Environmental Analysis in Business

This assignment requires students to examine the influence of both micro and macro environmental factors on business strategy. It necessitates a thorough understanding of PESTLE analysis, Porter's Five Forces, and other relevant frameworks for analyzing the business environment. Students must demonstrate their ability to identify key environmental trends and explain how businesses can adapt their strategies to succeed in dynamic market conditions.

Business and Business
Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO1: Explain the different types, size and scope of organisations..................................................1
LO2: Demonstrate the interrelationship of the various functions within an organisation and how
they link to organisational structure.................................................................................................1
a) Different types and purpose of organisation (P1).............................................................1
b) Size, scope and range of different organisation (P2).........................................................2
c) Relations between organisational functions and linking them to objectives and structure
(P3).........................................................................................................................................3
LO3: Use of contemporary examples to demonstrate both the positive and negative
influence/impact the macro environment has on business operations.............................................5
a) PESTLE for Marks and Spencer (P4)................................................................................5
b) Internal and external analysis of the organisation (P5)......................................................7
C) Interrelation of strengths and weaknesses with external environment (P6)......................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business can be defined as the economic activity which focuses on earning profit through
exchange of goods and services. A business can be categorised on the basis of structure, size and
scope. A business environment is the ecosystem in which business operates. The ecosystem
consists of various factors which can be categorised into external as well as internals that affect
the functions of the business. This assignment focuses on various types of organisation on the
basis of their objectives, size and scale of operations. The effect of the macro environment will
be taken into consideration (Björklund, 2011). The assignment focuses on Marks and Spencer, a
leading retailer of United Kingdom. The strengths and weaknesses will be identified and their
interrelationship with the external environment will be done.
LO1: Explain the different types, size and scope of organisations
LO2: Demonstrate the interrelationship of the various functions within an organisation and how
they link to organisational structure
a) Different types and purpose of organisation (P1)
Private Sector
Private sector organisations are owned by private individuals or corporations. There is no
interference of the state in the matters of the business. The sole objective of the company is to
earn profits and yield revenue. The secondary objective of the private organisations is to increase
the market share or growth of the company.
Marks and Spencer is one of the leading private retail chain in country. The company
focuses on selling clothes, food products and home products. The profits of the company in 2017
was 115.7 million euros. The company operates in 959 stores throughout the country. The legal
definition of the company states it as a profit corporation. Which means the company’s shares
are available for public purchasing with limited liability for the purpose of raising capital and
achieving economies of scale (Bryman and Bell, 2015). Prime example can be health services
and education. These are funded by the amount which is paid in the form of taxes to state
government. Voluntary Organisation
These organisations can also be defined as the common-interest association or society. In
these organisations, a group of people come together and forms an agreement for a defined
purpose. The people who come together have a mutual interest or a goal. For instance, the people
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who form an association have something in common. Trade unions are example of voluntary
association in which people who come together wishes to enhance their bargaining skills and
promote common interest. The examples of the same can be trade unions, societies and
environmental groups. These organisations can be further categorized into corporate and uni
corporate.
“World Vision” is one of the biggest charity organisation for children in the country. The
organisation operates on a global scale and focusing on eradicating poverty of children living in
fear. Sole objective of such organisation is to cater to needs of children in under developed
nations without having any profit motive. The legal definition of the company states it as
religious non-profit organisation.
Public Sector
These are the companies which are owned and managed by the government. These
organisations are operated by government and exists to provide service to its citizens. Main
objectives of public-sector enterprises are to provide public services irrespective of their social
and economic status (Cuervo‐Cazurra, 2011). Public sector does not focus on generation of
profits which is in the case of private companies. people have seen a substantial rise in the public
sector. Range of services it includes are governmental services, including infrastructure and
public transportation and health and safety facilities.
The British Broadcasting Corporation(BBC) is public service broadcaster in London. The
company was formed in 1920 and employs around 20,916world wide. This organisation is
owned by central government and its operations are funded with the amount raised by television
licensing in the United Kingdom. The organisation is managed and funded by the Royal charter
in its legal structure.
b) Size, scope and range of different organisation (P2)
Marks and Spencer
Marks and Spencer shortened as M&S is a multinational retail chain. Its major operations
include clothing and food retailing. Range of the products include selling of clothing, home
products and food products (Drucker, 2017). Recently product range expanded when company
began selling Kellogg Corn flakes which is one of the largest consumed product in the country.
