Business and the Business Environment Assignment Sample

BUSINESS AND THE BUSINESS ENVIRONMENT
For
Level 4
Higher Nationals Diploma (HND) in Business
Name: Ismail Tukur
Student ID No: 19001806
Learner’s Declaration
I certify the work submitted for this assignment is my own and research sources are fully acknowledged.
Learner’s Signature:
Date:

Table of Contents
1.0 Introduction...............................................................................................................................................................2
P1 Explain different types and purposes of organizations; public, private and voluntary sectors and legal structures. 2
1.1 Types of Organization and Legal Structures........................................................................................................3
M1 Analyze how the structure, size and scope of different organizations link to the business objectives and product
and services offered by the organization........................................................................................................................7
D1 Provide a critical analysis of the complexities of different types of business structures and the interrelationships
of the different organizational functions.........................................................................................................................9
1.2 Functional Structure.............................................................................................................................................9
1.4 Matrix Structure....................................................................................................................................................9
1.5 Flat Structure......................................................................................................................................................10
1.6 Hierarchical Structure.........................................................................................................................................11
1.7 Divisional Structure............................................................................................................................................11
P2 Explain the size and scope of a range of different types of organizations..............................................................13
P3 Explain the relationship between different organizational functions and how they link to organizational
objectives and structure.................................................................................................................................................15
M2 Analyze the advantages and disadvantages of interrelationships between organizational functions and the impact
that can have upon organizational structure..................................................................................................................17
P4 Identify the positive and negative impacts the macro environment has upon business operations, supported by
specific examples..........................................................................................................................................................18
M3 Apply appropriately the PESTLE model to support a detailed analysis of the macro environment within an
organization...................................................................................................................................................................18
P5 Conduct internal and external analysis of specific organizations in order to identify strengths and weaknesses...21
P6 Explain how strengths and weaknesses interrelate with external macro factors.....................................................24
M4: Apply appropriately SWOT/TOWS analysis and justify how they influence decision-making...........................24
D2) critically evaluate the impacts that both macro and micro factors have upon business objectives and decision-
making...........................................................................................................................................................................25
7.0 Conclusion..............................................................................................................................................................28
References.....................................................................................................................................................................28
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1.0 Introduction
At contemporary times the business environment in which various organizations run their businesses is significantly
changing the scope and structure in which businesses operates. Various businesses run for different purposes which
depends on the purpose in which the business was found and what it intends to serve the public. The environment is
the situation and condition that surrounds an organization which comprise of social, political, environmental, legal,
economical and many more (Achcaoucaou, et al., 2009). These factors influence the operations of a business
significantly. Besides various forms of business organizations such as suppliers, competitors, debtors, employees,
financial institutions, environmental groups, government agencies and more whose interest has to be satisfied
(Denison & Mishra, 2015). The business environment comprises of the eternal and internal environment. The
internal environment comprises of the factors that enhances the internal operation of the organization and therefore
directly affects the company. The external factors affect the business organization from outside the firm (Bryson,
2012). They are the factors that cannot be controlled by the organization and usually comprise of the general market
conditions. An organization is comprised of group of people that has a specific purpose such as for business or
serving the public (Choi, et al., 2008). There are various forms of actions carried out by managers within an
organization and t includes planning, organizing, coordination, arrangement, structure selection, logistics, running
and management.
Toyota is one of the major companies within the global market in contemporary time. the company was established
in 1937 by Kiichiro at Japan (Basu, 2004). As at the 19th century, the company has been able to expand its
operations and sales of their products in various countries of the world reaching the demand of vast number of
consumers (Scheer, 2012). The corporate structure of Toyota comprises of 364,445 employees all over the world
and by 2018, and by revenue was the 6th largest world company. As at the year 2017, the company is the largest
manufacturer of automobile. It was the fit company in the world that produce 10 million vehicle per year since the
yar 2012 an has produce worth of 200 million in quantity (Etherington, 2017). In the sales of hybrid cars, Toyota is
the market leader in the world and the largest company to encourage adoption of hybrid vehicles massive scale. It is
also the leader in the hydrogen fuel cell vehicles in 2017, the cumulative global sales of the company hybrid car
model reached 10 million milestones (Etherington, 2017).
The organization has been successful in observing the changes in their business environment all through the world
as the demand for automobiles has fallen and price and production cost have increased gradually. The equipment
and parts of cars are getting higher. Nevertheless, the value for money and strategies for innovative products of the
organization have enhanced their ability to sustain a strong competitive position in the global competitive market.
As a result, strategies for continuous improvement for the organization will help the company get to an even more
reliable position in the global automotive market (Scheer, 2012). Nevertheless, based on the contemporary
competitiveness in the market, this report aims at assessing Toyota understand the various functions carried out by
various organizational unit and structure and how the company and the external environment of the business
effectively relate with one another.
P1 Explain different types and purposes of organizations; public, private and
voluntary sectors and legal structures
Business deals with the conversion of processes, material and skills to meet the request of customers or provides a
specific form of service to meet customers demand. As identified by Achcaoucaou, et al. (2009), business
environment comprises of various factors such as resources, customers, supplier, competitors, substitutes, industry
trends, distributors, government activities, population the economy and innovation, demography and technological
development. There are therefore various types and purpose of business organization and they can be identified as
private, public, voluntary organizations which has various legal structures that binds them (Butler, et al., 2012). The
various types and purpose of various forms of organizations are identified in the table below.
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Table 1: Types and Purpose of Various Types of Organization
Types Public Private Voluntary
Definition The public sector is an
organization that is directly
controlled by the government
or through government
agencies. This form of
organization runs for the
wellbeing of the populace of a
country (Denison & Mishra,
2015). An example is the
National Health Service in
England which is non-profit
oriented government
organization that provide
health services for people in
the society (Bryson, 2012).
According to Akindele et al
(2016), the private sector is
an organization that is
controlled and owned by
private individuals or group
and they are for profit
making businesses. This
form of organization varies
and they include the sole
proprietorship, co-
operatives, limited
company, partnerships and
more.
As identified by Bryson (2012),
the voluntary organizations are
involved in activities such as
voluntary services, charity and
community-based businesses.
They are primarily non-profit
oriented and not owned by the
government. In the UK Cancer
Research is one of the most
popular voluntary organizations
(Al-Qatawneh, 2014). They are
the body that carry out various
social activities that are
specifically made not for profit.
Purpose The aim of the public company
is to deliver public goods and
services by the government
such as police, military, public
transit, public infrastructures
which is directed towards the
betterment of the entire society
(Ahmady, et al., 2016 ).
These are firm that are
major parts of the economic
system which runs its
business to make profit
(Bryson, 2012). They are
also essential for the growth
and development of a
country through generating
income for the populace.
This form of organization is
created mainly to enrich and
provide benefits for the society at
large without expectant of any
form of profit (Achcaoucaou, et
al., 2009). They create important
social wealth and help in
improving the society.
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1.1 Types of Organization and Legal Structures
There are various legal structures for different kinds of organizations and even within their subdivision. As a result,
the legal structure of various forms of organizations can be identified in the following Tables.
Table 2: Legal Structure for Various Forms of Private Company
Sole
Proprietorship
Partnership Private Limited Company Public Limited
Company
A sole
proprietorship is
characterized by
unlimited
liability for the
debts and failure
of the business
and tends to be
an
unincorporated
business
(Schiffer &
Weder, 2010).
This indicates
that legally,
there is no
difference
between the
owner of the
business and he
business itself
(Ahmady, et al.,
2016 ). If the
business is sued
for a breach of
contract, for
debt collection,
personal injury
and so on, the
court can also
hold the owner
liable and might
use his or her
personal
belongings to
compensate.
Partnership is the
association of various
individuals which are
usually between 2 to
20 people (Butler, et
al., 2012). Each of
the partners holds
responsibility for the
debt of the
partnership and as a
result, a form of
agreement is essential
to clarify each role of
the partners
(identified as the
Deed o Partnership)
(Bryson, 2012). As
earlier identified,
majority of the
partners are
characterized with
unlimited liability
regarding the debt of
the company (Scheer,
2012). The only
partner with
exemption from this
is the limited partner.
This is the party that
raises an additional
fiancé for the
company but does not
partake as an active
partner.
This is a joint stock company which is an
incorporate organization, where the business
stands as a legal entity that is separate from
the owners. Each shareholder in this kind of
company must be part of the company and in
no cases can they sell shares to the public
(Achcaoucaou, et al., 2009). Each
shareholder is entitled to one vote during the
annual general meeting (AGM) of the
company and also takes their fraction of
share of the company at the end of the year
(the dividend). Each of the shareholder has
limit liability for the debt of the company
and can only face a loss of the invested
amount in case the company folds up
(Bryson, 2012). This kind of company is
headed by the board of directors that the
shareholders have elected and being headed
by a chairman. Before the formulation of the
company there some legal document should
be adopted, the most important which is the
Memorandum of Association and the
Articles of Association which comprise o he
