Business and the Business Environment

This document provides an analysis of different forms of business organizations, the size and scope of diverse enterprises, and the interrelationship among organizational functions. It also discusses the purpose and legal structures of different types of businesses and examines the positive and negative aspects of the external environment. Additionally, it explores internal analysis to identify strengths and weaknesses and their relation to the external environment. The document focuses on the subject of Business and the Business Environment.

Business and the Business
Environment
1

INTRODUCTION................................................................................................................3
PURPOSE END LEGAL STRUCTURES OF DIFFERENT TYPES OF BUSSINES
ORGANISATIONS………………………………………………………………………....3
SIZE AND SCOPE OF DIFFERENT TYPES OF ORGANISATIONS…………………...5
DIFERENT ORGANISATIONAL FUNCTINS AND STRUCUTRES ..............................7
POZITIVE AND NEGATIVE ASCPECT OF EXTERNAL ENVIRONMENT………..…8
INTERNAL ANALYSIS TO INDENTIFY STRENGTHS AND WEAKNESSES……….11
INTERRELATION BETWEEN STRENGTHS END WEAKNESS AND EXTERNAL
ENVIROMENT……………………………………………………………………………12
CONCLUZION. …………………………………………………………………………..14
BIBLOGRAPHY……………………………………………………………………...…15
2

INTRODUCTION
Business environment consist of different external and internal factors that are affecting
different business functions that consist of customers, management, employees and supply &
demand for business (Worthington and Britton, 2009). Hennes & Mauritz AB, popular as H&M,
is a Sweden-based multinational retail clothing corporation that is famous across the world for its
variety of designer garments for men, women and children. The corporation was established in
the year in 1947 by Erling Persson and the headquarters of the corporation are situated at
Stockholm, Sweden (H&M Clothing Company, 2020). Over the years, the processes of the
business have been expanded to more than 70 countries all over the world. The following report
deals with analysis of different forms of business organisations and size and range of diverse
enterprises. An attempt is also being made to determine the organisational functions and
organization and the interrelationship among diverse organisational functions. The statement also
measures the external and interior environment of a business organisation and attempts to relate
the internal power and the limitation with the macro-environment components of the business
organisation.
Purpose and legal structures of diverse kinds of business enterprises.
Organisation is defined as a group of individuals work together within a structure of
responsibilities and authorities for each individual to attain the organisational aim. The
organisational aims may be “for profit” or for “not for profit” There are different types of legal
structures depending on their aims as stated above.
Private limited company:
Private limited company is a business entity that is “private” by ownership and consist of
many jurisdictions that have to be followed and adopted for purpose of achievement of specific
objectives.
Private limited company can have a share capital and the company allots shares to its
shareholders who own the company in proportion to the percentage of the face value of the
capital they hold.
Private limited companies operate under the regulations prepared by them which are called
Memorandum and Articles of Association and is governed by the Companies Act.
Private limited companies generally have between one and fifty members and the capital is
raised without making an open offer to the public to invest in the shares.
3

The liability of the shareholders is limited to the extent of the capital susbscribed . However
with the advantage of limited liability comes the responsibility to submit audited accounts,
directors particulars and file statutory returns to the companies House.
Since these companies are not registered on the stock market, the shares in the private
Limited companies cannot be transferred freely.
Large number of businesses operate as private companies limited by share capital.
Private limited companies can also operate by guarantee from its members without having a
share capital and is preferred legal structure for not for profit companies.
Sole proprietorship: Individual persons operating a business with a unlimited liability
becoming personally responsible for all the liabilities of the business is called sole
proprietorship. This does not require any registrations and is easy to start. So also it does not
require any statutory obligations to be fulfilled relating to its legal structure. Small shops,
individual professionals like doctors, lawyers, chartered accountants do operate under this legal
structure. Sole proprietor is the owner and the manager of the business.
Partnership: When two or more individuals operate a business jointly under a agreement called
the partnership deed where the liability of the individual members is unlimited is called a
partnership. There are limited members usually between 2 and 20 and the partners share the
profits of a business as agreed in the partnership deed.its action is performed within this which
talk regarding earnings allocates share and different policy of corporation. The partners are the
owners and the managers of the business.
Public Limited companies (PLC) or Corporation: These are established under the
provisions of the companies Act and raise significant capital from the public at large through a
legal document called the prospectus.The management of the corporation is separated from the
investors in the company and the provisions of the Companies Act govern their relationship. The
Memorandum and articles of the association are the internal regulations which govern the
corporation and which are in compliance of the Companies Act.The Companies Act imposes lots
of responsibilities on the directors who manage the company.
Public Sector organisation- These enterprises are possessed and operated by governments of a
country generally to provide an essential service at a reasonable price. For eg in the Uk all the
state funded schools, NHS, BBC are still state owned enterprises. The ownership has been
4

