Business and the Business Environment

This report explores the dynamic nature of the business environment and its impact on business operations. It discusses different types of organizations, their legal structures, and their size and scope. It also examines the relationship between organizational functions and structure. Additionally, it provides insights into the positive and negative impacts of the macro environment on business operations.

BUSINESS AND THE
BUSINESS
ENVIRONMENT

INTRODUCTION
Business environment is dynamic in nature and identifies the performance of business,
opportunities and profitability of business etc. It is a collection of internal and external factors
which affects the operations of organisation. It includes all those forces which are outside the
control of business enterprise (Hillary, 2017). All business organisations like public, private and
voluntary sector organisations needs to be aware of the regular changes then respond to deal with
those changes.
This report is based on the different types of organisations, legal structures and their size
and scope. It describes the relationship between organisational functions and their structure. Also
identifies the positive and negative impact or strength and weaknesses of organisations and how
they interrelate with macro environment. Marks & Spencer is a British multinational retailer
headquartered in Westminster, London. Company is specialised in offering high quality clothing,
home and food products. It has approximately 950 stores in UK in which around 600 stores only
sell food products.
TASK 1
Different types of purposes of organisations and their legal structures
Organisation is a group of people who are gathered to meet their individual as well as
organisational goals (organization, 2019). Organisations are of three types:
Private Organisation: It refers to any corporation or agency which is operated by an individual
or in partnership for profit (Hamilton and Webster, 2018). Funding of these corporations must be
raised by themselves. This sector contributes its larger share in the development of economy.
Although the business operations must follow some laws of the government as well as they can
make their own laws to run their business (private sector, 2019). For example, Marks & Spencer
is a British supermarket retailer founded in 1884, headquartered in Westminster, London. It was
the largest supermarket chain in Britain. They follow the regulations of Consumer Contracts
Regulations 2013 in which they provide full legal terms and conditions that may apply on the
products of Marks & Spencer.
Purpose: Their purpose is to maximise its profit, develops transparency in reporting and
choosing a correct organisational structure to operate their business. They can be organised as
Sole Proprietorship, partnership and corporation.
1

Legal structures:
Sole Proprietorship: This form of business formed and operated by individual. As per
this business, it has only one owner who pays the personal income tax on profits which are
earned for business. It can be seen in small businesses where small finance is required to
establish a business (Legal structures: the basics, 2018). It is the easiest form of business and can
be established without complex paperwork. In this organisations, owner is responsible for all
debts of the business and it does not require any government approval to establish its business.
This type of business is famous among sole owners, individual self-contractors and consultants.
Partnership: It is an association of individuals between minimum 2 and maximum 20
partners to carry out a business for profit. These companies are set up by partnership deed which
is a document made by partners in the presence of lawyer to avoid conflicts among partners
(Legal structures: the basics, 2018). This deed includes legal terms among partners such as profit
sharing ratio, responsibilities and authorities of partners etc. In this type of business, the personal
assets of partners can be liquidate in order to meet the debts of an organisation.
Corporation: It is an association of individuals who create independent business entity.
These organisations are owned by their stakeholders which are elected by the Board of Directors
to operate the business activities. To form these associations various legal formalities are
required which need to be fulfilled (Laudon and Traver, 2016). Corporation is an individual
entity and carry its own name and trademark.
Public Organisation: These organisations are owned and operated by government to provide
various services to people (Public Sector, 2016). These are the organisations which is owned by
state, local and central government. It is a composition of both public services and public
enterprises. These organisations are state owned who provide various good and services and
operates on commercial basis (Erasmus, Strydom and Rudansky-Kloppers, 2016). Funding of
these organisations are raised by government. Some service providers move from public to
private sector which is known as Privatization. For example, British Broadcasting Corporation
(BBC) is a British public service broadcaster, headquartered in Westminster, London. It is the
largest broadcaster in the world in terms of employees.
Purpose: Their purpose is to transform the economy, Development of socio-economic
infrastructure, spread awareness among people, provide good value services and optimum
utilisation of available resources (What Are the Main Objectives of the Public Sector, 2019).
2