details of the company such as the business
objectives, the registered headquarter and
offices and the capital that is being raised by
the from the details of the detail of the sale of
shares concerning meetings within the
arrangement of the business for account
auditing purpose of the business (Bryson,
2012). With the completion of these, they
send them to the Registrar of Companies in
which the firm will be issued the certificate
of incorporation. By the law, the name of the
company must end with the word “Limited”
and setup with a share capital of 50,000
pounds a share capital.
This is another
form of joint stock
company, which is
a public limited
company (PLC).
The PLC is a
business
incorporated and
ran by Board of
Director on behalf
of the company’s
shareholders and
has a period in
which shareholders
votes on certain
issues concerning
the company
(Arabi, 2007). The
difference between
Private Limed
company and PLC
is that a PLC can
list its share on the
stock exchange
such that the
members of the
public can buy
shares (Coslor &
Spaenjers, 2016).
But in other
characteristics they
share major
similarities
especially in terms
of liabilities.
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Table 3: Legal Structure for Various Forms of Public Company
Public Sector Organizations
The public sector organizations refer to the companies that are accountable to the government whether
centrally or locally. They are directly funded by the government and tend and are used for providing
government goods and services and are not profit making oriented (Atinc, et al., 2010). The public sector
produces three kids of goods which includes (Bryson, 2012):
1. The public goods that cannot be easily provided by private organizations, as a result of the venture not
being profitable but essential or the populace (such as armed forces and emergency)
2. Merit goods are the goods in which the government believe that everyone has to possess whether they
have the capability of possessing it or not (such as healthcare and education).
3. Essential services include, parks, libraries, roads, reuse collection, street cleaning and many more.
A public corporation is the term used in describing an industry that is nationalized for the provision of goods and
services for the general public. Public goods, merit goods and essential services are funded by the government
through taxes and are liable for the provision of essential services to the people
Table 4: Legal Structure for Various Forms of Voluntary Organization
Unincorporated
Association
Trust Company Limited by
Guarantee
Charitable Incorporated
Organization (CIO)
This structure is usually
adopted by small
associations built for a
short-term goal, low
income, without intention
to acquire property or
employ staff (Al-Qatawneh,
2014). Unincorporated
associations are very quick
and affordable to setup.
Unless this group applies
for being a charitable
organization, it needs no
other agencies to be
involved in its activities.
They do not make any fee
payment except for getting
legal advice (Achcaoucaou,
et al., 2009). Nevertheless,
legally, the owner or
founders of unincorporated
association do not have a
separate legal identity and
remains for the purpose in
regards to the collection of
individuals. Any form of
contract or property is held
by an individual for the rest
of the group members, or
any form of legal
proceeding legal position
filled against the entire
group is filled against the
individuals within it which
In general, trusts are
created to manage
property or money
towards a clearly
defined objective and
goals (Ahmady, et
al., 2016). They are
the basis of a formal
relationship between
three parties which
includes the donor of
the property or
money, the trustees
which are usually
three and are the
nominal owners of
the property of the
trust and the
beneficiaries. Trust
can be fast to setup
and significantly
affordable (Bryson,
2012). Mainly, they
are nondemocratic
organizations as they
have no legal
structure for
membership. The
trustees can be liable
personally for the
contract the trust
enters into and are
not protected from
being personally
This tend to be one of
the most common
voluntary organization.
They are limited liability
organizations, registered
at the Companies House
and incorporated
(Ahmady, et al., 2016 ).
The article of association
governs the activities of
the group. It is on its
own a legal entity and
therefore could hold
properties and enter into
contact in its name. This
is a well-recognized
structure and it being of
limited liability provides
its members with a
certain level of
protection (Butler, et al.,
2012). One of the
disadvantages of this is
within the expense and
formality that might
arise as being a limited
liability company. The
filings have to be
submitted to the Charity
Commission and the
Company House. The
trustee is also
responsible for the duties
their trustee duties and
The CIO is the most recent
legal form for a charity
organization as it is
designed specifically for
such purpose
(Achcaoucaou, et al., 2009).
The Charity Commission
solely regulate them and
therefore avoids the need for
filings compared to the
limited liability company.
The activities of the
organization are governed
by a constitution which is
given by the Charity
Commission and does not
have much flexibility as the
unincorporated association
or the trust. The benefit of a
CIO arises due to the fact
that its members are able to
possess limited liabilities
and the association having
its own legal identity
providing a level of
protection for members
(Arabi, 2007). The negative
aspect of this structure is
that it is relatively untried
and new which could bring
about potential problems in
the process of seeking
finance from financial
bodies which maybe not be
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makes the members liable
(Butler, et al., 2012). The
liability circumstances can
be quite unclear.
liable. also work as directors
under the Companies
Act of 2006 (Ahmady, et
al., 2016 ).
familiar with the stricture.
Legal structure of Toyota (as example of private company): Toyota is a private company that covers various form of
areas such as objectives, people, resources and management. The main objective of the Toyota is to make profit,
maximize shareholders interest, market share, excellence and corporate social responsibility. The company is a
publicly traded company which does not possess a single owner or does not even have a majority owner. In the
Japanese keiretsu model, the largest shareholder of the company is Toyota Industries (holding about 6.7%),
(Seymour, et al., 2012) which is a member of the Toyota group of companies. Toyota is a publicly traded locally on
the Osaka, Tokyo, Fukuoka, Sapporo and Nagoya and also foreign listed in the London Stock Exchange and New
York Stock Exchange. Toyota h been traded publicly since 1949 in Japan and internationally as from 1999. Since
the company is a publicly traded company, it is bound by the legal structure of a public corporation outlined in Table
2 as a private company (Bhasin, 2018).
Legal structures of Cancer Research UK (voluntary organization): The Cancer UK is a voluntary organization
focusing on sensitization about cancer and taking care of cancer victims. Their social service also includes the
conduct of research and campaign directed to prevent cancer from taking over the society. As a voluntary
organization, they aim to spread awareness relating to cancer amongst everyone in order to eradicate the disease at
all levels. Being a voluntary organization then, the company is bounded by the legal structures in Table 4 mainly in
regards to CIO.
Legal Structure of The National Health Service (NHS) (Public Company): is the UK public healthcare provider
which include the, NHS Scotland, NHS England, NHS Wales, and affiliated with the Northern Ireland’s Health and
Social Care (HSC) (Choi, et al., 2008). They wee formulated to be one of the social reforms that comes after the
Second World War. Each of the health service providers offers a comprehensive range of health services that is free
for people ordinarily residing in the UK at the point of use, apart from optical care and dental treatment. The NHS
however requires payment for prescription charges with some exceptions from such charges. Each of these service
providers operates independently, but accountable politically to the relevant government Welsh Government, the
UK Government, Northern Ireland Executive, Scottish Government.
M1 Analyze how the structure, size and scope of different organizations link
to the business objectives and product and services offered by the
organization
The size structure and scope of any form of organization are interfaced with the objectives of that business
organization. It was identified that any form of organization set a significant focus towards its goals through the
structuring of their organization. In the case that an organization possess people in their working structure without
each group having to know what to do in terms of their goals then it might not be feasible for them to achieve the
objective and goals of the organization since they are have less level of clarity to carry out duties (Akindele, et al.,
2016). Organizations identifies their objectives based on evaluation of their scope. In the case that the scope of the
organization is to serve national clients, the objective of such organization will be specified in such manner. If they
aim to serve the global client, they have to set their objectives in such manner. In general, organizations set their
scope, size and structure based on product and services, markets they aim to cover, expectant level of profitability
and more (Gabriel & Rosenthal, 2013). If businesses venture to identify that their organization team does not require
them to possess massive structure at any for and point, then they will not setup such structure. Moreover, if the
objective scope is tremendously large then such business will set up massive organizational size.
The scope, size and structure of organizations in the market gives a very clear idea and implication on the purpose of
the business and the kind of products and services they aim to offer. The relationship amongst them can be very
clear in enhancing decision making by the manager which will further enhance efficiency an effectiveness of a
business (Demirguc-Kunt, et al., 2011). A firm that is a public limited company possesses large size with a scope
that is enhanced in the market. It has high number of customer base to serve with clear implications over the
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products and services offered in line with the business objectives. A large firm like Toyota which is a business in the
private sector possess significantly dynamic and huge business objectives which drives the company forward in
setting it size and scope. Based on the large scope and size expansion to man countries and regions, the organization
has been able to produce and market large number of products all over the world. Besides the large scope and size
Toyota enjoys large scale economies, learning advantages and other combinations of competitive edge over its
competitors though operating at lower cost, enhancement of benefits and values being created for customers (Child
& Möllering, 2013). Moreover, a sole trader possesses a smaller scope and size which deters it in offering improved
and expensive products. Their objective is based on a shorter period of time which serves the organization in a poor
way in meeting goals in longer term period.
At recent times, Toyota has restructured in order to streamline the work process of the company on its global
company wide bases in regards to its scope of business. The primary goal is to create an organization that is built
around its product base rather than functions (Conway, 2015). This will enable the organization distort various
barriers within the company and eliminate the coordination of work that are unnecessary, therefore helping to make
sure that the efforts of all team members will be significantly towards the purpose of manufacturing of making better
cars and also developing workforce that are talented (Bhasin, 2018). Such structural changes are implemented by the
company in order to achieve the objectives of making better cars supporting the autonomy and strength of the
regional operations of the company and laying emphasis on the importance of the problem solving and onsite
learning (genchi genbutsu) in the training of personnel particularly in 2011, the company restructured the
organization to achieve the objective of promoting autonomous regional based management and by the year 2013, a
significant proportion of the company’s automobile operations was splatted into four business units (Seymour, et al.,
2012). In spite of the structural changes, Toyota however identified that the company still relates significantly on
efforts made by individuals by its own stakeholders and team members as a result of the present work process and
structure and in most cases, it has been found that cross-functional coordination consumes a disproportionate
amount of effort and time. Toyota has been confident that higher value can be added through this new structure of
management in which nine-region and product-based business units will have to compete and learn from one
another while having to operate along with the head office (which holds responsibility for the corporate functions)
(Srdjevic, et al., 2012).
Figure 1: Product Based Structure of Toyota
7