Domestic stores are 959 in number and its emphasis is on selling of food which constitutes
approximately 60% of the total stores. The company operates at international level and have
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around 468 stores in around 58 countries. The short-term goals of the company are improvement
in sales and the long-term goals can be justified with expansion of the company in the emerging
markets.
British Broadcasting Association
BBC operates on the global level and termed as the largest public service provider in the
country. The main medium preferred are TV, radio, and online services. The news is broadcast in
29 languages which is the largest in terms of publishing. The commercial division of the
corporation are BBC worldwide, BBC world news, BBC studious and BBC studio works. The
expenditure of the is around 4.722 billion euros which is the second largest in terms of budget.
This publishing house covers more than 200 countries and territories worldwide. The objectives
of the company is to provide cost effective and quality broadcasting services to the people. The
revenue generated by the broadcaster is submitted to the central government in the form of
consolidated funds (Hamilton and Webster, 2015).
World Vision
The World vision is one of the biggest charitable organisation which is working for the
welfare of the people. This organisation serves around 97 countries and the fund generated
through the grants, products and donation is approximately 2.01 billion euros. The initial purpose
of forming this service organisation was to meet the essential needs in times of emergency. The
scope of operations has widened and it is now working for the welfare of people focussing on the
children and community development.
c) Relations between organisational functions and linking them to objectives and structure (P3)
Organisational functions are the operations which are carried out in a business to
accomplish the objectives of the company. The objectives of the company determine the style
and amount in which these functions will operate to accomplish the same. The structure of the
company defines the way in which various components in the organisation interact with each
other (Rose, Hair and Clark, 2011). The chain of command will be identified for an error free
transition. The functions have a direct influence on the structure of the company. The main
functions performed in a business are:
Finance Function
This is defined to be the most crucial function in an organisation. It assesses the
requirements of the funds to accomplish the task and identifies the sources which can provide
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with the same. It is the blood of the organisation necessary for all the tasks. The purchasing of
inputs, salaries, repayments and formulating of all the strategies are conducted keeping in mind
the finances of the company. The finance is accumulated on the basis of objectives. M&S wants
to increase in sales which can be achieved through advertisement or sales promotion activities
which will require finance.
Human Resources function
These functions are confined to finding and developing the human resources of the
organisation. The objectives determine the human resource requirement. M&S wants to open
new retailing outlets in London which will require more human assets to perform the operations.
HR team determines the best structure suitable for the company whether it be functional, matrix
and divisional structure (Schaltegger, Lüdeke-Freund and Hansen, 2012).
Sales and Marketing Function
There is a difference between marketing and selling. Marketing helps a company in
making aware about the products, discounts and providing basic knowledge about the same
whereas sales team facilitates the sales of the product and reach the target. The objectives of the
company decide the way or type of strategy used. M&S wants to boost sales of clothes in the off
season so the marketing team would understand the requirement and formulate strategy for
example: Sales promotion technique. The functional structure helps in facilitating the same in an
efficient manner as it requires a high level of integration between the same but sometimes there
can be situation of confusion and overlapping of work in the organisation.
Production Function
Production function is one of the most important function of operations. It revolves
around turning the raw material into the finished goods. It is the duty of the production manager
to facilitate the same. Objectives of the company determines the area and scale of output.
Company looking to expand its operations will focus on producing more of the output (Sena
Ferreira and et. al., 2012). The divisional structure can be preferred when the company have
different product lines or various production facilities.
Supply Chain
It is a process of making the product reach to its final user. The supply chain is a different
field altogether. It involves various elements working together to fulfil the requirements of the
prospects. The company is a retailer therefore the supply chain is proactive. M&S have various
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supply chain strategies depending on the requirements and origin of the product. The company
deals in cloth line, food, beauty and food products. On comparing them all the food supply chain
is more complex so in these circumstances going for divisional structure can help them entangle
the tasks and can perform better.
LO3: Use of contemporary examples to demonstrate both the positive and negative
influence/impact the macro environment has on business operations.
a) PESTLE for Marks and Spencer (P4)
PESTLE is an analytical tool which help in assessment of factors of the external
environment. To better understand the circumstances and to create policies to counter the same.