retained by the government with a particular national objective which will not be achieved if it is
privatised. (Hamilton and Webster, 2018). For example in HS2 ( high speed railway company)
no private investor would be willing to put investment given the large amount of funding
required and the great uncertainty in the payback period. These organisations are funded by the
government through its own budgets and their financial performance is reported to the
parliament. These organisations can be at the local councils level , or at the state levels or at the
national levels, but are essentially owned and funded by the government.
The general complain levelled against government sector is that they are bureaucratic, inefficient
and not fast enough decision making happens to be successful in modern business world.
Voluntary organisation:
The major objective of this venture is to do communal services that offer advantages to
community (Čepel and et. al., 2018). Oxfam is the organisation here which motive to eradicate
possessions globally. The organization run internationally and has efficiently urbanized
sovereign segment that has wrap the poor division of community appropriately.
Purpose: The aim of Oxfam is to eliminate the problem of international poverty and provide
relief during natural disasters or in man-made crisis situations like war by collecting donations
from countries and people and corporations all over the world.
Legal structure:
Trusts and Foundations : These kinds of legal structures are similar to corporations and
strictly regulated with a main difference being that they are not for profit and do not permit any
distribution of surplus to members and unlike in a corporation the members are the equal owners
and each member has one vote irrespective of his contribution to the trust or the foundation.
Un-incorporated association: The laws and legislation within this form of contributions
is not defined in any establishment. There are numerous limitations in the organisation and
running of voluntary activities except on a very small scale.
Size and scope of different types of organisations.
5

Private organisation:
H&M is a retail brand that is focussing on acknowledging customer requirement by
offering them with high quality products.
Visions: H&M vision statement is based on driving a long lasting change and working on
improvement of living conditions of people with better innovative ideas and communities.
Mission: H&M has a mission statement of two main components that is transforming of
(Sivarajah and et. al., 2020).
Objective: The objective of H&M is to consider the needs of present & future generation
to enhance awareness how business can be conducted in a socially, economically and sustainable
way.
Size: H&M is spread across 74 nations and they are having a workforce of 123.376
employees.
Scope: The scope of H&M is focussing on promoting democratic fashion that is
sustainable at same time, sustainability vision is based on innovation and technology (Brennan,
Canning and McDowell, 2020).
Structure: In H&M there is use of matrix organisation structure that can help in proper
flow of information with a mix of both functional and divisional structure.
Public organisation:
These ventures are controlled and managed by government to provide required benefits to
society with earning of profitability.
Background: NHS belongs to health care industry started in the year 1948 and since then
offering services in optical and dental care.
Vision: Vision of NHS is to deliver better value, better care and better health related
services to people.
Mission: The aim is to focus on achievement of a constant and providing quality care to
each person every day.
Objective: NHS is a health organisation which is is to offer effective health care facilities
and managed believe of people.
6

