Impact of Business Environment on Firms

This assignment examines the crucial link between the business environment and the performance of firms. It requires a thorough analysis of how different aspects of the business environment, such as legal regulations, economic conditions, technological advancements, and competition, impact firm success. Students are expected to explore various theories and research findings on this topic and draw conclusions about the key factors influencing firm performance within specific business contexts.

Business and the Business
Environment

Contents
Business and the Business Environment..........................................................................................1
INTRODUCTION...........................................................................................................................1
TASK1.............................................................................................................................................1
P1 Different types and purposes of public, private and voluntary sectors..................................1
TASK2.............................................................................................................................................3
P2 Size and scope of a range of different types of organisations................................................3
P3 Relationship between different organisational functions.......................................................4
P4 Impact of macro factors on business operations....................................................................6
P5 SWOT analysis of Virgin group............................................................................................8
P6 Impact of external environment on strength and weakness...................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
A business environment consists of internal and external factors that affects company's
functions which includes employees, customers, management, supply of goods, demand and
organization regulation (Botha, Kourie & Snyman, 2014). Along with this it also connotes macro
elements forces and institution that are far beyond from an organization and does not relate to it
but having a dark impact on business, these aspects includes political, legal, technological,
competitors. Customers, social, suppliers, etc. Some these factors are having a connection with a
business and some of them are far apart, in spite of that having a dark impact on business
environment functioning. In this module three different types of business organizations includes
that are working in distinct area, namely private, public and voluntary sector. Private sector firm
is Virgin Atlantic which is established in Crawley, West Sussex, England., whereas NHS
(National Health Service) is public funded national healthcare system originated in England and
Welcome Trust is a biomedical research charity based in London.
TASK1
P1 Different types and purposes of public, private and voluntary sectors
There are a huge range of businesses, that are serving their utmost services with their
prosperous and optimistic approaches, yet they have distinct vision or mission but the only aim
they follows is to get victory. For this they adopt separate strategic functions and activities, that
aid run a business far long away. There are several kind of business organizations with their
diverse environment, they have different functionalities and operations, these all organizations
are working with certain economy and to find an objective with a higher standard of growth
(Savrul, Incekara & Sener, 2014). The main objective is to attain a predetermine target with
success. In this study, there are three different criteria to measure a firm's business. Here, three
sectors are involved to recognize business environment, such as private, public, voluntary sector.
Private sector: Private sector firms refers to established and hold by individual or a
group, that does not have any public or government authorities, these organisations are solely
owned by individual groups to make profit. Although, private sector is spread across, and makes
a big benefit to economy, with several entities, such as sole proprietorships, partnerships, small
and mid-sized businesses, large corporation and multinationals, professional and trade
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associations, trade unions. A firm is formed by regulatory body, that means entrepreneur and
business have separate identity, a regulatory body is board of members, who takes decision
related to the firm.
For an instance, Virgin Atlantic is a private organization associated with British Airline
in Crawley, United Kingdom. British airline was established in 1984 by Randolph Fields and
Alan Hellary, they were the two partners who conceptualize for a flight between London and
Falkland Islands. As this company was started with a mutual partnership, and now it's fifty-one
percent shares are holding by Virgin Group and forty-nine percent by Delta Airlines.
The company is also houses corporate offices of Virgin Holidays, Swansea, Wales, along
with international offices which are located at Norwalk, Johannesburg, Barbados, Shanghai,
Hong Kong, Greater Delhi, Lagos and Dubai (Belás,Demjan and Habánik, 2015).
Purpose: The paramount purpose of Virgin Atlantic is to avail various classes of travel
with quality of services.
Legal structure: Before a company get formed and begin its working, every
organization needs to register. A number of legal documents must be completed with most
important Memorandum of Association and Articles of Association, that covers-
 Objectives of business
 Location of headquarters and registered office
 Raised capital amount from sale of shares
 Number of business meetings with details
 Position of accounts for audit.