Source: Parker (2016)
This structure is to achieve the objective of:
 Connecting the work procs ranging from manufacturing, thereby enabling the manufacturing of better car
and strengthen the workforce of Toyota.
 Enabling the individual units of business in making decisions independently and quickly
 To strengthen the function that is responsible for formulating medium to long term objectives and the
corporate strategies (Bhasin, 2018).
D1 Provide a critical analysis of the complexities of different types of business
structures and the interrelationships of the different organizational functions
Business structures are the manner in which organizations are formulated. Different forms of functions are carried
out in every forms of organizations having various structures. But the structural nature and their interrelations varies
from one organization to the to the other which makes their business and operational implication very essential
(Coslor & Spaenjers, 2016). There ae various types of organization holding various functional units and they are
discussed below:
1.2 Functional Structure
An organization can be structured n accordance to the various functions which determine the manner the
organization operate. The functional structure has a common form of configuration in which an organization is
divided into various smaller components by areas of specialty (like finance, IT, marketing and operations). It is
usually referred to as “silo” entities that are disconnected from one another and vertical. In corresponding to this, the
top management of the company usually comprises of various functional leaders (such as chief operating officer and
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chief financial officer) (Ahmady, et al., 2016 ). Communication occurs within the various department in the
organization through the heads of the departments.
Figure 2: Functional Structure
Source: Ahmady, et al. (2016)
An example of organization that adopts the functional structure is FedEx. The above organizational chart is
functional organizational structure drawn from FedEx (it can be seen that marketing, finance and HR) is being b the
functional heads (CIO, CFO, various VPs, and more) top-down. Advantages of such structure is that it allows for
greater efficiency in operation because employees that possess shared knowledge and skills are grouped together
which allows each group to operate independently and management acting as cross-communication point between
the functional areas which allows for increase in the level of specialization (Al-Qatawneh, 2014). Nevertheless,
various units of the group do not usually communicate which potentially decreases the level of innovation and
flexibility of the organization. Functional structure cane be most effective in large organizations that produces goods
that are homogeneous.
1.4 Matrix Structure
This is an organizational structure which personnel are grouped through to frames of operation. It is best adopted
generally in companies that are large enough to justify such increased level of complexity (Coslor & Spaenjers,
2016).
Figure 3: Matrix Structure
9

Ahmady, et al. (2016)
In the matrix structure above, the organization is structured by function and product. The product lines are
horizontally managed and the functions vertically managed. This indicates that each of the functions such as
production, sales, research and finance have separate forms of internal functions in regards to each product. It has
been argued that this structure allows the team members to share more readily available information across
boundaries and tasks which counters the critics of “silos” management system (Arabi, 2007). It provides the ground
for specialization that can both increase the level of knowledge and assign individuals with specific needs of
projects. However, the matrix structure possesses high level of complexity in the command chain when employees
are assigned to both functional and project management. This increase in the level of complexity can bring about
higher manager-to-worker ratio that can result to increase in costs or bring about conflicting loyalties of employees.
It can also bring about gridlock when one manager at one part of the matrix disagrees with the other (Drucker,
2009). The blurred form of authority in this structure can bring about reduced level of agility in conflict resolution
and decision making. Organizations that operates in different regions with varieties of products may need to interact
with the product development teams and geographic specialists and a matrix structure and be adopted.
1.5 Flat Structure
A flat organizational structure is arranged with none or few levels of management between employees and
management (Butler, et al., 2012). It promotes employee involvement in the process of decision making by posing
less supervision on them.
Figure 4: Flat Organizational Structure
10

Ahmady, et al. (2016)
It elevates the responsibilities of employees in the organization and removes the excessive management layers which
improves the speed of communication amongst employees and coordination between them. It promotes faster
decision making among employees and eliminates supervisory cost at various levels. Nevertheless, it usually lacks
specific forms of boss that employees must report to which can result to confusion and possible struggles in lie of
power among the management (Demirguc-Kunt, et al., 2011). The flat organization does not produce specialists, but
generalist. The specific job function of employees may not be clear.
1.6 Hierarchical Structure
This structure follows a pyramid layout all the employees of the organization, except the CEO is in a subordinate
position to another within an organization. The layout comprises of multiple divisions that descend into the base of
the employees at the staff level, that lies at the bottom of the pyramid (Ahmady, et al., 2016 ).
Figure 5: Hierarchical Organizational Structure
11

Ahmady, et al. (2016)
Employees recognize specific leadership level within the organization. Levels and authority responsibilities are
obvious and there are opportunities for the promotion of individual employees to perform effectively. Expertise on
specific functions can be developed by employees to become specialists and the can look out for the best interests of
their departments. Nevertheless, communication across the various departments tends to be less attractive compared
to the flat organization (Bryson, 2012). Higher bureaucracy usually hinders the speed of change in the organizations
and higher time might be needed to respond to customers.
1.7 Divisional Structure
A divisional structure groups each function of the organization together in a division. Each of the divisions within
the structure can be in correspondent towards geographies or products of the organization. Each division comprises
of all the resources that is necessary and functions that can support it in geographies or product line of the
organization (Coslor & Spaenjers, 2016). The geographical and product division can be characterized as shown
below.
12