Legal Structures:
Central Government: This includes various business activities which are directed by
them and have control over business (What is Central Government, 2019). Central government
has the power to constitute laws for the whole country, in contrast with local governments.
Companies who are operated by central government need to take permission from them to
operate and before taking major decisions.
State Government: They share their political powers with national government. There are
some services which can be controlled by state government (What is a State Government, 2019).
As some goods and services which can only be provided by state government.
Local Government: They collect funds in the form of Community Charges which are
formerly known as Council Tax. Local Government plays a unique role in prevention and
identification of needs (Local government, 2019). They figure out the funding and relationship
aspects of deal with new sectors. They support the organisations by staying in the boundaries of
Local Government Act 1972.
Voluntary Organisation: These organisation are a group of individuals who came into market
for social welfare. Membership is not necessary in these organisation and have paid or unpaid
staff (Charter, 2017). People join these organisations for social welfare. They are non-profit
organisation and not have any formal legal structure. These organisations are helpful those areas
who has limited amount of resources in order to perform their functions in better ways. For
example, National Council for Voluntary Organisation (NCVO) is a charitable organisation in
England and follows the regulations of Charities Protection and Social Investment Act 2016
which covers the issues of official warnings and can disqualify people from serving as trustees.
Purpose: Their aim is to Connect people and organisations, grow and enhance
volunteering, strengthen voluntary organisation. They work for social welfare or society, work
for poor and needy people, old-age and NGOs.
Legal Structures:
Trust: It is a type of charity which is run by group of people, are trustees. It is governed
by trust deed which is more flexible because there is no statutory framework (Chang, 2016).
Trustees for this organisation are not elected, they are appointed by the board. To establish a
trust, the group members need to make an agreement in written form which is called as trust deed
and represents that an organisation is legally charitable.
3

Unincorporated Association: This charity is set up by that constitution which is not
described. Company need to include some features such as restriction on the distribution of funds
to members as individual need to make constitution and set rules under which it run (Prajogo,
2016). These associations are not incorporated, so they cannot make any contract. Number of
individual came into this category and without knowing it that what exactly an association do.
Size and scope of the organisation
Basis Marks & Spencer BBC NCVO
Vision Their vision is to
reflect the values and
be the standard against
which others are
measured. They
inspire emotions of
people.
Their vision is to take
pride in delivering
quality and value for
money. Company
thinks that “Great
things happen when
they work together”.
Their vision is to make
better world for people
and encourage them to
work with them.
Mission Their mission is to
inspire the quality
accessible to people
and to provide
rewarding shopping
experience to people
and they need to
understand more about
the customers needs,
preferences and
behaviour.
Their mission is to
provide impartial news
and information to
engage people with the
world around them
and support learning
for people of all ages.
Their mission is to
fulfil primary needs of
needy people and also
spread awareness
among people.
Size and scope Organisation follows
flat structure and this
encourages employees
The total number of
staff is 35,000
approximately and it
There were
approximately 166,854
voluntary
4

in more decision-
making. Company has
around 1035 stores
and 428 International
stores ().
includes flexible, part-
time and fixed contract
staff.
organisations in UK.
There are around
900,000 groups
working as voluntary
organisations. NCVO
has scope as it works
for civil society (HOW
MANY VOLUNTARY
ORGANISATIONS
ARE THERE, 2019).
Stakeholders Their stakeholders are
the owners at the top
of business who put
their money into
business and if
business loses money
then the stakeholders
also lose their money
(What is a
Stakeholder, 2019).
Stakeholders
engagement is a part
which represents that
how the company
continuously improve
their performance.
Their stakeholders are
owners, managers,
customers, suppliers
etc.
They are directly
connected to the
organisation like
funders, charity
commission etc. in
voluntary organisation
employees, members,
local community and
local voluntary
organisations can be
stakeholders.
TASK 2
Organisational structures and functions
Organisational Structure: It is a system which helps in outlining the certain activities in order
to achieve the goals and objective of an organisation and it include roles and responsibilities of
company (Organizational Structure, 2019).
Matrix Structure: This structure is based on matrix or grid structure rather than hierarchy
(Deasy, and et. al., 2016). In this structure people have different work assignments and they need
to report their work to more than one manager as they may be assigned different projects under
different managers. BBC follows global organisational structure as it works in television or
5