Size: The healthcare industry has engaged over 1.5 million employees that on the
ongoing basis looks for the effective fitness of individuals. Along with the firm operate its
business in four nations UK, Wales, North Island and England.
Scope: Scope of NHS is focussed on providing a comprehensive health related services
apart from optical and dental care.
Structure: NHS is a part of public funded health care systems of UK. There are four
systems of UK that includes NHS Scotland, NHS wales and health & social care in northern
Ireland. There is use of divisional structure as internal functioning of organisation.
Voluntary organisation:
Such organisations are based on no earning of profits but focussing on achievement of
special laid objectives.
Background: Oxfam is a voluntary organisation that is working towards eradication of
poverty incorporated in 1942 and they have established 19 firms across different parts of world
working towards eradicating poverty.
Vision: Oxfam is focussed on alleviation of poverty to ned the injustice situation of
poverty.
Mission: The mission of Oxfam is to protect, save and rebuild situation of disasters
strikes for building of better lives for people.
Objective: The objective of Oxfam is to deal with issue related to climatic change, land
rights and discrimination against women.
Size: Oxfam consist of 17 independent organisation that are working together across 94
countries.
Scope: Oxfam is working as a global movement of people so that there can be dealing
with unprivileged group of society and there can be a planet free from poverty. All these
functions are focused on helping to build better lives (Franklin and Marshall, 2019).
Structure: The firm consider functional structure were there is division according to
specialised functions such as finance, human resource etc.
Different organisational functions and structures.
Organisational structure:
7

Organisational construction determines the manner in which organisational tasks and
activities are directed towards accomplishment of goals and objectives (Cassia, Paleari and
Redondi, 2005). It is system outlining and specifying the reporting relationships and also
determines the duties and accountabilities of each member of the organisation. Primarily, the
following three types of organisational structure are widely popular among business
organisations:
Functional structure:
Organisations that implement functional organisational structure are based on division of
entire business organisation into similar departments with similar tasks and activities such as
marketing, production, sales research and development, finance and accounting, legal, human
resources. Herein, employees having similar job responsibilities and skills are put together under
teams to achieve the departmental goals and objectives. Under every department, a functional
head or superior monitors the tasks and activities of that department who is usually an expert
from that particular field. For example, Marks and Spencer follows a functional organisational
structure.
Divisional structure:
In divisional structure, the entire business organisation is separated into diverse divisions
that are either supported to manufactured goods ranges or geographical locations. Every function
act as a separate functional unit with the provision to support every function within it such as
marketing, production etcetera. For example, TESLA is an organisation that follows product-
based divisional arrangement based on SUVs, and Sedans .
Matrix Structure:
In a matrix organisation, two or more than two organisational structures are united to
frame or develop a structure which is best suited to the organisational needs and requirements.
For example, integration of functional organization with divisional configuration where the
workers will have divisional and functional heads. Matrix organisational structure is suitable for
organisations with business operations at different geographical locations demanding consistency
in superiority of goods and facilities. For example, H&M follows a matrix organisational
structure. It helps the company to manage it international operations in a very effective manner
and attain the business objectives of providing the best quality of products to the customers. With
the help of integrating functional heads with various geographical divisions, the management of
8

the company can ensure uniformity in its business functions and enhance the level of customer
satisfaction globally.
Interrelationship between organisational functions:
Marketing and Production Department:
Production and marketing department execute important business functions that are
directly connected with the long-term as well as short-term survival and development of the
commerce administration. These two functions have a very significant relationship and
effectiveness of the association among production and advertising section determines attainment
of business objectives (Russell, Bamforth and Stewart, 2014). For example, the marketing
division of H&M is accountable for market and trend analysis to determine the current level of
customer satisfaction and analyse the needs and expectations of customers to provide this
information to the production department for better product designing. In a comparable way,
manufacture division offers a detailed data about the products being manufactured to the
marketing department including important details such as features or quality of the product that
lays the foundation for promotional and advertising campaigns being run and managed by the
marketing department. Hence, an important relationship exists between marketing and
production department of H&M.
Sales and Human Resource Department:
Human resource division of any business establishment is responsible for maintaining
and enhancing employee motivation to increase the overall productivity of the organisation.
Thus, the effectiveness and productivity of sales team and department depends on the
effectiveness of Human resource department of the organsiation. In a similar manner, sales
department communicates the information with respect to desired skills and qualities of the sales
personnel which then shapes the recruitment and selection procedure by human resource
department (Johnston and Marshall, 2016). Thus, it can be concluded that an important
relationship exists between the sales and human resource division of H&M.
Finance and accounting and other department;
The primary job of the accounting department is to ensure that all the transactions are correctly
recorded and analysed to minimise the losses in production, maximise the profitability through
product mix in marketing and arranging finance for the growth of the business activities.
9