Figure 6: Divisional Organizational Structure
Source: Hoque, et al. (2013)
The above structure is the Toyota’s organizational structure. As with the type of organization, the divisional
structure present distinctive qualities and works best for organizations with wide varieties of products offering
geographic and regional operations in various locations. It provides greater flexibility in operations and when one
division fails it does not affect the other (Bhasin, 2018). It might however, result to operational inefficiencies from
separating the specialized functions for instance, the personnel in the finance department of one division do not
communicate with the personnel in other divisions.
The consolidated management of Toyota is built upon the divisional organizational structure. Presently, the
company comprise of seven different sales division that is under the control of the executive vice presidents directly
and also under the Administrative Unit of the organization. To separate management from operations further, in
2017, the various executive officers that takes the role of directors were limited to the officers that are with
companywide responsibilities for management and soundness of the functioning and management and quality of the
Board of Directors were supported through by the creation of specific roles of the board to make decisions basically
at the top-priority issues of management and for monitoring of the business operations (Etherington, 2017). The
functions of governance were distributed to the CSO/CIO, CTO, CCO/CAO, and CFO to facilitate the functions to
high levels of specialization and reinforce the function of governance to increase the pace of decision making.
Micro firms possess the simplest form of structure as a result of the simple nature of business size, scope, objectives
and staffs. Those kinds of companies have various functions of business but are carried out collectively an easily
(Ahmady, et al., 2016 ). For instance, a coffee shop produces coffee and have it sold immediately to the customers
where there is assurance of distribution services. Therefore, interrelations in micro-organizations functional units is
simpler and more direct in nature which simplifies the model of the business an overall performance and operations,
this can usually be flat structure. In a small company, the organizational structure is usually moderate, where it is
formulated as a partnership or company. The functions of such organizations are slightly distinctive and separate
where efficiency can be enhanced in the organization through increasing interrelationships amongst the various
functions. In medium scale businesses the structure is usually complex enough such that various different functions
of the firms are maintained. For instance, Virgin Money participates directly in making decisions related to
marketing, services and research and developments where the interrelations between the various functions must be
ensured (Schiffer & Weder, 2010). Large global organizations possess the most complex structure where decision is
taken buy regional operations mostly on a divisional structure. The business functions must be interrelated and
standardized to achieve greater level of performance.
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P2 Explain the size and scope of a range of different types of organizations
Organizations are different based on scope and sizes which is very essential in terms of businesses. There are either
about four sizes in which a business organization might fall into and the include micro, small, medium and large
companies and possess varying scope regarding their own environment of their organization (Drucker, 2009).
Table 5: Size and Scope of Organizations
Micro-Enterprises Small Enterprises Large and Medium Organization
Size A micro enterprise has
less than 10 employees
and annual turnover that
is below 2 million
pounds (Achcaoucaou, et
al., 2009). They
comprise of small
businesses where there is
low level of employment
and low investment
capital
The small enterprise is
characterized by fewer than 50
workers and acquire an annual
income of 10 million pounds
(Arabi, 2007). They are owned
by private individuals and
possess small number of
employees and have the aim of
enhancing their business,
making higher profit and
expanding their volume of
sales.
Medium-sized companies possess ls than
250 worker and acquires an annual
return that is less than 50 million pounds
or a balance sheet being less than 43
million pounds. On the other and, large
organizations have 250 or more
employees (Achcaoucaou, et al., 2009).
They comprise of both employees that
works as a voluntary member and paid
workers and are usually a multinational
organization that possess high capacity
to expand their growth very fast.
Scope These kinds of
organization are usually
located in developing
countries where all
necessities can be
fulfilled by mainly mall
scale entrepreneurs.
They are the main
contributor to the
economy in terms of
individual employment
and growth due to lower
cost of setting up the
business. An example of
such organization is the
Cancer Research UK
As identified by Holcombe and
Ipate (2012), a small business
has continued to failed in the
strive to compete with large
organizations. Small businesses
operate and can survive in a
small market. Moreover, the
scope of a small-scale business
is very small for it to randomly
change strategy. In general,
competitor entry could have
their businesses damage
significantly. Nevertheless,
these organizations possess
lesser resources to have
themselves protect rom new
entries to the market. They are
usually sole proprietorship,
private organizations, when the
enter into partnership, they tend
to get a chance to vary their
sizes and revenue in such
accord.
As identified by Willard (2012), the
medium sized companies possess a
better opportunity than small scale
businesses. They focus on larger scope
of market and can strategically change
their moves once or twice in a year.
They can even expand their business to
various new markets with new and
existing products. They have enough
resources to protect themselves in the
case o new entries. The large
organizations possess even more
resources to protect the rom high risk.
Generally, it has been identified that
such organizations are classified in such
category based on production capacity
such as primary, secondary and tertiary
institutions. The primary organizations
focus on raw material production, while
the secondary on covert the raw
materials to products and then the
tertiary organizations retails the product
and sells to the customers.
The scope, size and structure of various organizations are not the same. The size, scope and objective of various are
identified below according to organizational types. This is identified int he Table below.
14

Table 6: Size, Scope and Objectives of Organizations Based on Organizational Types
Organization Size Scope Objectives
Private The size of private
organizations is generally in
comparison to public
organizations (Bryson, 2012).
These forms of organizations
are mostly funded managed
and operated by the owners or
some other individuals that are
selected to manage the
company placing the rules and
regulations of the governing
bodies in mind (Achcaoucaou,
et al., 2009). They have a
small governing bodies and
various obstacles may arise
for such organizations. These
forms of companies are mall
and, in some instances, could
be medium scaled
The scope of this kind of
organization varies because
of the organizations in any
country are mostly private
(Achcaoucaou, et al., 2009).
Majority of scope for these
private companies are
information technology,
finance, banking, insurance,
telecoms, construction,
manufacturers and more.
The major objective of these
kinds of organizations is for
profit making. These forms of
organizations are limited
liability companies in most
cases, it maintains its
profitability motive, crate jobs,
develop competitive status and
transparent in regards to
reporting performance (Bryson,
2012).
Public Public corporations are
usually operated by the
government or government
institution and are usually
very big than private
companies (Ahmady, et al.,
2016 ). They are government
owned and governed. If profit
is generated in this kind of
organization, it goes into the
pocket of the government and
also, they operate under this
specific law. The largest
companies in most countries
are public companies.
The scope of the
organization is very large as
the organization get
privileges that are unlimited
to operate smoothly and
fairly (Achcaoucaou, et al.,
2009). The most popular
public company are the
police, soldiers,
transportation, road,
infrastructures, electricity
and so on.
The primary objectives of the
public organizations are liable
to the people for their services
to be provided as expected. The
main structure of a country is
built based on the public
organizations and without the
existence of the public
organizations it would be quite
impossible to run a country
productively (Atinc, et al.,
2010). The major objective the
public company is to provide
welfare for the entire society.
Voluntary In comparison, the size of the
voluntary organization is not
as big as the private and
public organizations are
implemented and operated not
to focus on the aiming to earn
profit (Akindele, et al., 2016).
As such, they are not very big
but usually small or medium
scale.
The operational scope of the
voluntary varies. These
forms of organizations are
mainly for the social welfare
of the populace or a long
mission to solve various
kinds of possible problems n
societies (Denison &
Mishra, 2015). They are
self-motivated and
developed in fostering
social welfare. The scope of
voluntary groups is charity,
community service, non-
profit, social enterprise,
interest of the community
and more.
Voluntary organization has the
objectives of doing so many
things for the society (Coslor &
Spaenjers, 2016). Such forms
of organizations are created
ensure the social welfare of the
people in general and can help
promote standard of living and
help in the development of
economic conditions of
countries.
15

