Business and Business Environment - Assignment

BUSINESS
AND
BUSINESS ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Explaining the different types, size and scope of organisation..............................................1
TASK 2............................................................................................................................................5
Types of organizational structures..........................................................................................5
Relationship between different organizational functions for achieving organizational
objectives................................................................................................................................7
TASK 3............................................................................................................................................9
The impact of macro environment on the operations of organisation....................................9
TASK 4..........................................................................................................................................11
SWOT analysis of the company...........................................................................................11
Interrelationship between external factors and internal factors............................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Business environment is the collection and sum of all internal and external factors such as
employees and customers needs and expectations, supply and demand, suppliers, innovation in
technology, social trends, market trends, economic changes, government activities and
management (Beatty, Samuelson and Abril, 2018). Present study will base on the Merrill Lynch
Investment company. This had around 4400 offices worldwide and is one of the UK leading
investment company. The company is also providing an intensive range of financial services
such as commercial banking, investment banking, market personal financial services. Study lays
emphasis on the different types, size and scope of organisation and also highlighted the
advantage and disadvantage of organisation. Report will discuss about the interrelationship of the
various functions within organisation and link with organisational structure. Study will identify
those factors which influence business in negative and positive ways for that report will cover by
PESTEL analysis. It will also determine the strength and weakness of business and explaining
their interrelationship with external macro factors with SWOT and TOWS analysis.
TASK 1
Explaining the different types, size and scope of organisation.
There are different types, size and scope of organisation are underneath:
Sole trader’s organisation
The sole trader business is owned by one person. Most of the sole trader businesses
operate in the services sector like restaurant, hairdressers etc. For example: Forest Side, Cumbria
is a sole trader restaurant in the UK. Advantages and disadvantages of sole trader organisation
are as follows:
Advantages
 This kind of business has advantage which maintain full control of
their business.
 Sole traders business retain all the profit for their business.
Disadvantage
 Disadvantage of sole trade business is unlimited liability for debts
as there's not have any legal distinction between the private and
assets of business (Erasmus, Strydom and Rudansky-Kloppers,
2016).
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 Business often find it difficult to build finance for their business.
They will struggle for expansion in the future.
Partnership organisation
A partnership is business, there are two or more owners of the business and enterprise. In
this kind of business partners sets deed of partnership. Partnership deed includes roles profit
sharing ratio, mission and vision statement etc. For example: John Lewis partnership firm.
Advantages and disadvantages of partnership firm are as follows:
Advantages
 The advantage of partnership firm is a suitable type of organisation
because in that not require legal formalities.
 Other, this business has large resources like person are available for
business.
Disadvantages
 Having more people in the business, it can be complicate for
decision-making process and also decrease profits.
 Disagreement between profit sharing ratio partners, it is one biggest
reasons that companies are dissolve.
Public organisation
Public organisation is generally operating and owned by government and exist to provide
services for its citizens (Hillary, 2017). For example: Tesco is public company is public
company at UK. Advantages and disadvantages of public company are as follows:
Advantages
 The public company is provide the best services in whole country.
 Public company is generally provide lower rate education, medical
treatments to public.
Disadvantages
 It is very difficult to manage public company.
 Public company, most of the time suffers a financial loss, the
government will provide subsidies to covers this loss.
Private organisation
Private organisation is refers to any person, partnership, corporation and agency
which is not cover in public body that is operates for profit. For example: Merrill Lynch
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Investment is private company. Advantages and disadvantages of private company are
underneath:
Advantages
 The main advantages of a private company are limited liability of its
shareholders.
 Restricted trade of shares is other advantage because shareholder
cannot sells shares to outside buyer.
Disadvantages
 Private company has a very longer period and registration process.
 Compliance formalities is other disadvantage of private company
because it requires a range of compliance post incorporation.
Voluntary organisation
The voluntary organisation refers organisations that have primary purpose is to create
social impact rather than profit (Laudon and Traver, 2016). For example: British Heart
Foundation is voluntary sector firm. Advantages and disadvantages of voluntary organisations
are as follows:
Advantages
 The main advantage of this kind of business is employees are not
liable for the debts of the non-profit organisation.
 Voluntary organisations do not pay taxes, as per that all earnings can
be re-cycled back into the organisation in order to improve it.
Disadvantages
 Voluntary firms generally require more time and money to start
business.
 Small and medium sized voluntary organisation typically have very
tight budgets and handful for employees.