broadcasting and manages various shows at a time and also present in many countries. BBC
promote its shows with the sponsorship of other brands. Employees are assigned at different
work and they have to report themselves to different managers.
Flat Structure: This structure has limited levels of management. It encourages decision-
making among employees. It is a structure where few levels are included between the middle
management and staff (Pearson, 2017). Marks & Spencer follows international organisational
structure as it import and export its products and also have no investment outside their country.
Divisional Structure: This structure allows more liberty among groups. It is majorly seen
in those companies where many tasks are operate at a same time (Organizational Divisional
Structure, 2019). NCVO follows this structure in its organisation as it is a very complex
organisation and many projects and programmes runs at a same time. Organisation follows this
because it gives powers to each individual.
Marks & Spencer is a British supermarket retailing company so to manage it, the
organisation is divided into different functional units such as HR, Marketing, Finance, Sales etc.
Various departments are discussed below:
HR and Finance Department: HR department focuses on human capital which is an
asset for the organisation (Evans, and et. al., 2017). Finance department provide funds and views
HR as a cost unit. Both the departments of Marks & Spencer interrelated with each other due to
which skilled candidates are recruited in finance department. Through this their objective is to
gather best candidates who can develop more financial strategies to make company more
financially stable.
Marketing and Sales Department: Market department conduct market research for
gathering different types of data like taste, need, preferences and demand of customers (Ji-fan
Ren and et. al., 2017). Sales department provides the products to customers and develop various
sales strategies to increase their sales. Through this the objective of Marks & Spencer is to
increase profit and revenues and also the reputation of company.
IT and R &D Department: IT department look for the maintaining and managing the IT
equipments like software, machines and technology they use. Whereas R & D department do
research for them like which technology is suitable for them and new technology present in the
market (Schaltegger, Hansen and Lüdeke-Freund, 2016). Through this their objective is to apply
best technology for products in the organisation.
6

TASK 3
Positive and negative impacts of macro environment upon business operations
PESTLE Analysis of UK retail sector
PESTLE analysis is a framework which is used to identify the external factors of the
business environment which helps in achieving the success for business and reduces the risk
factor for it. It is important for companies to conduct it because it helps in identifying the various
factors for an organisation which protect them to take wrong decisions for them.
Political: Profitability of any retail store is influenced by government policies. These
policies impact the purchasing habits of customers, trading laws and economy and only laws can
abide the companies policies. Selling of products influenced by political regulations. Companies
who offer food products must apply health guidelines and food & safety act projected by
government. By various issues such as data opening, anti-trust issues etc. government need to
interfere in the companies polices like how they store data, uses and share it. For example, due to
the impact of Brexit Marks & Spencer reduces its cost on products because taxation policy could
become threat for business.
Economical: Customers buy products when the economy of the country is strong. This
factor is very risky and uncertain in retail sector as the economic rates and growth of the country
is fluctuating. Economic growth develops high demand for retail sector. When the economy is
decline then people start saving their money for the necessary products. Economy affects when
the unemployment rates rises. At the time of recession it put positive impact because retail
industry can hold itself up as they can manage themselves (PESTEL/PESTLE Analysis of The
Retail Industry, 2019). For example, Marks & Spencer changes its marketing strategies so that
they will not get dis-balanced. Company was able to hold itself up during the time of recession.
Social: Customers taste, requirements and preferences affects the retail sector.
Companies identify the buying trends of the customers and do market research to analyse the
consumers behaviours (PESTEL/PESTLE Analysis of The Retail Industry, 2019). Customers
preferences depends on their social values. Companies will advertise in its targeted area by
which they can attract customers to visit their stores. It put negative impact on those companies
who does not conduct market research before launching their product in the market. For instance,
Sainsbury's make sure that its products range is updated and keep introducing creativity in the
market to attract customers.
7