Positive and negative aspects of external environment.
PESTLE Analysis:
It is a framework of tactical administration that helps in monitoring and analysing the
impact of outside environment factors on business process and decision-making. PESTLE
Analysis helps a business manager to determine early opportunities and threats on account of
changes in macro environment of business and take necessary actions (Del Marmol and Feys,
2015). A PESTLE Analysis of H&M is being done in the following manner to determine positive
and unconstructive aspects of external atmosphere:
Political Factors:
Factors such as political constancy or unsteadiness, level of government control and
intervention, different policies and objectives of government influence the business processes in
a commerce region. Positive and negative impacts of external political factors for H&M are:
Positive: Increasing globalisation and liberalisation policies and free-trade agreements
has a constructive contact on the operations of the organisation and presents an opportunity to
expand the operations in many developing countries and maximise the generation of revenue
from international markets.
Negative: Political factors also result into negative impacts for business organisation. For
example, increasing tensions and trade-war between US and China has increased the cost of
textile imports which is a negative impact and has resulted in increasing cost of production for
the organisation (Dunford and et. al., 2016).
Economic Factors:
Economic factors refer to the economic condition of a business territory, rate of capital
and labour, import-export rates, tax rates etcetera. All such factors have a profound impact on
business operations and decision-making that can be analysed as follows:
Positive: Increasing level of household incomes in growing countries has a optimistic
collision on the operations of H&M as it presents an opportunity for the organisation to increase
sales and revenue by offering goods of high quality in these business territories due to increase in
luxury spending and demand of high quality goods.
Negative: H&M operates in many countries around the world and the changing labour
rates, tax rates, rate of capital etcetera in different countries makes it challenging for the
10

management to adopt a pricing policy to suit its international operations in every country and
constant price-shocks are common.
Social Factors:
These factors are primarily concerned with the consumer behaviour and the trends and
dynamic needs and requirements of the customers. Impact of social factors on the business
processes and determination devising of H&M are as follows:
Positive: Increasing demand of designer clothes and the changing attitudes of consumer
is a positive collision of social components on the functions and determination devising of
H&M. It provides the organisation an opportunity to cater to these expectations and demands of
the consumer and increase profits and revenue.
Negative: Over the past few years, consumers have become increasingly conscious of the
choices they are making and their purchase decisions and hence, ethical business operations have
become a very important factor influencing consumer choices.
Technological Factors:
Rapid pace of technological development and innovations have influenced operations
under every business industry opening avenue of expansion and growth as well as threats in case
of security threats. The optimistic and unenthusiastic collisions of technical factor in the context
of H&M are:
Positive: Social media marketing and online sales channel have helped the business
organisations to increase the spread of information about the various products and services to
widely scattered potential customers. It provides an opportunity for business managers to attract
new customers and maximise revenue (Alalwan and et. al., 2017).
Negative: With the extent of technology being extensively used in generating more
revenues, threats of customer data privacy and security have increased at an alarming rate and
also affected the goodwill and image of many business organisations. Thus, data privacy and
security are amongst the negative impact of technological factors.
Legal Factors:
These factors include rules and regulations, legal guidelines and frameworks, labour laws
etcetera. Impact of legal components on business functions are:
Positive: It provides an opportunity for an organisation to follow legal frameworks and
increase the market goodwill and build trust with the customers.
11