Sole trader – In this kind of firm there is one owner of the business firm who takes complete
responsibilities to run a business. They does not hire the more a large number of employees for
their help. These business can be refers as small retail shops in a local area. The core purpose is
to provide the things which has some benefits for the customers. The owner is responsible for the
profit and loss including the risks as well.
 Partnership – There are more than one or two parties can involve in a contract to form a
partnership venture. These organisations can be a private or public limited organisation.
The involved parties shares the equal liabilities towards the firm and they all are
responsible for the investments, profit, loss and challenges.
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Public sector: Public or state sector is the part of economy, which comprises both public
services and public enterprises (CaiYang, Belás and BahFang, 2015). It provides such goods and
services which are not offering by private sector companies, because they work to get profit
only. Public sector works for a wellbeing of others, whether they pay for that or not. Government
has a big share in this sector, it includes electrical grids, telecommunications, public transit,
educations along with health care services, etc.
For example, NHS or National Health Services is a public sector organization, which
public funded organization in England, and a largest single payer healthcare system across the
world. It offers services for dwellers of the country, with most of free services, such as
emergency treatment, and treatment for inflectional disease for the residents and visitors also.
This came in inception with the idea of rendering free health care, in the year 1948. NHS offers
a majority healthcare, including primary care, in-patient care, long-term healthcare,
ophthalmology and dentistry. Along with this, it has special care in around 1600 hospitals.
Purpose: NHS has a purpose to provide major services to public at free of cost at some
points.
Legal structure: The public firms are involving approval from state government, and
central government, so that it implement strategies.
Voluntary sector: Voluntary sector is a non – profit of non – government strategies, this
sector is considers as third sector, in contemporary with private and public (Bartosand, Habánik,
and Novák, 2014). For illustration, Well come trust is a charity firm in London, founded by Sir
Henry Welcome in 1936, to improve human and animal health.
Purpose: Its purpose it to achieve prodigy amendment in health by supporting the
brightest minds.
Legal structure: Welcome Trust is independent charitable foundation and it is regulated
by Charity commission. It is needed to register with complete documentation, and it has its
constitution, Article of Association, Memorandum of Association.
TASK2
P2 Size and scope of a range of different types of organisations
Every organisation has a different size and scope according their nature, they work to
accomplish certain objectives and aims which was set by themselves to attain within a
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prospective time period (Menychtas,Vogel and Giessmann, 2014). Above its a description about
company types and here it goes with scope and size of company:
Private sector: As it is defined that private company is solely owned by an individual or
a group, partnership, etc. These private sector firms are sharing a huge economy in the country
with higher profit margin. As it is previously mentioned that private firms have single entity
entrepreneurship consisting of sole proprietorships, partnerships, small and mid-sized businesses,
large corporation and multinationals, etc. These individuals are responsible for enhancing its size
and new aspirations to make a goal.
Size: The size of Virgin Atlantic refers to its growth which it acquires from the time of
inception till the date, the number of its operating countries and employees, flights, and earning
in terms revenue and income. Virgin Airlines flies between London to Gatwick, London to
Heathrow and Manchester, the fleet size is about 46, and it covers thirty-three destinations with
eight thousand eight hundred seventy five employees across serving area. Its revenue nearly
268.9 crores GBP in 2016 and operating income around £153.2 million as well.
Scope: Scope includes what are the new expected things it going to accomplish. Virgin
Atlantis is already operating in several countries including the USA, Mexico, Dubai, United
Arab Emirates, Glasgow, United Kingdom, Hong Kong, etc.
Public sector: Public sector is established with the government and public shares, for the
benefits of public (Virglerová, Dobes and Vojtovic, 2016). It has involvement of government, so
it is regulated by legal and government bodies and that's why it considers as large organization
than private. The core purpose of these bodies is to provide better services which is profitable for
people, such as infrastructure, health treatment, hospitals, public transportation. These firms are
completely drive by government, and has a great impact on economy.