Difference between those organisation as per size, scope, legal structure and objectives are
underneath:
Basis Sole trader
organisation
Partnership
organisation
Public
organisation
Private
organisation
Voluntary
organisation
Size One individual
person start
More than two
and less than
Public
company
Private
organisation
This kind of
business
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this kind of
business.
10 person are
required for
starting this
business.
requires more
than 250
employees for
running a
business.
requires more
than 200
employees for
running a
business.
requires more
than 50
employees in
order to run
business.
Scope Scope of this
business is
very limited
because of
limited
product and
investment
like restaurant
manager
selling only
food.
Scope of this
kind of
business is
high because
all partners
handle
problem in
company and
its result is
best.
Scope of
public
company is
high because
government
bears all
losses which
are generated
from business
(Teece,
2018).
Private
organisation
has great
scope because
business have
ample number
of products
and services in
order to satisfy
business.
Voluntary
organisation
has limited
scope in
market.
Legal
structure
Sole trader
organisation
follows
hierarchy
organisational
structure for
running a
business.
Partnership
firm generally
follows the
functional
organisational
structure
(Organisation
al structure,
2019).
Public
organisation
follows the
divisional
organisational
structure in
order to
complete their
work.
Legal structure
of private
company is
hierarchical
organisation
structure.
This kind of
organisation
generally
follows
hierarchical
organisational
structure.
Objective Is to create
self-
employment
and earn
profit. This
Is to bring
together the
skills and
resources of
multiple
Objective of
public
company to
prevent
property of
The main
objective of
business is to
make profit as
much as
Objective of
voluntary
business is to
provide best
services or
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falls under
secondary.
business to
generate better
profit margin.
This falls
under
territory.
economy
power and
growth of
private
monopolies.
This falls
under
territory.
possible. This
falls under
territory.
other form
directly
support to
customers this
kind of
company is
falls into
hospitality
sector because
this provide
the services.
TASK 2
Types of organizational structures
It is essential for Merrill Lynch to determine appropriate organizational structure for its
appropriate divisions in investments section which are majorly Merrill Guided Investment and
Merrill Lynch Wealth Management in order to achieve desired objectives of the organization.
Organizational structure can be defined as a structure that provides guidance to all the employees
of the company through laying out the official reporting relationship which governs the
workflow of the company. A systematic outline of a company's structure helps in adding new
positions in a company more easily with providing a flexible and ready means of growth. The
organizational structure which can be used by Merrill Lynch is hierarchical structure or
divisional structure.
Hierarchical Organizational Structure
Merrill Guided Investment division of Merrill Lynch Investment is using Hierarchical
structure in order to achieve its targeted objectives. It is one of the most popular organizational
structure type which also derived few models. This structure consist of a supervisor provided
with employees that are grouped with every employee, this grouping is being done by
considering several factors which includes function, geography and product. Merrill Guided
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Investment utilizes this structure in order to improve its efficiencies as it have several
advantages. In this structure, employees recognizes defined level of leadership within the
organization where authority and levels of responsibilities arises. It also provides several
opportunities for the promotion which motivates employees to perform well.
Hierarchical structure helps the employees of Merrill Guided Investment in developing
themself as specialist as this structure narrows the focus of employees which help them to
become expert in s specific field. This helps the organization by creating loyalty of employees
towards department of the company and looks out for the best interest in their field. There are
several drawbacks of the structure which needs to be considered by Merrill Guided Investment
while implementing this structure in the organization. There is a chance of rivalry between
different departments which may inflame each department which encourages them to make
decision that benefits their own interest rather than the organization's as a whole (Maduenyi and
et.al., 2015).
Illustration 1: Hierarchical Organizational Chart
Source: Hierarchical Organizational Chart, 2019
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Divisional Structure
Merrill Lynch Wealth Management is one of the most successful division in Merrill
Lynch investment as it uses divisional organizational structure in order to perform its operations.
Divisional organizational structure can be determined as type of organizational structure that
groups all functions of an organization into a division according to product or geographies. A
product division can be organized by various activities related to the product or a service by
providing it a separate department which is led by a supervisor. Merrill Lynch Wealth
Management had undertaken this process by creating several divisions for its products and
manage its operations in a more significant manner. Geographic departmentalization includes
grouping of activities based on geography that can be according to country, state, city or locality.