Marks and Spencer is universal retailer therefore is exposed to the external factors under
different circumstances so it is crucial to evaluate them from time to time.
Political Factors
These are the various laws and policies formulated by the government in respect to
business corporations. The policies in European union have been very strict. The market is now
open for other retailers to enter in the segment therefore reducing the market share of the
company (Welford, 2013). Trades are permissible until they don't harm any public policy and
public order. When it comes to food department the policies are very strict and a company have
to abide by the laws to carry on its operations. There were some concerns about the company not
following the rules and neglecting health regulations.
Economic Factors
Economic factor takes into consideration situation in the market. Interest, wages,
inflation, demand and supply are given importance while understanding the economic condition
in the market. There has been situation of recession in the market which have led down the
volume of sales of the company. The economy is very sensitive to the fluctuating interest rates.
The company have suffered some bad outcomes of the recession. In order to cut down the
expenditure the company has to let go 2% of their employees which is approximately 1400
employees. Lately the company have experienced positive growth in terms of economy and are
optimistic about the retail sector and GDP of the country is one highest among Europe.
Social Factors
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These factors take into account the lifestyle and the tastes and preferences of the
consumer. People in UK are brand conscious and prefer better quality rather than price. But a
competing brand can easily capture market by providing competitive pricing. Company's
products target various market segment. Lately the company have been struggling in order to
keep their market share unaffected (Wheelen and Hunger, 2011).
(Source: - Micro environment factors, 2015)
Technical Factors
The online web portals have been a revolution in the field of retailing. The technical
operations have provided flexibility in the operations. Online marketing has increased the sales
volume and company can obtain competitive advantage in UK.
Environmental factors
The changes in the environment have caught the attention of all. There had been
significant pressure on the company to adopt sustainable means of development. Marks and
Spencer have formulated their own policy of green development called as “plan A”. This plan
focuses on building a sustainable future of the company which have a positive impact on well-
being and communities on the planet (Wild, Wild and Han, 2014).
Legal Factors
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Illustration 1: Micro environment Factors

These are the laws which are enacted by the government. In marks and Spencer there is
regular evaluation of policies to ensure whether its following all the laws or not. In food sector,
there are strict health and safety laws which are to be abided by. The fair packaging and labelling
Act (1996) makes the company to follow the norms which are established under the act.
b) Internal and external analysis of the organisation (P5)
It is very crucial for an organisation to conduct internal and external analysis. SWOT
analysis is one of the common tool to accomplish the same. In this technique, team identifies the
strengths, weaknesses, opportunities and threats considering internal and external factors which
influences functioning of business (Williams and Naumann, 2011). The analysis can be utilized
while formulating plans, assessment of business circumstances and deciding objectives. SWOT
analysis of Marks and Spencer is as follows:
Strength
 Brand Value
 Differentiated products
 Distribution network
 Human asset
 shopping Ambience
 customer service
Weaknesses
 Strong Competitors (Tesco, Asda and
Sainsbury)
 The rise of fake products
Opportunities
 Venturing into new market segment
 Expand into emerging markets such as
India and china
 Developing their own website quality marketing
Threat
 Exposure to different markets
 policies of government for retail sector
 Better pricing of the rivals
 losing market share
The above analysis gives a clear description of strengths and weaknesses of the firm.
Along with this it also provides the existing opportunities in the market and rising threats.
This assessment helps in identifying the standing of the company in the market. The
Strength are the areas which can be further explored or utilised to have a better position in
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market. For M&S the strength in its product portfolio, vast distribution network and in the
manner of satisfying the needs of the customers.
The weaknesses of the company are the areas which are to be improved to fulfil the
objectives of the company. The main competitors are Tesco and Asda which are eating away the
market share of the company. The fake products in the market have become the threat of
company (Zott, Amit and Massa, 2011).
Opportunities are the chances which an organisation have to increase their size or scope
of operations. M&S can expand its operations in the market where they are receiving positive
response from the customers such as India and china.
Threat are the factors which can cause damage to the business. M&S operates at global
level therefore the political and economic situation can be a threat to the company. The market
share of company is slipping away from its hands which can cause irreplaceable damage to the
company.