Looking at the examples of the types of organizational size an example of a micro organization is the Cancer
Research which is a micro voluntary organization setup with low cost but works with wider organizational objective
to eradicate cancer all through the world. It has its major advantage in employee fulfilment and freedom and meeting
the needs of consumers in helping them to grow (Child & Möllering, 2013). It has basically very small member of
permanent employees less than 10 and a small capital for startup. Small companies include organization such as
Zoom Shops and Redbox which are retail organizations that seek to enhance their business, expand their sales and
partnering with other organizations or individuals to achieve their objectives. Virgin Money is a medium sale
company which is owned by the UK government but works not for profit providing a channel to help its customers
through provision of loans and advances and as a result working for the public benefit. Examples of Large
organizations are Toyota which works across regions and in the global land scape selling its products (specifically
cars) all through various nations. It has also been identified as the largest car producer in the world producing 10
million vehicles per with over 150 offices, and 900 subsidiaries and 364,445 employees (Pratap, 2017).
P3 Explain the relationship between different organizational functions and
how they link to organizational objectives and structure
The function of an organization depends majorly on its various functions which includes, marketing ad sales, human
resources, operations and production, research and devilment, IT, administration, accounting and finance. Toyota
has implemented various corporate objectives that are supported by a well-structured and detailed Corporate
Strategic Action-Plan which deals with the various functional units of the organization (Monden, 2011). Any of the
plan followed by the functional units have been designed by higher level managers that builds the objective. Each of
the functional unit then makes use of such objective and the date in which the achievement is due and then prepare
its own Functional Strategic Action-Plan with sub-deliverables/objectives and sub-task which will be formed with
input from the heads of the units within the function (Kyodo, 2013).
Figure 7: Relationship between Functions and the Objectives and Mission of Toyota
Source Scheer (2012)
Marketing: The Marketing functions is identified as a bridge of relationship between an organization and the
customers for the satisfaction of the customers (Hoque, et al., 2013). The marketing process possess benefits for
both suppliers and customers. It helps organizations such as Toyota in gain information from customers for the
development of new products which will support customer’s quality life. It can be identified that Toyota has been
16

able to create a very competitive environment in regards to their pricing strategy which is highly competitive.
Product distribution system has been developed by the organization which allows customers to access their products
and services effectively resulting in higher demand (Mustawadjuhaefa, et al., 2017). High demand of the cars by
Toyota has given the company a chance to expand and grow its operations globally ad achieve higher level of profit
in various markets of the world. The marketing communication has helped the company improve its social behavior
positively. Various awareness has been made by the organization such as alerts on anti-smoking and also unsafe
driving condition such as drunkenness which may increase the organization’s responsibility towards the society.
This goes in ha with the first aspect of the vision statement of Toyota, that “the company will lead the way into the
future of mobility, enriching lives all over the world with the most responsible and safest way to move people
(Bhasin, 2018). Through the commitment of the company to constant innovation, quality and respect towards the
planet, with the aim to exceed expectations and gain rewards with a smile.
Finance: as identified by Monden (2011), finance interrelates with the usage of resources or expenditure of the
organization for various operations that is being carried out. The function of the finance segment of Toyota provides
valuable information on the finance position and performance of the organization in regards to the measuring and
budgets on the se of financial resources against the budget performance. In order for the cash flow of the
organization to be effectively managed, it has to make sure that there are funds sufficient to meet the requirements
of the business. The financial performance of each and every department is identified and monitored by the internal
audit department. The investment of the resources is considered generally as risk by the financial department which
comprises of internal projects such as cost improvement projects, additional production lines, buying new
technology to help efficiency and quality (Conway, 2015). It can be identified that the financial reports of Toyota
usually develop projections that helps the company meets the requirement of its market at various parts of the world.
As identified by (Datamonitor, 2007), finance in Toyota deals with handling of daily transactions regarding sales,
purchase, utilization of the resources of businesses externally and internally. The cash flow of Toyota makes sure
that the organization pay sufficiently to maintain the liabilities of the business at the time payments needs to be
made. The finance team of the company is responsible to source for funds for the expansion of the business.
Human resource: Toyota possess an effective human resource (HR) department that takes care of the needs of
employees within the organization. The obligation of the HR department is to manage the employee of the company
such that they perform effectively and with 100% efficiency (Bhasin, 2018). The HR department is also concerned
with the policies and legislations about the people of the company. The department plays roles which involves the
administration, recruitment, management of compensations, job design, employee relations, maintaining law of
employment, staffing, training and development and more. This goes in hand with part of the mission of Toyota that
identified that the company will meet goals through engaging the passion and talent of people that believed there is a
better way.
Operations: Toyota adopts the bureaucratic style of leadership in the management of its operation. According to this
leadership style, the higher management level makes decisions or develop its strategies. After which the team
leaders and employees have to achieve the goal or strategies identified within the specified frame of time (Parker,
2016). In line with the primary concept of Toyota, the bottleneck factor brings about limitation for the production of
the company at specific frame of time. as a result, the implementation of the company involves identification of the
bottle neck factor, idol time and cycle time strategy, specific production system process, utilization of resource and
through put time.
17

M2 Analyze the advantages and disadvantages of interrelationships between
organizational functions and the impact that can have upon organizational
structure.
Structure Advantages Disadvantages
Functional
Structure
Arguably, functional departmental
organizations bring about greater
efficiency in operations as a result of
employees gaining shared knowledge and
skills as they are grouped together by
functions that they carry out (Akindele, et
al., 2016). Each specialist in the group
can therefore independently operate with
the management acting as the cross-
communication point between the
functional areas. This form of structure
brings about increase in specialization.
One disadvantage in regards to this form of structure
is that different functional sections within the
organization may not communicate, potentially
bringing about decreasing innovation and flexibility.
Functional structures also tend to be susceptible to
being a tunnel vision, with each of its function being
seen by the organization only from within the frame
of operation of the group. (Ahmady, et al., 2016 )
The contemporary trends that aims on combating
these disadvantages comprises of the use of team
that operates across traditional lines of departments
an effectively promote cross-functional
communications.
Divisional
Structure
Compared to other organizational
structures, the divisional structure has its
general division work effectively for
organizations (Arabi, 2007). It can be
useful due to the fact that it affords
greater flexibility in operations.
Additionally, the failure of one division
does not directly negatively influence
other divisions
A disadvantage of the divisional structure includes
the level of inefficiency in operations from
separating the function based on specialization. For
instance, the personnel that works in one division
cannot make communication with someone in
another (Bryson, 2012). The multidivisional
structure can also bring about tax and accounting
implications
Matrix
Structure
Th matrix structure allows the member s
of the team to share readily information
with other departments and task
boundaries, which counters the “silo”
critique of the functional management
(Denison & Mishra, 2015). It also allows
for specialization in organizations that can
bring about both increase in knowledge
depth and assigning individuals
according to the needs of the project.
The matrix structure has some negative impact as it
brings about increase in the level of complexity in
the command chain when the employees are
assigned both in terms of function managers and
also project managers. Such increase in the level of
complexity can bring about a higher worker-
manager ratio, which can also result to increase in
cost or bring about conflicting employee loyalty
(Gabriel & Rosenthal, 2013). it can further bring
about a gridlock in making decisions if a manager at
one part of the matrix disagrees with another
manager at the other part. The blurred level of
authority in the structure can bring about reduction
in agility of conflict resolution and decision-making
process.
Flat
Structure
This structure elevates the level of
employee responsibilities within an
organization. It removes the excess layers
in the management level and bring about
improvement in sped and coordination of
communication within the organization.
Employees can usually lack a specific superior to
report their activities to and this can create
confusion and power struggles all around the
organization. The flat structure results to the
creation of generalist workers and not specialists
(Ahmady, et al., 2016). The specific function of
18