Technological: Retail stores uses different technologies in the terms of sales and
promotion of their products. This industry gained lot of benefit because of internet as it becomes
easy for them to reach audience worldwide. Companies has their own websites based on the
digital catalogues of their products (PESTEL/PESTLE Analysis of The Retail Industry, 2019). It
put positive impact on the retail industry as because of technology they can easily identify the
market and its conditions. For instance, Marks & Spencer launches its self-driven automotive to
deliver products to its potential customers. For this, company adopts advanced technology which
can increase its overall production cost.
Legal: Before opening a store, retailers need to follow or meet various legislative
conditions and laws which abide them. These factors becomes tricky when company expands its
business and start online selling. For example, while auditing in the Marks & Spencer, it found
that company forced their workers to work for 7 days which is violation of Labour Act and by
this company breaches its legal policies and this act of the company put negative impact on the
mind of customers and employees and become threat for the company (PESTEL/PESTLE
Analysis of The Retail Industry, 2019).
Environmental: The environmental state impacts the quality of products which means
companies need to abide by more economical and political factors. Climate and the seasonal
changes by environment put great impact on the customers. It includes the ecological
environment, organisational culture, market values etc. For instance, Marks & Spencer promotes
carbon reductions in most of its stores which becomes opportunity for it and put positive impact
on the mind of employees (PESTEL/PESTLE Analysis of The Retail Industry, 2019). Its stores
are environment friendly and emits less carbon-dioxide than a new build store.
TASK 4
Internal and external analysis of organisations
SWOT Analysis of Marks & Spencer
Strengths Weaknesses
 Marks & Spencer is becoming
successful in the implementation of
new projects and earning in valuable
returns.
 Prices of Marks & Spencer are too high
for the middle class customer as it
cannot be successful in underdeveloped
countries.
8

 Expanding its business in international
market strengthen the UK market
(Virglerová, Dobeš and Vojtovič,
2016).
 Company is not able to accept the
challenges as Wal-Mart acquire its
empire despite of its best IT services
(SWOT analysis of Marks and Spencer,
2019).
Opportunities Threats
 Marks & Spencer has opportunity to
merge with other retailers to acquire
new market segment and give tough
competition to its competitors. For
example, they can merge with Asda in
order to acquire more and more market
conditions.
 Company's strong brand reputation will
help in its premium pricing and they
also lead the market of other countries
by its products (SWOT analysis of
Marks and Spencer, 2019).
 Company has face lawsuits in those
countries who has volatile political
climate and policies keep changing.
 Marks & Spencer has threats from its
competitors such as Wal-Mart,
Amazon, TESCO etc.
Porter's Five Forces Model
This analysis used to examine the competition in the market. It is a strategical direction
instrument to analyse business and interpret inherent levers of profit in a given industry. UK's
retail sector can use this framework to realise how the five competitor forces impacts
profitability (Porter's Five Forces, 2019).
Threat of New Entrants: New entry can effect UK retail sector's market share and
financial presentation. Threat of new entrants is moderate because of the following micro
factors:
 Low-level change costs is high because it permit customers to easy relocate from one
sector to other sector.
9