C) Interrelation of strengths and weaknesses with external environment (P6)
There is a direct relation between the external environment and strengths and
weaknesses. These external factors may not have an immediate effect on the business but will
surely affect the functioning in the long run.
Political environment
Changes in the laws and policies have a direct impact on the business. The government
increases the taxation on the imported goods which will affect the sales margin of the product
making organisation more vulnerable to the environment. The Government increased VAT
which affected the strength of company. Most of the day to day operations are funded by sales
revenue (What is Environmental Analysis? 2015).
Economic Factors
The situation of recession is of no use to the organisation. A progressing economy
becomes strength of the organisation. A customer in a stable economy have more purchasing
power which results in strength of company by increasing sales revenue.
Social factors
Social Factors can be categorised into three broad categories:
 Demographics
 Psycho-graphics
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 Geographic
The company's areas of operations and vast distribution network can help overcoming
geographic barrier. The wider product portfolio helps in targeting each and every segment, helps
in increasing sales and brand value of the product.
Technological factors
The latest IT and technological development can help an organisation develop a
competitive advantage among its rivals. The development of online web portals or the rise in e-
commerce can help a company in increasing the sales revenue or creating a flexible distribution
network.
Environmental Factors
Today it is very crucial to abide by various environmental norms. Any company who is
working against it will be forced to shut down its operations. The M&S have developed a “Plan
A” which focuses on sustainability. The company cares for the wellbeing of nature. Which
provides with a positive brand image and can reflect in sales numbers as well.
Legal Factors
These are the laws enacted by the state. The laws regarding importing when relaxed can
help an organisation procure goods at effective prices and sell at a higher margin. On the other
side when the laws are strict it can hinder the growth therefore becoming weakness of the
company.
CONCLUSION
From the above report, it can be concluded that the business environment has a direct
impact on business operations. It comprises of two major components i.e. Macro and micro
environment. The organisations can be categorised into three basic categories such as private,
public and voluntary organisation. The main differentiation basis are their size, scope and
purpose. Various business functions such as finance, human resources, marketing and supply
chain help organisation in effectively achieving their objectives. Strengths and weaknesses of a
company identified through SWOT analysis. Relation between the external and internal
environment have been studied and the impact that these factors have on the strength and
weakness is analysed as well.
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REFERENCES
Books and Journals
Björklund, M., 2011. Influence from the business environment on environmental purchasing—
Drivers and hinders of purchasing green transportation services. Journal of Purchasing
and Supply Management. 17(1). pp.11-22.
Bryman, A. and Bell, E., 2015. Business research methods. Oxford University Press, USA.
Cuervo‐Cazurra, A., 2011. Global strategy and global business environment: the direct and
indirect influences of the home country on a firm's global strategy. Global Strategy
Journal. 1(3‐4). pp.382-386.
Drucker, P. F., 2017. The Theory of the Business (Harvard Business Review Classics). Harvard
Business Press.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University
Press, USA.
Rose, S., Hair, N. and Clark, M., 2011. Online customer experience: A review of the business‐to‐
consumer online purchase context. International Journal of Management Reviews. 13(1).
pp.24-39.
Schaltegger, S., Lüdeke-Freund, F. and Hansen, E. G., 2012. Business cases for sustainability:
the role of business model innovation for corporate sustainability. International Journal
of Innovation and Sustainable Development. 6(2). pp.95-119.
Sena Ferreira, P., and et. al., 2012. Framework for performance measurement and management in
a collaborative business environment. International Journal of Productivity and
Performance Management. 61(6). pp.672-690.
Welford, R., 2013. Hijacking environmentalism: Corporate responses to sustainable
development. Routledge.
Wheelen, T. L. and Hunger, J. D., 2011. Concepts in strategic management and business policy.
Pearson Education India.
Wild, J. J., Wild, K. L. and Han, J. C., 2014. International business. Pearson Education Limited.
Williams, P. and Naumann, E., 2011. Customer satisfaction and business performance: a firm-
level analysis. Journal of services marketing. 25(1). pp.20-32.
Zott, C., Amit, R. and Massa, L., 2011. The business model: recent developments and future
research. Journal of management. 37(4). pp.1019-1042.
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Online
What is Environmental Analysis?. 2015 [Online]. Available through:
<http://pestleanalysis.com/what-is-environmental-analysis/>. [Accessed on: 6th October 2017].
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