Influence of Business and Environmental Factors on Organizational Behavior

This report evaluates how different cultural, business and environmental factors influence behavior of an organization with respect to its productivity, profitability and efficiency. Furthermore the report performs PESTLE and SWOT analysis upon the organization in an effort to better understand the various factors which affect its operational performance.

Business and Environment
Report

ABSTRACT
This report evaluates how different cultural, business and environmental factors influence
behaviour of an organisation with respect to its productivity, profitability and efficiency.
Furthermore the report performs PESTLE and SWOT analysis upon the organisation in an effort
to better understand the various factors which affect its operational performance.

Table of Contents
1. INTRODUCTION.......................................................................................................................3
1.1 Company Background...........................................................................................................3
2. Literature Review.........................................................................................................................4
2.1 Economic Environment and its impact..................................................................................4
2.1.1 Economic Policies...............................................................................................................4
2.1.2 Economic Conditions..........................................................................................................5
2.1.3 Economic Systems..............................................................................................................5
2.2 Non Economic Environment and its impact..........................................................................6
2.2.1 Natural Factors....................................................................................................................6
2.2.2 Demographic Factors..........................................................................................................6
2.2.3 Cultural Factors...................................................................................................................7
3. PESTLE AND SWOT ANALYSIS............................................................................................7
Pestle Analysis of Marks and Spencer.........................................................................................7
SWOT Analysis of Marks and Spencer.......................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

1. INTRODUCTION
A traditional business environment is made up of various factors, all of which tend to
influence the business or organisation in one way or other. Various factors tend to directly
influence the operations and behaviour of a business whereas, others indirectly influence the
business environment. Hence the business environment is complex, multi dimensional and
highly dependent on multiple individual factors which decide the productivity and efficiency of
the business. There are generally two types of business environments : economic environments
and non economic environments.
Economic environments: The success and profitability of a business is highly dependent on the
economic environment it operates in. Economic environment comprises of all the individual
aspect of a country's economy which can have a major influence on a company's functioning.
These include the economic policies, economic laws and regulations, economic systems and
economic conditions of a country. Economic conditions which affect the operations of a business
in a country are gross domestic product, product market, capital availability, per capita income,
amount of foreign exchange, growth or stagnation in market, inflation etc. (Aastveit, Ravazzolo
and Van Dijk, 2018). Economic policies which affect business operations are industry policies,
import export policies, monetary policy etc. There are primarily three types of economic systems
which can affect the operations of a business: capitalist economy, socialist economy and mixed
economy.
Non Economic Environment: There exist multiple individual factors which all have an effect on
the operations, productivity and profitability of an organisation and comprise the non economic
environment such as various natural, demographic, social, technological, political, legal factors.
Additionally, the natural factors that can have an effect on a business's operations also include
the geographical and ecological factors which can affect businesses operations and productivity.
1.1 Company Background
In this report we analyse the various economic and non economic factors which go on to
influence the operations, productivity, profitability and efficiency of a business. The organisation
on which we have evaluated the effects of these factors is Marks And Spencer, a British
multinational retailer located in UK. It has been in operation since 1884, a surprising 136 years
ago and has been able to expand its operations into various distinct markets such as premium
clothing, food products and home utilities. By current data Marks and Spencer has operates

around 1043 stores in UK and 444 stores globally. It employs 79,000 people globally out of
which 71 percentage are female (Marks and Spencer - Statistics & Facts. 2019.). In 2019, Marks
and Spencer noticed a slight increase in previous year's profit and collected a profit before taxes
of 84.6 million British Pounds. With the changes to international trading laws post Brexit still
under debate, Marks and Spencer waits eagerly for the government to notify the public of the
extent of the modifications so they can develop an appropriate business strategy. In addition, we
also perform SWOT and PESTLE analysis of Marks and Spencer in order to better understand
the effects of these factors.
2. Literature Review
Both economic and non economic factors play a huge role in deciding the productivity,
profitability and efficiency of an organisation's operations. These factors govern various business
operations such as how a business resources its input materials and supplies, how it manufactures
and produces goods and services, how much tax would it have to pay to the authorities, how it
can treat its labours and employees etc.
2.1 Economic Environment and its impact
2.1.1 Economic Policies
A number of economic policies of UK have a massive impact on the operations,
productivity and profitability of Marks and Spencer. The operations and functions of a business
in UK like Marks and Spencer is controlled by the laws and legislations passed by the UK
authorities. Although these are present to safeguard the health and safety of employees and
public against corruption in organisations , they still hinder the operations and productivity of
any business. Some of UK's economic policies which Marks and Spencer has to adhere to and
which end up affecting their productivity are the multiple Employment Laws which are present
to protect the safety, health and rights of the workforce (Kordos and Vojtovic, 2016). These
include
Health and Safety at Work Act 1974 which stipulates that the employer or management has to
provide safe work environment to their employees in relation to the state of machinery available
and that the business must guarantee that the health of employees is not affected by work. This
act increases Marks and Spencer's operational costs as addition money has to be invested by the