It is an essential aspect if tastes and brands differs across regions because it allows flexibility in
product offerings and marketing strategies. There are several advantages and benefits for the
structure which helped Merrill Lynch Wealth Management in achieving its desired objectives by
implementing this organizational structure. Another advantage of using this structure is the
failure of one division doesn't effect the other divisions (Auschra, 2018).
There are several drawbacks of the structure which are being considered by Merrill
Lynch Wealth Management in order to prevent any loss. Multi-divisional structure can include
increased accounting and tax implications. It can create a mess if two different department of
started comparing their performance which can lead to their personal interest instead of
organization's as a whole.
Relationship between different organizational functions for achieving organizational objectives
Merrill Guided Investment and Merrill Lynch Wealth management are two major
divisions of Merrill Lynch investment with various departments which made essential for the
company to generate communication between different departments in order to achieve
organizational objectives as it helps in building trusts between teams, improving customer
service, increasing efficiency of communication and many more. The most essential relationship
required in Merrill Guided Investment includes relationship between human resource
management and operations department, and Merrill Lynch Wealth management includes sales
and marketing department, and lastly research & development and production department.
Human resource management and Operations department
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These are the most essential departments of the Merrill Guided Investment which have to
work in a significant manner in order to achieve objectives of the organization. These
departments are being created as per hierarchical organizational structure in which these have
their specific supervisors which guides them and keeps them coordinate for an effective
operation. Human resource management works on recruiting and selecting employees for the
purpose of controlling and operating functions of the organization. Operations department
includes the monitoring of other departments which helps them to ensure that all the operations
are being performed in a significant manner. This makes essential for both the departments to
coordinate with each other which can help in selecting and recruiting all those candidates which
can work effectively with the organization which can result in achieving desired organizational
objectives that is increasing productivity by improving customer satisfaction (Maduenyi and
et.al., 2015).
Sales and Marketing department
These are majorly two departments which are being brought together by Merrill Lynch
Wealth Management in order to implement all the processes in a significant manner. As the
company is using divisional structure, the organization is having two different divisions in order
to specify their tasks and this helped them in performing their tasks in a more significant manner,
but at the time of mismanagement in one division, the other division might also affected through
it because these both are dependent on each other. Sales team can coordinate marketing team in
such a way that marketing team can help the sales team to target that customers who are being
targeted while marketing. This can help in effective selling of products by targeting all those
consumers who were influenced by the marketing team. By approaching maximum number of
consumer, company can achieve its objectives in a much easier way (Valero and et.al., 2016).
Research & development and production department
Production department of Merrill Lynch Wealth Management play a major role in
achieving objectives of the company by implementing hierarchical structure, as less production
cost increases the profit margins which increases productivity of the company. Research and
development department works for developing the processes in the organizations to reduce costs
and increases profitability. So, these both departments of Merrill Lynch Wealth Management
must consider that these departments have a significant relationship which can result in
improving production process with the help of proper research and development department, this
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will vitally lead in attaining desired targets of the organization by working with as a team and
discussion for the innovation can lead to bring creativity which will attract more number of
customers that may lead increase in productivity of Merrill Lynch Wealth Management
(Sarvaiya, Eweje and Arrowsmith, 2018).
TASK 3
The impact of macro environment on the operations of organisation.
Macro environment-
It is defined as the environment that exists outside the business. It is also known as
general environment that affects the operations of all the firms. It influences the decision-
making, strategies and performance of the company.
PESTLE analysis-
It refers to the tool that assist the firm to identify and determine the impact of factors that
are existing in external environment of the organisation. Evaluation of external environment
factors helps the business to take better decisions and also help to gain competitive advantage
over other companies (Koshesh and Jafari, 2019). Merrill Lynch Investment will use PESTLE
analysis for evaluating the impact of external factors on the performance of the firm.
Political :
Political environment involves various factors that may affect the profitability and
sustainability of the business. Such as level of stability in political environment, government
laws, trade barriers, rate of taxation etc. There are various laws formed by Government of the
country like contract law etc. Noncompliance of the laws will negatively impact the operations
of Merrill Lynch. Further, government has developed various schemes for public that will help
Merrill Lynch to gain confidence of customers. Moreover, new regulatory rules of government
regarding capital like charging 8% surcharge on profit of banking firm etc. This will negatively
affect the profitability of Merrill Lynch Investment company (Bohari, Hin and Fuad, 2017).