Fewer management level enhances easier
process of decision making amongst the
employees (Atinc, et al., 2010).
Eliminating the cost and salaries of
middle level managers reduces the budget
of the organization.
Jobs of employees may not be well defined and
clear. The flat structure may bring about limiting
long-term development and growth of an
organization, the management may make decisions
against newer opportunities in an effort for
maintaining organizational structure. The flat
organizational structure is more difficult for larger
organizations to adopt except it is divided into
smaller units of management.
Hierarchical
Structure
In this structure employees recognizes the
defined leadership level of responsibilities
in the organization including the level of
authority and responsibilities. It is
designed to promote employee motivation
for effective performance (Achcaoucaou,
et al., 2009). Hierarchical structures
promote developing specialist skills in
employees. The employees can narrow
their focus towards specific functions.
They tend to become loyal towards their
departments and seek towards achieving
outcomes at their best interest.
Cross department communications tend not to be
very effective in this type of structure compared to
flat organizations. Departmental rivalry may arise
as each of the departments has the power to make
decisions that places benefit on its own personal
interest rather than the organization as a whole
(Arabi, 2007). The higher level of bureaucracy often
hinders the speed for such organization to adopt
change. It could require more time to meet the
needs of customers. The structure requires relatively
higher cost to pa managers at multiple layers of the
organization.
P4 Identify the positive and negative impacts the macro environment has
upon business operations, supported by specific examples
Macro environment comprise of the combination of external factors that cannot be controlled and also affects the
performance decision making, and strategies within an organization. The macro environment of an organization
comprises of the various environmental factors that pose negative or positive impact on the operations of the
business. Toyota is affected by different forms of factors arising from the macro environments (Cusumano, 2011).
The emergence of the opportunities for global growth through higher market creation and higher demand through
the information technology has enhanced the development of business operations and expansions all through the
world. Countries all over the world has continued to reduce restrictions at their borders and companies can now
seamlessly operate in virtual organization as if thy are in the same location. This has helped companies like Toyota
in its vast global expansion all through the years and allowing its products and services to effectively reach various
markets effectively. Aside from the enhancement arising from social technology, technological development in
business operations and production processes brings about higher level of efficiency in functional units and general
performance of an organization. The rising digital revolution in regards to consumption with higher level of
productivity is bringing about better opportunities for firms to develop higher quality product and utilities which
makes business operations highly effective (Seymour, et al., 2012). The global shift of social and economic power is
actually resulting to higher demand for the product and services of Toyota in both developed and mostly
underdeveloped nations of the world which aims to benefit from the lower priced cars and automotive provided by
the company and the company has stand to gain significantly from this. On the other hand, pressure arising from
sustainable and ethical growth along with the expansion of the cyberspace are creating uncertainty and risks for the
business operations of Toyota.
Legal policies a various form of government regulations can have both positive and negative impact on Toyota. In
contemporary times, free trade is being promoted by major players in the global economy which presents significant
opportunity for Toyota. Nevertheless, countries like Brazil and India are imposing legal restrictions on foreign
automotive products in order that they promote their indigenous producers limiting the entry potential for Toyota in
such countries (Srdjevic, et al., 2012). In the past few years, Toyota has been enjoying from some of the key
decisions of the governments. The limitation of the Japanese government on importation of vehicles to Japan pose
19

positive impact on Toyota in the local market and he introduction of quota system by the US government in vehicle
important eases the pressure of heavy competition from outsiders like Toyota reducing their potential in the US
market.
The recession all over the world significantly affected the automotive industry with inevitable losses in which
companies has to reduce workers. This is also applicable in the case of Toyota. With the continually increase in the
cost of living, people might have to prioritize their needs and this would seriously negatively affect the automotive
industry (Akindele, et al., 2016). For the past 5 years, the sales of automobile have significantly dropped.
M3 Apply appropriately the PESTLE model to support a detailed analysis of
the macro environment within an organization
The PESTEL Analysis provides the framework that vastly covers the important aspects of the macro environment in
which an organization operates in and the description can be found the Figure below:
Figure 8: PESTEL Description
Source: Basu (2004)
20

Table 7: PESTEL Analysis of Toyota
Factors Description
Political
Factors
As a result of the boom in the boom in the European market economy and its stable political
climate, Toyota has made a strategic decision for its expansion into the UK market. But in the
case when the political is not stable, Toyota the company tends not to make a mistake of entering
such market as it occurred in Thailand some years back. Toyota had considered entering the
Thailand market in order to expand their car development (Bhasin, 2018). They had the
willingness of investing more than 20 million baht (equivalent of over $69 million) in the year
2014. Nevertheless, the political situation in Thailand significantly unstable such that Toyota was
discouraged to invest further in the country after some loss as it did not expect that the demands of
the country will be significant enough to bring about loss n investment (Child & Möllering, 2013).
Economic
Factors
During the global recession, Toyota faced a lot of problems as various companies did. The
recession resulted to people not being in the positions to buy cars as they see it as a luxury, where
the needs to get food and pay for rent w the major concern. This resulted significant fall in sales of
the company at the period and the company could not develop much strategy to circumvent it.
Moreover, this brought about various trade restriction laws such that makes it more difficult to for
distributing Toyota products to various parts of the world (Srdjevic, et al., 2012). Toyota use to be
one of the choices of the people due to fuel efficiency, in more recent times, the emergence of the
electric vehicles coupled with the economic recession as shifted the focus of the people towards
the electric vehicles which tend to be the future of automotive in which Toyota has not tapped
into.
Technology
Factors
The first hydrogen car was launched by Toyota as it directs significant effort towards research and
technology in the quest to optimize its vehicles to use alternative energy options. Not only as a
result of scarcity in fuel but also as a result of the recent concern for environmental damages and
trend s towards fuel efficient cars (Bhasin, 2018). While this is being resolved, there is more
abundance hybrid cars in contemporary times. Toyota has also been one of the foremost on such
trend and usually introduces more modifications. In the automobile industry, innovation can be
very critical, but comparatively Toyota does not try effectively enough to catchup with competitor
in paving ways for the future.
Ecological
Factors
Gases such as carbon monoxide and carbon dioxide and other combinations of oxides that is
produced by Toyota can be harmful and damaging to the environment and contribute to climatic
change. It also brings about health problems for humans such as heart and lungs problem this was
one major reason that the company moved towards the making of hybrid cars which uses less fuel
such as the Prius model (Seymour, et al., 2012). The Toyota vehicle uses lesser amount of oil and
gas in operation. This was the reason Prius bring about people not having to worry much about
renewable energy as the Toyota produce brings about less pollution which tend not to result to
high pollution effect. Additionally, Prius bring about new technologies which aims to secure the
environment though Plug-in-Hybrid electronic vehicles (PHEV) (Mustawadjuhaefa, et al., 2017).
Legal
Factors
The PHEV places Toyota on the spot in meeting special legal and policy standards which brings
about reduction in radiation of usual air pollutant compared to other vehicles compared to
conventional cars, the PHEV brings about reduction in fuel expenditure and most importantly
helps the car meet environmental laws (Bhasin, 2018).
21

P5 Conduct internal and external analysis of specific organizations in order to
identify strengths and weaknesses.
A tool that can be used to evaluate the internal and external environment of an organization that will give
implication on the strength and weaknesses is the SWOT analysis it is used widely as a strategic management tool
which assists managers in taking specific strategic decisions (Seymour, et al., 2012). It presents the analysis of the
internal environment within the Strength and Weakness framework and then the external environment using the
Opportunities and threats framework.
Figure 9: SWOT Description
Source: Srdjevic, et al. (2012)
22

Table 8: Internal Analysis (Strength and Weaknesses)
Strengths Weaknesses
Strong Brand Recognition and Market
Position: Toyota possesses a strong position in
the market in various countries around the
world. The market share for the company and
incorporation of the Lexus brand excluding its
brands of mini vehicles) in Japan is 45%, in
North America is 12.2%, 13.4% in Asia
(excluding China and Japan), and 4.3% in
Europe. Additionally, the company holds 7%
of the China market and major market share
in Oceania, South and Central America,
Africa and the regions of the Middle-East
(Seymour, et al., 2012). This form of strong
position in the market allows the company to
gain strong competitive edge and also capacity
to expand internationally. Furthermore,
Toyota possesses a strong brand portfolio in
the automotive sector. The brand portfolio
gives the company a very strong competitive
advantage that helps it gain higher sales and
turnover in the market.
Strong Focus on R&D: Toyota focuses
strongly on research and development to
expand its combination of product portfolio
and improve the quality, functionality, safety
and compatibility of the product with the
environment (Pratap, 2017). The efforts
directed by the company towards R&D has
helped the organization in continually
developing competitive products and process
and enhances the capabilities of the ones
already existing. Research and development of
the company is carried out in 14 of its facilities
all through the world (Lum, 2012). The strong
focus of the company on R&D has supported
the company in the adoption of more exciting
features to its range of products and also in the
development of new technologies in various
perspectives. This also help the company
uphold technological leadership in majority of
its product segments. It also gives them the
Brand image could be affected by product recall: a
number of product recall has been made by Toyota recently,
which could negatively impact its band image and the sales
of the company in general. For example, in the year 2011,
the company recalled 11,000 models of its Lexus and Toyota
brands as a result of damaging elements found in the
substrate and potential shutdown of the hybrid system
(Bhasin, 2018). Moreover, in similar vein, Toyota had also
recalled 181,000 vehicles in Japan regarding to the oil
leakages and abnormal oil detected in them which arose as a
result of slack bolts used in the sub transmission and
differential in the rear wheel (Monden, 2011). The
government has stepped in to investigate the reasons for
recall in the company. In 2012, the National Highway Safety
Administration carried out a preliminary investigation on the
potential of a faulty window manual switch in the doors at
the driver side of RAV 4 and Camry of the 2007 models.
This could bring a lot negative impact of the company’s
operational margin, which also brought about major
penalties for the company.
Declining sales in the major geographic market
segments: the company has recently witnessed a fall in sales
in majority of its geographic market segments. In Asia,
North America, Europe and other regions, the company has
witnessed declining sales which accounted for about 60.8%
of the company’s revenue. A consistent decline in the key
geographical segment of the company can place pressure on
the segments in which the company is still making profit and
the general revenue and profitability of Toyota.
Poor resource comparative allocation: Toyota currently
faces a low return on equity (ROE) and Return on Assets
(ROA) compared to other companies. The competitors of
the company such as Nissan Motors and Honda have higher
ROE than that of Toyota. The ROE of Honda was 4.8%
whereas Nissan has 8% in comparison with that of Toyota at
2.7% (Bhasin, 2018). The lower ROA and ROE compared to
other competitors which indicates that the shareholders
money is not being effectively enough to generate
shareholders return. The poor resource allocation could hurt
shareholder’s confidence and value in the long run
23