management to ensure the maintenance and functioning of all of their manufacturing machines to
meet industry standards periodically.
Employee Protection Act 1978: This act mandates businesses to provide written contract of
employment to all its employees in an effort to protect them against biased terminations and
states that, in cases where businesses terminating an employee working in the organisation for
more than 3 years have to provide additional redundancy pay to the employee. This too increases
Marks and Spencer's operational costs as additional investment has to be made in relation to
employee training, recruitment and redundancy pay.
2.1.2 Economic Conditions
The most prevalent economic condition that can have a massive impact on the operations
and productivity of Marks and Spencer is the current political instability in UK often termed as
Brexit. Most analysts predict that Brexit would mean economic uncertainty in the market with
the UK economy to slowing down post Brexit (USKUL. and Oishi, 2017). This would result in a
decrease in consumer spending in UK market, a measure which drastically affects the operations
and profitability of Marks and Spencer's operations in UK. Post Brexit the free trade deals
between the rest of Europe and UK would also come to an end, effectively increasing
purchasing costs of raw materials and supplies that Marks and Spencer imports from
neighbouring countries. The supply chain and logistics division of Marks and Spencer also
employ a huge number of migrant labourers. Post Brexit with Marks and Spencer trying to
continue operations by employing UK residents to fill migrant labours positions can lead to an
increase in the operational labour costs incurred.
2.1.3 Economic Systems
There are multiple economic systems which can have a significant impact on the
functioning and profitability of Marks and Spencer in UK. These are the economic factors that
are directly related to the UK's economy such as its gross domestic product, interest and
exchange rates, market inflation or recession, consumer income etc.
Income: One of the most important economic factors influencing the operations and functioning
of Marks and Spencer is the average income of customers in a market (Khorin, Brovkin and
Potanina, 2018). This metric is the measure of a customers ability to spend on goods and
services in a market and directly influences the operations of retailers like Marks and Spencer.

Inflation: Inflation refers to the general rise in prices of goods and products without relative rise
in wages of customers, effectively resulting in a decrease in customer's purchasing power. This
too has a massive impact on the operations of Marks and Spencer as during inflation time in UK,
with customer's purchasing power decreasing, Marks and Spencer would also have to lower their
manufacturing scale or risk great losses as products in market don't sell due to reduced
purchasing power of customers.
2.2 Non Economic Environment and its impact
2.2.1 Natural Factors
There exist multiple natural factors which can affect the operations of Marks and Spencer
in UK. Natural Factors including climate, minerals, oceans, rivers, forests etc. exert a huge
influence on the operations and profitability of a business like Marks and Spencer as they are
directly involved in a vast number of individual business operations.
Sourcing of Raw materials: Most businesses including Marks and Spencer rely on a country's
natural environment to provide the input raw materials and supplies which are required for the
operations and functioning of the business (Harrison, 2018). For example Marks and Spencer
being a clothing retailer operating in UK has to procure input materials such as cotton, silk,
various dyes etc. in order to continue its operations and unavailability of such raw materials
would effectively halt Marks and Spencer's manufacturing operations.
Climate: The impact of a country's climate also cannot be understated when analysing the
operations and profitability of any business. Even non retail businesses have to accommodate
changes in climate in their business plans as summers and winters both add separate additional
costs to the original operational costs of any business. For Marks and Spencer the impact of
climate is huge upon its operations as it has to account for changing weather in order to provide
clothes which are relevant to the current climate. Climate in UK also affect Marks and Spencer's
logistics division as during extreme rains or hailstorm, logistics division can find it hard to
transport goods and services to their destination, incurring addition operational costs for Marks
and Spencer.
2.2.2 Demographic Factors
There are a number of demographic factors which affect the operations and functioning
of a business like Marks and Spencer in UK. Most common of these are:

Income: This is one of the primary demographic variables that affects the operations and
profitability of any organisation in a market. Businesses usually have to prioritise groups
belonging to a certain income demographic rather than cater to all customers in varying income
ranges. For example, Marks and Spencer caters to the middle to high class families who possess
of substantial income in the market to buy their premium high quality clothing products
(Galanaki and Papalexandris, 2017). Conversely there are many competitors to Marks and
Spencer in retail sector who cater to low to middle class income demographics for increased
productivity and profitability.
Gender: Gender of target demographic can also play a huge part in the operations and
profitability of any business's. Marks and Spencer being a clothing brand primarily services
females with their high quality premium clothing products. All Marks and Spencer product
development and innovation have to keep the gender of their customers in mind during
operations.
2.2.3 Cultural Factors
There exist various social and cultural factors that have an influence on the operations
and profitability of Marks and Spencer. These cultural factors including the customer's beliefs,
customs behavioural tendencies, traditions, fashion trends and market habits, all influence the
operations and productivity of a business. For example Marks and Spencer being a clothing
retailer brand expanding operations into Japanese market would fare better by first analysing the
Japanese market trends and Japanese people's cultural and behavioural habits in order to better
service the Japanese people (Trobez and et.al., 2019). Selling high quality Mexican ponchos to
Japanese public looking for kimonos would be nothing short of disastrous for Marks and
Spencer.
3. PESTLE AND SWOT ANALYSIS
Pestle Analysis of Marks and Spencer
Political Factors: A major political factor affecting Marks and Spencer's operations in UK is
that of Brexit
Effects: Post-Brexit, many of the current complex trading regulations will be terminated and
replaced by more transparent laws, easing Marks and Spencer's trading operations. Whereas post

Brexit many of UK's current free trade policies will also shut down, increasing Marks and
Spencer's operational costs .
Economical Factors: Currently the UK boasts a growing economy which ranks as 5th biggest
globally and also enjoys high Foreign Direct Investments made into the country. UK government
has also announced a decrease from 19% to 18% in the in corporation tax which is levied at a
business's profits.
Effects: The reduction in corporate tax effectively increases the amount of profits Marks and
Spencer's made. High foreign direct investment also increases the total amount of foreign income
Marks and Spencer earns (Perera, 2017). Contrastingly these benefits will also be enjoyed by
Marks and Spencer's competitors, increasing market competition.
Social Factors: The current social trend of customers increasingly switching towards trendy
online stores as opposed to traditional retailers.
Effects: Marks and Spencer has the opportunity to expand its business operations and capture an
ever increasing market share through its online stores, resulting in increased profitability and
productivity for the entire business. Contrastingly Marks and Spencer needs to be careful while
operating its online stores so as to not damage its well earned and high reputation.
Technological Factors: Modern technological trend of installing AI controlled self-checkout
counters in supermarkets and retail stores.
Effects: Despite the high installation costs of such self-checkout counters, these will effectively
increase Marks and Spencer's profits in the long run as these render most people currently
employed at retail stores redundant, slashing staffing costs. Contrastingly, customer
inconvenience due to logical errors and cybercrimes committed towards these counters will
decrease Marks and Spencer's brand reputation and customer satisfaction.
Environmental Factors: Marks and Spencer is a big believer in the model of sustainable
development and has implemented its processes in all of its productions and operations.
Effects: Implementation of sustainable development model in Marks and Spencer's operations
has increased its brand value in the market, with people choosing to be associated with the rand
much more regularly than before (Rastogi and Trivedi, 2016). Contrastingly, implementation of
the model also has resulted in additional operational costs incurred by Marks and Spencer and
many of its competitors have also started to implement the sustainable development model.

Legal Factors: Marks and Spencer has to adhere to UK's standard taxation, labour and
employment laws which affect its operations
Effects: Following these standardised regulations helps the company maintain a satisfied,
motivated and productive workforce. Contrastingly adhering to various legal regulations for
multiple business operations makes the job of Marks and Spencer's management quite difficult
and failure to follow regulations results in legal penalties.
SWOT Analysis of Marks and Spencer
Strengths:
Brand Recognition: The brand value and perception of Marks and Spencer in the market is
extremely high as compared to its competitors owing to them being in the business for almost
136 years.
Innovation: For product development and innovation in UK's retail market Marks and Spencer
lead the competition (Gürel and Tat, 2017).
Global Business: Marks and Spencer is a global retailer having expanded its market share into
various countries by its stores operating in 57 countries around the globe.
Weaknesses:
Investment: Marks and Spencer need to increase their investments into new technologies when
compared to their competitors.
Financial Planning: Marks and Spencer needs to better plan its business strategies and financial
activities in the market.
Mergers and Acquisitions: Marks and Spencer needs to improve its merger and acquisitions
process, both horizontally and vertically in order to improve its productivity and profitability.
Opportunities:
Technology: Modern technological advancements such as the self checkout counters present
great opportunity to Marks and Spencer to increase their profitability and decrease incurring
staffing costs.
Online Stores: Marks and Spencer's expansion into online stores is a great opportunity for the
business to expand its customer base , market share, increase its productivity and profitability.