Size: NHS is the fifth biggest employer in the world, with approximately 1.4 million
employees who are serving the services in almost all medical fields along with nearly 211
clinical commissioning groups.
Scope: As NHS is already working for a wide range of diseases but it also has a huge
scope to provide its services. It has a large force of nursing and doctor that servicing bio medical
services for the better healthcare.
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Voluntary sector: It is known that voluntary sector is a completely charitable, and it
carry out its operations on funding basis (Kljucnikov, Belás & Kozubíková, 2016). Wellcome
Trust is one of the largest charity in the UK which is serving its objective to fulfil desires.
Size: It is serving in the United Kingdom and overseas with a disbursement around £11
billion, endowment nearly £23.2 billion with employees which ranges approximately 2,057.
Scope: it is working for orphan children welfare to provide them a healthy life and give
them a cultured upbringing. It is pursuing the operations in Kenya Medical Research Institute,
The Wellcome Trust-Mahidol University-Oxford Tropical Medicine Research Programme, etc.
P3 Relationship between different organisational functions
Every firm has different functions and activities for what they prepare their strategies and
plan accordingly to achieve a task in a certain flow of process (Shehu and Mahmood, 2014). For
this all the department is liable to pursue defined procedure, they have to communicate with each
other to not be a victim of loop holes, as that a small mistake can be a reason for blunder. These
mistakes can roll back the entire process, to avoid this mess, it is better to every section should
keep in touch to produce expected objective, that will not only help to construct a goods or
services but also it will increase productivity. There are a number of departments which operates
a firm’s objective like human resource management, designing and product development,
research and developing, marketing, finance, administration. There is a Virgin Atlantic is a
business organization which work as airways, but also need to establish its services. Below is the
description how of it relate to different organizational functions:
Administration – Administration is the top most level within any organization, that has
decision power, except this no one has the right to take decision. It's order that has to follow by
next two levels. In Virgin Atlantic the decision power consolidates with founders, CEO, and
management team. For any kind of operational or functional approval, middle have to take the
permission.
Human Resource Management – Human resource management is required to recruit
staff, whether for ground services, logistics or in air staff, like air hostess (Sodeyfi, 2016). It
contacts with all the other sections and their controllers get the information of requirements.
There are other departments so it hires the employees for all of these, like in finance section
wants to recruit accounts officer, weather forecasting channel, etc.
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Designing and product development – Virgin Atlantic offers aviation services, though
it need to modifying designs of its products like changing the seating arrangements when needed,
or alteration in plane's design within its internal functioning, or it may needed to change in its
servicing procedures after the completion of designing the production department will start their
work and if they face some problem to implementing design, they can discuss with that and then
implement the final product.
Research and developing – Research and development team is essential in all
organizations, because they find out the demands of population, what they want. In Virgin
Atlantic it is get to know that people are always facing problem while travelling, may be because
of availability of flights, of staff issues, etc. It analyses the hurdles and provide information to
the governing bodies so that they can resolve such issues (Cascio, 2018).
Marketing – Marketing is requiring when some information is needed to release to the
people. For example, if Virgin Atlantic reduces the price for journey, sponsoring some
promotional events then population should know about it. At that time marketing team will take
actions to scream out the news.
Finance – Finance department sanctions the amount for new products when necessary
and controls all monetary transactions. It prepares a budget that invests on new planning and
accounts expenses and incomes that gives the idea of profitability which is calculated on the
behalf of previous year.