ability to introduce innovative products
bringing about high level of sales.
Table 9: External Environment: Opportunities and Threats
Opportunities Threats
Growing the Global Automotive Sector: the
economic recession significantly affected the global
economy with vat decline in revenue of companies
in 2008 and 2009. Nevertheless, 2011 has bought
about a strong rebound and this has continued since
then. As identified by MarketLine, the global
automotive industry has experienced growth by
8.9% in 2012 reaching a value of up to $1563.9
billion (Liker, 2014). The global automotive
industry recovery therefore provides the company
with the opportunities to attain more growth. In
term of revenue and customers.
Toyota poised to benefit from growing BMW
partnership: In June 2012, Toyota and BMW
entered into a memorandum of understanding with
the objective of having a long-term strategic
collaboration on the technical perspectives (Kyodo,
2013). As a part of the agreement, both of the
companies will jointly develop a fuel cell system,
architecture and components for the future of sport
vehicles and collaborate on the electrification of
powertrains and joint R&D on lightweight
technologies. The growing partnership of the
companies is expected to improve the technological
knowhow of the organizations and may bring about
the development of new products and as a result
contribute to increase in revenue.
Strong Global outlook on new cars: the global new
car industry has continued to experience moderate
growth rate. Moreover, it has also been forecasted
that it will wax stronger between 2020 and 2025.
Therefore, there is strong outlook for the global ca
industry coupled with new car systems which brings
about growth opportunities.
Intense level of Competition: the automotive market
all through the world is highly competitive. Toyota
faces high level of competition from manufacturers of
automobiles in different markets. The competition
amongst its different players is most likely going to
intensify in terms of the continuing consolidation and
globalization in the global automotive sector. The
factors that impact competition comprises of product
features and quality, the amount of required time for
development and innovation, reliability, pricing, fuel
economy, safety, financing and consumer service.
Increase in the level of competition lead to lower unit
sales of vehicles, and large inventory, which may bring
about downward pressure on pricing and therefore
negatively impact the financial performance and
operation of the company.
Appreciation of the Japanese Yen: the Toyota
company is significantly sensitive to fluctuations in
exchange rates especially of the Japanese Yen, Euro
and the US Dollars. When the Yen strengthens against
the Dollars this tend to have adverse impact on the
operating result of Toyota and in turn impact the
valuation of the company.
Natural Disaster could impact structure of
production: natural disasters such as floods,
earthquakes and more can impair the production of
Toyota. Japan which is the primary location of Toyota
is well known for earthquakes as the country has
witnessed various devastating earthquakes in most
resent times which disrupts the economy of the country
significantly. In the year 2011, the worse earthquake
was experienced in the country which brought about
temporary halt in production by Toyota and various
auto facilities in the country. In the same period ,
Thailand experienced flood that hated the activities of
Toyota and halted the production of 150,000 vehicles.
If natural calamities therefore occurs consistently, it
could significantly influence the output of the company
24

as a result of stoppages in work, which negatively
impact productivity, sales and revenue of the company.
P6 Explain how strengths and weaknesses interrelate with external macro
factors
For an organization, the strength and weakness can be influenced or influence external macro factors. The manner in
which Strength and weaknesses interrelate with external macro factors for Toyota includes:
 Strength/Political: The strong market position and brand recognition of Toyota was achieved as a result of
political landscape of European countries such was stable allowing it to be able to penetrate the economy of
the country. This external environmental factor provides the opportunity for the company to expand and
grow its business across the continent enhancing its brand recognition and market positioning. If the
government of such nation had been restrictive or had major instability, Toot may not have been able to
gain such prominence in such countries to build its brand strength. This is also through of other regions of
the world.
 Weakness/Political: One of the weaknesses of Toyota is the decline in sales in major geographical
segments an this can also be seen in the evidence o the failure of the company in Thailand, when they
venture to increase care development in Thailand but failed due to political instability and the failure of
Toyota to be able to foresee such issue before embarking in investment in the country.
 Weakness/Economic: The leftover of the global recession in which countries still battles to stand back on
their feet can also be traced to the weaknesses losing sales in its major markets. This arises as people will
tend to scramble for their necessities such as food, rent, cloths and more rather than purchase cars which
tends to be luxury for them. Moreover, the increase in fuel price may have shifted attention to smaller cars
that are more efficient, although Toyota produce such cars but electric cars and hybrid cars are taking over
the market and Toyota does not yet produce such and need to invest in such technology.
 Weakness/Social: One of the weakness of Toyota is the product recalls the company carries out due to
errors. The company recalls vehicles and as they pay fines and penalties as a result of car malfunctions.
Specifically, with passengers reporting that vehicles are going out of control affecting millions of people.
This resulted to people becoming less likely to purchase Toyota portraying the product with negative
perception especially as a result of the lackluster response from the president. This could also contribute to
the declining sale of the company.
 Strength/Technology/Environmental Factor: One of the strengths of Toyota is the strong focus on research
and development by the company. This goes in hand with the company being the first to produce hybrid
cars on the technological factors in the macro and external environment. This is not doe only because of oil
scarcity but also to develop vehicles that uses alternative option for fuel. However, one major reason for the
movement of Toyota into hybrid cars production is about its ecological influence which will waste less oil
and gas which will bring about reduction in pollution and any form of gas emission. Nevertheless, the
world is shifting into electric vehicles but Toyota has not taken moves towards this yet.
M4: Apply appropriately SWOT/TOWS analysis and justify how they
influence decision-making
The SWOT analysis shows provide the internal strength and weaknesses of an organization and the external
opportunities and strengths which can be essential for the development of various forms of decision in an
organization in order to meet strategic objectives.
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Table 10; Impact of SWOT on Decision Making and Objectives
D2) critically evaluate the impacts that both macro and micro factors have
upon business objectives and decision-making.
An organization carries out its business in two different forms of environment and they are the micro and macro
environment. The micro environment deals with factors that impact the environment from the inside and directly and
They are shown on the table below:
Condition Impact on Decision
Strengths Toyota is recently the largest producer of
automobile and currently ranked number one in
the automotive sector with a sale of 8.4 million
cars and holding a market share that is more than
16% of the automotive sector (Liker, 2014).
There is high demand for Toyota Corolla and
Camry Sedan which has continued to grow taking
a 9% of sales in the United States (Kyodo, 2013).
Toyota tended to adopt a renewed global
image with a vision that endeavors to meet
the mobility of people in a way that caters or
the environment and people tend to see the
organization as being socially responsible
and this translates to good public relations
(Achcaoucaou, et al., 2009). The company
has showcased itself as having strong
production system in place as it
manufactures the best hybrid cars in the
world.
Toyota made use of a strategy aimed on
starting the Innovation International
Multipurpose vehicle plan, which aims to
optimize global supply and manufacturing
system of automobiles (Lum, 2012). Having
its entry into the Asian Market, Toyota
speedily acquired higher share of the market
and develop a strong image for the
company.
Weaknesses Errors on cars from the factory and functionality More than 8 million cars and trucks were
called by the company globally as a result of
the defects that was discovered in their
production system and temporarily closed
the United States productions.
Opportunity Shifting demand towards lesser energy
consuming and cars that are fuel efficient for the
users which created major opportunities of
Toyota Vehicles in the United States markets
Toyota has entered into a joint venture with
French automotive companies, Peugeot and
Citroen, which allowed the company to enter
the European market. The company
produced cars that are of high quality and
26