Economical:
Economic factors can be described as those factors that are related with the economy of
the country. It includes factors such as rate of inflation, gross domestic product, foreign
exchange rate etc. that may impact operations of the organization. For example- Currently, rate
of interest of borrowing funds ranges from 5 to 20% for loan term of 3-5 years. This will help
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Merrill Lynch to attract more and more customer's. Further, the foreign exchange rate of the
country will negatively impact profitability of Merrill Lynch Investment company. Moreover,
disposable income of people living in the country is high. Therefore, large number of people will
deposit funds. This will positively affect the performance of Merrill Lynch Investment company.
Social :
Social environment involves different factors such as social mobility, lifestyle, labour,
changes in demographic factors like income, age of the people. Merrill Lynch Investment firm
should be aware of health standards, claims of employee's regarding harassment etc. There may
exist difference in educational background between target market and marketing manager of the
organisation. Merrill Lynch should focus on priorities and interest of clients while promoting its
products or services. In the country 18% of total population is above age of 65 (Widya Yudha,
Tjahjono and Kolios, 2018). It means mostly there is ageing population. This will provide an
opportunity to Merrill Lynch Investment company because old age people will have more
disposable and pension income. If, majority of people belongs to lower class, in that case it will
negatively affect the ability of Merrill Lynch to promote premium product in the market.
Technological :
Technology is an important factor because it has power to destroy pricing structure and
competition in the industry. Therefore, it has become essential to continue innovate new products
and services to improve profitability and to compete with other firms. Merrill Lynch has
introduced the solution that combines advice with digital capabilities. The technology helps to
provide clients the experience of 'do it yourself' and service of taking help from an advisor.
Further, it has also introduced a new feature that helps customers to adjust their personal targets
and goals like retirement etc. (Widya Yudha, Tjahjono and Kolios, 2018). This will help Merrill
Lynch Investment firm to attract and retain new as well as existing clients. Advance technology
will help to reduce cost, risk of fraud in the company etc.
Legal :
Legal environment involves legal laws and regulations of the government that are
necessary to be followed by companies. Such as law related with Intellectual Property Rights,
employment laws like law related with discrimination, wages etc. Further, government also form
laws to ensure the quality of products and services etc. Nearly 40 employees have filed
arbitration claims that claims that they have suffered losses due to shares of company during
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financial crisis. Claimants are managers and retired brokers. This has negatively impact the
reputation and operations of the company. Therefore, Merrill Lynch should make efforts so that,
it does not have to face problems in future (Rastogi and Trivedi, 2016).
Environmental :
It includes the laws and regulations developed by the Government for environment
protection from the activities of the company. In year 2015, Merrill Lynch Investment has
provided $ 14.5 billion for financing of the project for energy efficiency, renewable energy etc.
Moreover, it has provided grant of $ 1million to Water.org. This has help people to use safe and
clean water. Therefore, Merrill Lynch has taken various initiatives for protecting the
environment.
Macro environment factors affects the objectives and decision-making of the company.
Analysis of external factors will help Merrill Lynch to better understand the environment. It is a
useful tool for understanding the growth or decline of market, position of the business and
direction for potential future actions. Social factors will assist the firm to offer innovative
products to target segment of customer's by analysing the demands of clients. This will help
Merrill Lynch to improve the performance and growth of the business. Social environment
includes demographic factors like age, income of the people. This will help marketer to decide
the product will be suitable for which type of clients (Bohari, Hin and Fuad, 2017).
TASK 4
SWOT analysis of the company.
SWOT analysis-
It refers to the framework that supports the organisation to determine strengths and
weaknesses that exists in internal environment and opportunities and threats that exists outside
the business. The tool helps the firm to achieve strategic objectives (Gürel and Tat, 2017).
Further, it helps the firm to develop strategies. SWOT analysis of Merrill Lynch is described
below :
Strengths :
These are internal attributes that helps the business to achieve the objectives. Strengths of
Merrill Lynch Investment are as follows-
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 Merrill Lynch has reach in almost every state. It has nearly 4,400 offices worldwide.
Further, it has strong network for distributing products and services to a large number of
clients.
 The financial position of the organisation is very strong. Further, large amount of
accumulated reserves can be utilize for financing capital expenditures in future. It has a large product portfolio as it offers different types of products and services under
various categories.
Weaknesses :
It can be described as negative factors that take away the strengths of the organisation.