P4 Impact of macro factors on business operations
Be it any type of enterprise each one of them gets effected by the variety of factors that are
present in the market (Reynolds and Rohlin, 2014). It is important that while taking different
decision each one of them are considered as their impact cannot be avoided. The management
has no control over the changes that take place in the surroundings and need to adopt same in the
exact manner. The evaluation of these factors can be done using PESTLE analysis which is
capable of providing information of how virgin airlines is effected by the political social
economical and other factors. The explanation of same is given below:
Political Factors – To operate globally it is important to examine the government rules so
that accordingly planning for the same country can be done. These are those factors which vary
in every nation as the regulations and legislations imposed by political parties is different in
different parts of the world. The referred institution belongs to the airline industry which is
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effected by the terrorism activities every country has their own rules towards maintenance of
safety. This way Vergin group faces major issues as it has to go through a series of legal
formalities and needs to fulfill all the criteria’s to get permission. There is great threat of
terrorism from the Islamic countries which effects the capacity of the firm to have its existence at
global level. Much investment is required to be done on ensuring all the security requirements so
that fear of losing customers is avoided. This creates a financial burden on Virgin airlines and
hence the profitability of the firm gets effected. The referred enterprise has to face major political
restrictions as in this industry passengers are given more priority over eth airlines. It is a fact that
government intervention is required in this sector as to ensure proper functioning and safety.
Economic Factors – It deals with those elements that influence the full economy. Various
elements that fall under this are inflation rate, cost of products, labors etc. apart from this it also
includes that development and other exchange rates prevailing in any part of the world where
Virgin airlines wish to operate (Hillary, 2017). In context of the referred enterprise, it was greatly
affected by this external factor. Due to the stiff competition prevailing in this industry it has to do
negotiation with its price which were brought down as a result of tough competition from other
airlines in the industry. Other way through which this enterprise got economically effected
includes the increase in total cost as a result of high fuel prices and fluctuations that occur in
tourism.
Social factors – This includes those elements that are directly associated with the society.
In present world customers has become more cautious and therefore pressure on companies to
maintain standards has raised. Due to various options available in the market more power is held
by the users as they can make their choice after comparing all the alternatives that are present.
The living standards has raised which makes it easy for Virgin group to attract customers to use
its services. Now people travel more and use the airline services which has given positive chance
to the referred institution to expand in short run. It has become more of a status symbol
Technological Factors – This is another important factor through which continuity in
operations of a particular enterprise gets effected. It included changes in the present applications,
modifications in the business outsourcing procedures etc. Whenever a new application is
launched it becomes mandatory to adopt same as only than the competitive advantage can be
achieved. Technology aspect influence the growth of business operations as change in the
existing system has direct impact on the operational activities and lead to challenges such as
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electronic commerce in context of Virgin group. Alteration in the infrastructure system has
helped the refereed enterprise in generating goodwill and ease for customers which of utmost
importance to maintain long term existence in market.
Legal factors – This is similar to the political factors and varies with the change of
political parties (Wild, Wild and Han, 2014). Different issues are faced due to the changed legal
structure which makes it difficult for organizations to take entry in new areas.
Environmental factors – This is the last element of Pestle analysis in which issues related
to the surroundings are discussed so that the operations of companies are kept environment
friendly. Under this factor virgin needs to ensure that the operations of same do not affect the
surrounding in any manner and if found to be guilty than actions are taken against the same. This
creates pressure on airlines to keep their equipment’s updated so they do not create pollution
(Degtyarev, Malikov & Grishin, 2014). Apart from this it also needs to be taken care that all the
wastage is disposed of carefully so that degradation of the society is avoided.