 Highly variable capital cost is moderate because reimbursement of establishing a new
company authorise new businesses to move into the worldwide industry. High cost of brand development is low as it is costly to develop a strong reputation in
industry. Numerous small and medium businesses has lack of informant to make a strong
brand to match Marks & Spencer.
Threat of substitute:- Retail sector offers broad range of products and services including
foods, clothing, groceries etc. (Hamilton and Webster, 2018) The substitutes of UK's retail sector
is high because customers can switch from one brand to other brand who provides slightly
different product or any innovative and trendy product. Most of the second-string are competing
in the context of customer satisfaction and quality. In the diversified business environment
customers can switch from one brand to other brand.
Bargaining Power of Buyers:- The purchasers of retail sector have numerous choice
available in the world. They can easily shift from one brand to other if they are unsatisfied. The
purchasers can easily resist if Marks & Spencer will increase its prices and shift to other brand.
The small and more almighty the customer base is of Marks & Spencer, the high the bargaining
power of consumers. Therefore, the negotiation power of buyers is high in Marks & Spencer.
Bargaining Power of Suppliers:- Most of the companies in the retail business purchase
their raw material from various suppliers (Porter's Five Forces, 2019). The raw materials that
they use for its merchandise are accessible by a large number of suppliers. There are number of
suppliers that would be consenting to become the suppliers of Marks & Spencer. Therefore, the
negotiation power of suppliers is low as the suppliers are not in the position to bargain or can't
afford bargaining.
Competitive Rivalry:- Intensity of competition in food, clothing and grocery retail sector
is high. So many multinationals have almost the same to serve its customers. The Competitors
of Marks & Spencer are Asda, TESCO, Aldi etc. and local market as well. Each sector is
spending on advertising and innovating in their products and open new franchises to develop
their customer base (Porter's Five Forces, 2019).
Strengths and weaknesses are related with external macro environment
Political: Global expansion of retail sector is high and government allows it to free flow
of trading in European countries whereas in other countries for trading they need to pay taxes
under Foreign Trade Regulation Act. The political stability in the rules and regulations of UK
10

will help retail industry on large scale to increase their brand image in the future (Using Business
Strengths and Weaknesses to increase Customer Satisfaction, 2019).
Economical: During recession, the sales for the consumer goods also increases which
can help them in becoming the largest retailer across the world (Using Business Strengths and
Weaknesses to increase Customer Satisfaction, 2019). The funds in the form of license fee to
retail industry has been reduced by the government and their operating cost is high which implies
that retail industry cannot be able to operate effectively in low funds in case when operating cost
is high.
Social: Retail industry introduces its products while keeping the customers viewpoint and
taste. But customers of their local areas are shifting to local market because of frequently
changes in trends and did not get the product according to their taste and need.
Technological: UK's retail industry promotes its products by media and introducing its
new products to customers. But by this strategy their overall production and manufacturing cost
increases so they need to change or modify their strategy.
Legal: Retail sector offer quality products to its customers is necessary to meet their
requirement. But company exploits its labour. So, this reduces the employees interest. Retail
sector is fully dependent on board of governance for funds which can reduce their strong brand
image.
Environmental: Retail industry uses huge amount of quality raw materials to produce
goods but it is quit critical for them to manage the use of materials.
In order to increase the profitability of company, it is recommended them to conduct the
SWOT and PESTLE analysis as it is useful in order to increase the profitability and
sustainability of it. As because of these factors company can easily identify the various factors
which help in its expansion and growth.
CONCLUSION
By the above information it is concluded that business environment is the collection of
both internal and external factors which influences the performance of business organisation.
Moreover, the purpose and legal structure is necessary for any organisation and also described
that different organisational functions and their linking with the structures. Proper coordination
between all the departments of business helps in the attainment of objectives. In this report we
have discussed the vision, mission and different objectives of different organisations. Here, we
11

discuss the SWOT and PESTLE analysis of different organisations and evaluate the external
environment which is essential for any company to enter into the business environment and how
the external factors impact business and also determined the internal and external strengths and
weakness of the organisation.
12

REFRENCES
Books and Journal
Online
13

KEY FACTS. 2019. [Online] Available through
<https://corporate.marksandspencer.com/investors/key-facts>./
HOW MANY VOLUNTARY ORGANISATIONS ARE THERE. 2019 [Online] Available through
<https://data.ncvo.org.uk/profile/size-and-scope/>./
14