Business should make efforts to improve weaknesses to remain competitive. Weaknesses of
Merrill Lynch Investment are described below-
 Merrill Lynch Investment company follows centralised approach for taking decisions.
Mostly, decisions are taken by top management of the firm. This has negatively affects
the efficiency of employees.
 Employees working in legal department are not highly qualified and lacking legal
experience. Due to this, company has faced various types of legal issues. Merrill Lynch has high turnover rate as compared to other companies. It means that large
number of workers are leaving the job.
Opportunities :
These are the external factors that helps the firm to gain success in the market.
Opportunities available to the company are as follows- There is an increase in disposable income of customer's following the recession.
Therefore, Merrill Lynch has an opportunity to attract new customers and offering them
products and services of the firm (Prajogo, 2016).
Threats :
It can be described as that cannot be controlled by the firm. Business have to develop
contingency plans to deal with threats that can affect the performance of the firm.. Threats to
Merrill Lynch are described below-
 Merrill Lynch is facing tough competition from various firms such as Barclays, HSBC,
Morgan Stanley, Goldman Sachs, Bank of Scotland Group etc. To compete with other
companies firm should make efforts for offering new products and services to customer's.
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 There are various firms that are adopting new technologies for offering services to the
clients. Merrill Lynch should make efforts for developing new technology for offering
financial services and products to the customer's.
SWOT analysis will help Merrill Lynch to take various types of decisions. Strengths and
weakness of the firm affects the ability to achieve organisational objectives. It helps to develop
policies related with personnel as well as for whole company. Further, strengths of Merrill Lynch
will support the firm to overcome the weaknesses. Therefore, SWOT analysis will help Merrill
Lynch to gain competitive advantage over other firms (Leonidou, Christodoulides and Thwaites,
2016).
Interrelationship between external factors and internal factors.
Internal environment includes strengths and weaknesses of the organisation. Whereas,
external environment consists of those factors that exists outside the firm. When there is a small
change in any of the external factor, it will affect the decisions of the management. Strengths and
weaknesses of Merrill Lynch are directly related with macro environment factors and they affect
each other. If, management of the investment company fails to analyse the internal environment
factors in that case, it will fail to develop strategic plans and policies to deal with macro
environment factors like social, political, legal etc (Hamilton and Webster, 2018). The
interrelationship between macro environment factors and strength and weaknesses of Merrill
Lynch are as follows-
Legal factors
It includes legal laws like laws related with health and safety of employee's, intellectual
property rights etc. Merrill Lynch should have skilled employee's in legal department that are
well qualified. This will help the firm to face every type of legal challenges (Lang and Bateson,
2019).
Economic factors
It involves factors like rate of interest, inflation rate, economic development of the
country etc. One of the major strength of Merrill Lynch is availability of accumulated reserves.
This will help the firm to overcome the challenges of economic environment. Further, changes in
economic factors will not affect marketing or pricing strategies of the organisation.
Technological factors
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It includes factors like change in technology of developing and delivering the products
and services of the company. If, Merrill Lynch is having skilled manpower it will easily upgrade
the existing tools and techniques to offer financial products and services to the clients. Further,
the organisation has already developed digital solutions that will help to improve profitability of
the company.
Social factors
It involves factors like change in demands of customer's, attitude of clients towards the
organisation etc. Strengths of Merrill Lynch like availability of financial resources, skilled
employee's will help the company to develop and offer products and services according to
demands of clients. This will help the firm to gain competitive advantage over other companies
(Weagley, 2018).
CONCLUSION
From the present report it can be concluded that business environment plays a vital role
in decision making of an organisation in order to achieve its targeted objectives. This report also
concludes that there are several types of organization which makes essential for the business to
choose the most significant type of organization in order to be successful. Further this report
concludes that there are majorly two types of organizational structures that includes hierarchical
structure and divisional structure which can be used by the organization in order to create a
significant outline of the business.
This study also concludes that relationship between different organizational department
improves customer services, increases productivity and helps in achieving the objectives of the
organization by maintaining interrelationship between them. Lastly, this study concludes that
political, social, environmental, technological, economic and legal factors of macro environment
influences the business in positive and negative manner which are to considered by the
organization while conducting a business in order to achieve organizational targets and
objectives.
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Hierarchical Organizational Chart, 2019 [Online] Available through
<https://www.edrawsoft.com/templates/images/geographic-divisional-org-chart.png>
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<https://www.investopedia.com/terms/o/organizational-structure.asp>
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