P5 SWOT analysis of Virgin group
Doing external audit is not just enough to evaluate how a company gets effected by
different factors. There are a number of distinct elements that are present within the organization
boundary which has their influence on company’s performance. Since they are present inside the
firm management can control same and can take corrective actions (Botha, Kourie &
Snyman,2014). These factors have their direct impact and by working on they can be converted
into favorable factors. Every organization is good and weak in different context and therefore it
is important that same is recognized before had so that accordingly planning and decision can be
made. Swot analysis is an effective tool through which the internal environment of an
organization is evaluated and threat, opportunities present for the firm are recognized. To
understand how Virgin group is effected by the internal factors SWOT analysis of same is
conducted below:
Strength – It involves information of those areas in which company is good at and can
earn more by using them in the long run. There are a series of strong sections of Virgin group
which are helping it in earning higher returns and are giving tough competition to other in same
industry. The top most strength of the referred enterprise is that it has developed a good brand
image in the market which has its direct influence on total sales. Now it is not necessary for
brand to invest more in on marketing as the people are well aware about the brand name and can
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recognize same. This way most of the promotion cost is saved which is further invested in more
productive areas and hence development is assured. After this the other key strength of the firm
is that it has high customer loyalty which makes it easy for the brand to maintain long term
connection with them. Thereafter it also makes a good connection with the costumers which
helps in gathering information regarding what changes need to be made in brand on customer’s
point of view (Moroni, Arruda and Araujo, 2015). The communication level maintained within
the different departments of the enterprise are very much effective that helps in avoiding any
kind of disturbance in the operates (Cai and Yang, 2014). It is important for every organization
to have clear communication in the different sections as if not than there are major chances of
getting failure in the results. It is also found that the referred institution has received continuous
rewards which develops a positive image of brand in the eyes of customers and hence more
revenue is earned in the long run. This shows that Vergin should focus on its different strength in
future and accordingly take the decisions as this will help in capturing greater market share and
chances of achieving targets ill further increase.
Weaknesses – This is another concept under which the weak aspects of an enterprise are
evaluated so that it can be recognized that what areas of business need to be improved. As the
organization is operating on a large scale it is difficult for the same to maintain same level of
efficiency in every segment. The major flaw with the Virgin group is that it lacks scale compared
to competitors. It has limited routes which restricts its capacity to expand its operations and
hence will have less service users. This way it becomes difficult to grow total revenues and
hence the development of organizations remains constant.
Threats – Due to the dynamic business environment it is difficult for the organizations to
maintain uniformity. Changes take place in the external surroundings which leads to disturbances
in the day to day operations. The price wars that occur in market hampers the profit margins of
enterprise as they then need to make change in their current prices which effects the total revenue
of a particular accounting year. Thereafter another threat to the firm is of economic downturn
during which demand for flights reduces and the chances of experiencing loss increases. Lastly
the change in prices of fuel also becomes a major threat to Virgin as it has to maintain stability in
its cost when the prices are increasing in the market (Belás,Demjan & Habánik, 2015). If brand
keeps on fluctuating its value for customers it effects the brand image to a great extent. It is
important that stability is maintained so that standards are fulfilled.
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Opportunities – Whenever any change take place in the market there are chances that
organization gets chance to expand. For same it is important that marketing audit is done on time
so that no chance is missed out. By expanding operations into distinct new markets the scale can
be expanded and total customers for the brand will also increase. There is continuous increase in
the airline industry which provide option to the referred enterprise.
P6 Impact of external environment on strength and weakness
Though the external and internal environment of the enterprise is different influence of
each on one another cannot be avoided. It was discussed above that the organization is strong
enough in marinating the brand value but due to change in the economic conditions the referred
institute has to bring deviation its prices which has a direct impact on the brand image(Bah and
sFang2015). Therefore, it was also found that the there is a weakness of continues changes in the
fuel price but in case of dealing in a country having stability in the same this weakness can be
eliminated and long term business can be maintaining at the safe level. It was also found that due
to change in the completion level the company faces pressure of marinating same level of sales
which can be avoided if it is found that Virgin is successful in achieving loyal customers who do
not switch to different brands frequently.
CONCLUSION
From the above report this has been summarized that there are a number of business
enterprise that exist in the environment. The legal structure and scope of each one of them is
different which makes them distinct from one another. The motive of each organization
contradicts as the public company operates with an aim of developing the present standard of
society whereas on the other hand the only motive of private firm is profit maximization.
Different from both of these there is another segment of business which is the voluntary group
which is run in order to provide assistance to those who are not capable of helping themselves
and need external help to earn their livelihood. Different tools were utilized to evaluate the
external and internal environment of the business which shows that each one of them has their
direct and indirect influence on business and it is mandatory for the entrepreneurs to make
change according to them.
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