cost effective in meeting the needs of is
niche market of the kind of users does not
have the capacity to afford the luxury of
expensive vehicles (Ahmady, et al., 2016 ).
Threat The economic downturn brought about liquidity
of credit in the United States and this had major
impact on level of the wealth of consumers. This
tend to negatively impact the sales of Toyota as
consumers do not have the strong disposable
incomes to buy cars (Monden, 2011). The
tightening of the regulations on the environment
on car emissions would affect Toyotas decisions
if the company manufacture cars with low
emissions.
The Hybrid car has been built by Toyota,
which is less expensive and ensued it
consumes lesser amount of fuel to ensure
that users can travel in a cost-effective rate
and also ensures that it conforms to the
environmental standard.
Table 11: Impact of Micro Factor on Business Objectives and Decision making at Toyota
Factors Impact on Business Objectives and Decision Making
Customers The research and development division of Toyota evaluates the needs and wants of the customers
and decides on the preferred cars that will bring about lesser fuel consumption. Consequently, an
arrangement was made by the company to produce the first green and hybrid cars, the Prius
which also proffer less damages on the environment. However, Toyota was able to understand
that people are in the era in which they want a fuel saving vehicle being cost and energy efficient
and as a result they will buy the Prius, and they marketed it with reasons for people to actually
buy it (Liker, 2014). Moreover, tax-cut were also offered by government to owners of green cars
which further helped the market of Toyota.
Competitor
s
While competitors such as Citroen have the vehicles that can compete with the Prius effectively,
Toyota still takes the leader in this market segment. Such reputation was built based on strong
marketing strategy the imagination of the people has been grabbed by being the first form of
hybrid cars and better in using advertisement. This indicate s that the major aspect of interest for
Toyota was the building of better ready to focus models of the needs and wants of buyers before
having them expressed (Bhasin, 2018). The deftness of Toyota gives the company the rivalry
edge in a business environment that are determined by changes in the pattern of business and
obligations to the government.
Suppliers Various Suppliers supply Toyota various materials and apparatus that the company might need.
The selected dealers are ensured to be reliable as the company has various choices to select
suppliers. High level of attention is directed to suppliers by Toyota ad they are identified at two
levels of function. The first level comprises of the product development team (PDT). The second
aspect works with various individual parts. High level of partnership exists and first level
exchange of information exists between both of the participants (Bhasin, 2018). This indicates
that the dealers are significantly cooperative and this brings about decrease in the time spent in
production improvement. Toyota uses technologies to communicate with their suppliers which
compensates for having to send personnel of the companies directly to dealers.
Workers The worker s comprises of the human resources of the company in which the company cannot be
operational when there is none. The workers of the company have direct impact on the
company’s decision making
Investors The investors are the individuals that provides the financial resources for the company to run.
Changes in the interest of the investors in the company, financial outcome can be affected.
The Macro environmental factors identify the external environment in which an organization carries out its business
in general and can be covered using the PESTEL analysis. The macro and micro environmental factors impact the
policy of the organization on decision making. It has major impact on the level of success achieved be the
27

organization and as a result, such factors should be considered during the decision-making process by the company’s
management (Bryson, 2012). This comprise of the factors that are external to the organization but impact the
decision the organization makes in order to survive the market conditions in the external environment and meet the
expect standards.
Table 12: Impact of Macro Factors on Business Objectives and Decision Making At Toyota
Factors Discretion Impact on Objectives and Decisions
Political The political environment has significantly
impacted the development of effective
decisions on marketing of Toyota.
Additionally, it faces legal contact
responsibilities, cost regulation, intellectual
property protection. Approximately $2.4
million dollars was paid by Toyota on
lobbying venture. Nevertheless, in one year
the amount was increased to $3.4 million
(Bhasin, 2018).
Toyota created a political committee for the
organization to develop strategies for more
effective bargain.
Economic As a result of the advantages and fuel saving
attributes of car models, customers tend
towards using hybrid cars. Moreover, the
government made cost of insurance and
taxation for the adoption of such cars to be
lower than conventional cars because they
are considered to be green cars. As it was
shown through facts, the price of fuel is now
higher, it indicates that users can save more
of their money by using the Prius by Toyota
(Lum, 2012). Recent figures show that the
rise in the cost of fuel bring s about negative
impact on the GDP.
Toyota decided that Hybrid cars needs to be
built in ore for the company to continue to meet
the objectives of creating quality cars that is
customer focused. As a result, Toyota produced
the Prius model which is regarded as a green
car.
Social Contemporarily, social actors have tended to
be one essential aspect companies must look
at as a result of changing in taste and
business climate. In regards to cars
consumers are now more environmental and
cost conscious (Kyodo, 2013). This is the
reason why Toyota has to consider the
production of vehicles that will not result to
contamination and damage to the
environment and also consider the cost of
operating the vehicle
Technological This is the main aspect for attaining The idea of making use of cars powered by
28

competitive edge in the car manufacturing
sector and for globalization. It deals with the
capability of the company to produce
products of high quality at the most
moderate cost and whether ground breaking
products are manufactured by the
organization in regards to the use of recent
technologies (Bhasin, 2018).
batter using plug-in hybrid electric vehicles
(PHEV) would have been a major
technological swift for Toyota as they do not
use fuel, they are more effective and efficient
(Bhasin, 2018). Nevertheless, Toyota has not
taken decisions towards this but has responded
to this need through the Prius hybrid vehicle
that consumes minimal amount of fuel even
before the advent of the technological shift
towards electric vehicles and Toyota should be
expected to take such step in the near future.
Legal These are factors such as the current market
legislation, future legislation, environmental
laws, regulatory processes rare provided
through the legal frameworks (Conway,
2015). Toyota is exposed to various legal
systems such as taxes, competition law,
consumer protection and intellectual
property right laws.
The Prius model is built with special
technologies that ensures that the cars uses
minimal fuel consumption system to achieve
the highest tasks while in operation and
ensured that it adhere to the environmental
laws. The systems and products of Toyota re
ensured to be original and designed within the
company without infringing any property right
laws (Bhasin, 2018). The company also ensures
that it adhere to consumer protection regulation
which can been seen by the vast amount of
recalls the company made on error and faulted
cars from various markets in the world
Environmental This deals with Consideration of
environmental laws and regulation which
are recently taken significant by consumers.
The greenhouse such as carbon monoxide
and carbon dioxide and others are
produced mainly by cars and mainly
harmful and damaging to the environment
such that causes climatic change (Parker,
2016). It can also bring about health
problems such as lungs and heath diseases.
A major reason for the production of Hybrid
cars by Toyota is as a result of the minimal
environmental impact it has and the less effect
on health and safety of people which made the
company one of the leading car companies to
produce environmental friendly products,
although it has not entered into the electric
vehicle manufacturing which uses cleaner
energy as it does not consumer any fuel or
produce any form of greenhouse gases directly
(Pratap, 2017).
7.0 Conclusion
The business environment is the combination of the internal and external factors that might have collective influence
on the general functions and operations of a business. Variations in the business environment influence the different
forms of decisions taken within the organization including scope, size, type and structure of the business. An
effective manager must be able to connect the sizes, types, scopes and structure with the offering of the products and
services of the company. Besides this, organizations must have effective understanding of the relationships between
the organizational structure and functions and understands their advantages and disadvantages of the interrelations
between various structures and functions of the organization (David, 2010). Furthermore, the macro analysis is very
essential and needs to be carefully understood in the implementation of the organizational strategy with the
accomplishment of the identified objectives.
29

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