Negative: Every nation has its own set of system and regulations which makes it
challenging for the management of H&M to understand and comply with legal compliances in
every business territory due to widespread international operations.
Environment Factors:
Increasing environmental concerns and the challenges presented by global warming and
climate change have impacted the business operations in the following manner:
Positive: The management of H&M aims to attaining 100% renewability by the year
2030 which is an opportunity for the organisation to increase goodwill and public image and
enjoy higher sales due to market favourability.
Negative: Clothing industry is the second largest pollutant which makes the constant
criticism a common element for firms operating in the industry and the non-compliance with
environmental protection guidelines can result into heavy fines and loss of public image and
goodwill for the organisation (Gwozdz and et. al., 2017).
Internal analysis to identify strengths and weaknesses.
SWOT Analysis:
It is a imperative instrument of internal analysis which is utilised to conclude strengths
and weaknesses and also recognize outside chances and pressure based on internal analysis
(Madsen, 2016). SWOT examination of H&M and Zara is being done as follows:
SWOT Analysis of H&M:
Strengths:
 A strong network of suppliers and
distributors that helps in promotion of
products and effective sales training
(Arrigo, 2018).
 A strong base of financial resources and
steady cash flow.
 Highly skilful and trained workforce. A strong international presence and
brand image.
Weakness:
 Low profitability ratio below the
industry average.
 Limited investment in latest
technologies and innovations.
 Missed opportunities due to poor
product demand forecast.
 Limited revenue outside core business
products and poor diversification
strategy.
Opportunities: Threats:
12

 Increasing purchase power of
customers and level of increasing
household income. Green drive and sustainability changes
in operations to improve goodwill
(Chen and Fang, 2019).
 Constant innovation and product
development to meet customer
expectations.
 Increasing intensity of rivalry in the
retail clothing sector.
SWOT Analysis of Zara:
Strengths:
 In-house production and zero
outsourcing policy increase the quality
of goods being offered to the
customers. Strategic location of the stores has
helped the company to attract new
customers with limited marketing
efforts.
Weakness:
 Centralised distribution system is the
biggest weakness of the company
which leads to many unpredicted
problems such as transportation and
logistics error.
 A very limited investment on marketing
is also a weakness of the company
restricting spread of information
(Koivulehto, 2017).
Opportunities:
 E-commerce and online sales channel
are a great chance for the corporation to
exploit its revenue and profits (Xuejie,
Chang and GuangHao, 2019). Global expansion with the existence of
free trade conformity and liberalisation
policies.
Threats:
 Increasing extent of competition is a
main risk to the long-term profitable
operations of the business organisation.
 Exclusive operations through its own
stores presents a threat of limited reach
and accessibility to Zara.
Interrelation between strengths and weakness and external environment.
Political Factors:
 Increasing free-trade conformity has helped the administration of H&M to expand to
different countries that acts as a main strength of the corporation.
13

 Due to the political tensions between US and China, the cost of production has increased
for H&M reducing its profitability ratio to a below industry average that acts as the
weakness for the corporation.
Economic Factors:
 Increasing stage of home profits has increased the customer base for H&M by increasing
the affordability that is a major strength of the company. Increasing fluctuations in tax-rates and rate of capital and labour in the international
market leads to mismanagement and poor pricing policy that is a weakness of the
company.
Social Factors:
 Over the years, consumer demand for designer clothes has increased exponentially
leading to a huge profit and revenue for the company. It has helped in generation of a
immense base of monetary resource for the corporation which acts as a major strength of
H&M (Sheikh Salman, 2018). Consumer awareness of environmental and social impact of retail clothing industry has
affected the image of H&M acting as a weakness.
Technological Factors:
 With the help of latest developments in information technology, the management of
H&M manages a strong interconnected network of distributors and suppliers providing
strength to the company. Investment in technology and developments has become imperative that increases the
expenditure for H&M and acts as weakness of low profitability (Bonilla del Olmo
Arriaga and Andreu, 2019).
Legal Factors:
 Due to favourable policy of many developing countries to allow foreign investment,
H&M has been able to expand in many countries providing a strong international
presence and acting as the major strength of the company. Increasing internal expansion summons the company operations to different set of rules
and regulations creating a challenge for the management and acting as weakness of the
company.
Environmental Factors:
14

 Due to the increasing environmental awareness, H&M has committed towards
elimination of carbon footprints and zero emission of greenhouse gases providing
strength to the company by improving public image and goodwill.
 Environmental issues and concerns have increased the expenditure of company into
sustainability campaigns leading to reduced profitability and adverse effect of weakness
of the company.
CONCLUSION
It has been concluded form the defined content that there are diverse functional division
within a firm. There are different categories of organisation like public, private and voluntary
and each sector company has its some specific purpose and objective. By monitoring the
interrelation among different functions of company, it can be outlined that how each function
support in running the business of enterprise. The influence of macro environment over
establishment can be analysed by PESTEL analysis. Along with this, the document has also
defined SWOT analysis to define the capability and impact of internal factors of organisation.
15