International Markets: Marks and Spencer can expand into new international markets in an
effort to grow their customer base, market share, diversify their operations and increase their
productivity and profitability (Phadermrod, Crowder and Wills, 2019).
Threats:
Substitutes: The biggest threat facing Marks and Spencer's operations is that of alternative or
substitute products offered by competitors.
Supplier's Power: An increase in Marks and Spencer's supplier's bargaining power could
effectively result in an increase in operational costs of the business.
Brexit: The changing of laws and regulations post brexit might pose as a threat to Marks and
Spencer's operations and profitability.
CONCLUSION
It can be concluded that currently Marks and Spencer has great reputation in the
international market. There are business, culture and natural environment really impact people
behaviour in this company in both terms positively and negatively. Top-level management of
M&S should maintain positive work culture in their work zone, because this type of work
cultures motivate employees to improve current performance. Management should give rewards
and appreciation to their employees. Reason is, all employees feel valued by management's this
type of steps. When management appreciate any employee in the workplace, in this situation it'll
indirectly increase dignity level of that employee. Company is responsible to use different
productive methods in its daily operations which will help in improve current standard of work
culture. There is natural environment is also highly influencing people behaviour in the
company. Suppose company currently giving favourable incentives to their all employees, But
suddenly company face huge loss in their operations because of high rain. Then management of
company has decides that to stop giving incentives to employees. This type of situations will
negatively impact employees, because no employee want to earn salary without incentives. This
is how natural environment can shape behaviour within M&S.
External and internal factors of its business environment are also highly influencing
company in both terms positively and negatively. Suppose social factors, these factors are a part
of PESTLE factors, in which social factors of its home country United Kingdom are very
favourable to this company. Reason is, most people in this country are completely literate. They
ready to give any cost to buy quality products and services. In this case, these factors will

influence company for providing quality products to customers. Another is, company still
providing its many products in plastic packaging. In this case, it needs to reduce use of plastic in
their packaging, because if company will not do this, then these attempts of company will
completely come under violation of environment protection act. There is environment act is a big
part of environmental factors, so this is how these factors are influence M&S. On the other side,
SOWT analysis has fully decried company's all major strengths, weaknesses, opportunities and
threats. These four factors of this analysis are generally shows company's internal environment.
In this case, these factors are influence M&S' over all performance too. Suppose company
currently has large customer base in international market, it is a strength of company. This
strength will influence company to launch some more effective products and services to gain
more customer base in retail industry. There is company still using some traditional business
strategies in their daily operations. In this case, this weakness of company will influence it
develops some new and modern business strategies to gain effective results in the market. On the
basis of opportunity analysis, currently company has great opportunity to increase its market
share by expanding their business operations. Company has another opportunity to use digital
marketing for attracting new customers towards brand. Day by day increasing competition within
retail industry is main threat to company. In this case, M&S should provide quality products on
cheap rates to gain huge competitive advantage in retail industry.

REFERENCES
Books And Journals
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uncertain economic environment. Journal of Business & Economic Statistics. 36(1).
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Forum for Empirical Scholarship. Emerald Publishing Limited.
Gürel, E. and Tat, M., 2017. SWOT analysis: a theoretical review. Journal of International Social
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Harrison, J., 2018. The Impact of Social Influences on the Perceived Likelihood of Academic
Dishonesty Among Undergraduate Business Students.
Khorin, A.N., Brovkin, A.V. and Potanina, Y.M., 2018. Management Economic Environment of
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SWOT analysis. International Journal of Information Management. 44. pp.194-203.
Rastogi, N.I.T.A.N.K. and Trivedi, M.K., 2016. PESTLE technique–a tool to identify external
risks in construction projects. International Research Journal of Engineering and
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Trobez, S., Vesić, M., Žerovnik, G., Ye, X. and Žužul, D., 2017. The Effect of Culture on
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USKUL., A. and Oishi, S., 2017. SOCIO-ECONOMIC ENVIRONMENT AND HUMAN
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Online
Marks and Spencer - Statistics & Facts. 2019. [ONLINE] available
through:<https://www.statista.com/topics/3707/marks-and-spencer/>