savrul, M., Incekara, A. and Sener, S., 2014. The potential of e-commerce for SMEs in a
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Virglerová, Z., Dobeš, K. and Vojtovič, S., 2016. The perception of the state’s influence on its
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Online
PESTEL ANALYSIS 2018. [Online]. Available through:
<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1736110>
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