BIBLIOGRAPHY
Alalwan, A.A., Rana, N.P., Dwivedi, Y.K. and Algharabat, R., 2017. Social media in marketing:
A review and analysis of the existing literature. Telematics and Informatics. 34(7).
pp.1177-1190.
Arrigo, E., 2018. The key role of retail stores in fast fashion companies: The H&M case study.
In Contemporary Case Studies on Fashion Production, Marketing and Operations (pp.
121-137). Springer, Singapore.
Belas, J. and et. al., 2018. Relationship of gender to the position of Slovak University students on
the socio-economic determinants of the business environment and the development of
entrepreneurship. Entrepreneurship and Sustainability Issues.
Bonilla, M.D.R., del Olmo Arriaga, J.L. and Andreu, D., 2019. The interaction of Instagram
followers in the fast fashion sector: The case of Hennes and Mauritz (H&M). Journal of
Global Fashion Marketing. 10(4). pp.342-357.
Brennan, R., Canning, L. and McDowell, R., 2020. Business-to-business marketing. SAGE
Publications Limited.
Cassia, L., Paleari, S. and Redondi, R., 2005. Management accounting systems and
organisational structure. Small Business Economics. 25(4). pp.373-391.
Čepel, M. and et. al., 2018. Business environment quality index in the SME segment. Journal of
Competitiveness.
Chen, X.J. and Fang, G., 2019, May. Analysis on green marketing strategy of clothing firm: take
H&M for example. In Proceedings of the 2019 International Conference on Management
Science and Industrial Engineering (pp. 146-150).
Del Marmol, T. and Feys, B., 2015. PESTLE analysis. 50Minutes.
Dunford, M., Dunford, R., Barbu, M. and Liu, W., 2016. Globalisation, cost competitiveness and
international trade: The evolution of the Italian textile and clothing industries and the
growth of trade with China. European Urban and Regional Studies. 23(2). pp.111-135.
Franklin, D. and Marshall, R., 2019. Adding co-creation as an antecedent condition leading to
trust in business-to-business relationships. Industrial Marketing Management. 77.
pp.170-181.
Gwozdz, W., Steensen Nielsen, K. and Müller, T., 2017. An environmental perspective on
clothing consumption: Consumer segments and their behavioral
patterns. Sustainability. 9(5). p.762.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Hans, V.B., 2018. Business environment-conceptual framework and policies. Internatioal
Educational Scientific Reseach Journal. 4(3). pp.67-74.
Johnston, M.W. and Marshall, G.W., 2016. Sales force management: Leadership, innovation,
technology. Routledge.
Koivulehto, E.I., 2017. Do social media marketing activities enhance customer equity? A case
study of fast-fashion brand Zara.
Madsen, D.Ø., 2016. SWOT analysis: a management fashion perspective. International Journal
of Business Research. 16(1). pp.39-56.
Russell, I., Bamforth, C. and Stewart, G., 2014. Whisky: technology, production and marketing.
Elsevier.
Sheikh Salman, N., 2018. Analyzing of H&M Brand, H&M Home.
16

Sivarajah, U. and et. al., 2020. Role of big data and social media analytics for business to
business sustainability: A participatory web context. Industrial Marketing
Management. 86. pp.163-179.
Worthington, I. and Britton, C., 2009. The business environment. Pearson education.
Xuejie, C., Chang, Q. and GuangHao, Z., 2019, August. Research on Innovation supply chain
Management in Fast Fashion Industry——A comparative analysis of ZARA and H&M.
In 2019 3rd International Conference on Education, Culture and Social Development
(ICECSD 2019). Atlantis Press.
Online
H&M Clothing Company. 2020. [Online]. Available
thru<https://www.crunchbase.com/organization/h-m-clothing-company>
17