Business and the Business Environment

This report examines the business environment, analyzing different types of organizations, their legal structures, and the impact of macro factors. It uses Hennes & Mauritz and Tesco as case studies to illustrate internal and external analysis, including SWOT analysis, and how strengths and weaknesses relate to external factors. The report concludes by discussing the importance of understanding the business environment for achieving organizational objectives.

Business and the business
environment

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
P1 Types and purposes of organisation and their legal structure................................................1
P2 size and scope of range of different types of company .........................................................3
P3 Relationship between different organisational function and its link with organisational
structure and objective................................................................................................................4
P4 Impact of macro factors on business environment ...............................................................5
P 5 Internal and external analysis of specific organization to identify strengths and weakness.7
P 6 Strengths and weakness interrelate with external macro factor ...........................................9
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business environment includes all the factors that affects business environment internally
or externally. The internal factors include strength, weakness, opportunities and threat of the
organisation. On the other hand external factors includes political, social, economic environment.
Apart from this environmental and legal environment plays important role in business
organisation that has been discussed in detail(Aithal, 2017). The present study is done on
Hennes&Mauritz a retail supermarket, which offers clothes and known for fast fashion clothing
in many countries and it has its headquarters in Swedan and Stockholm. In addition to this a brief
study is done on the types of the organisation along with the scope of the organisation. Apart
from this there are various organisational functions that is discussed in the present study and
which are interlinked to the objective of the business .Furthermore, strength and weakness are
very much interrelated to external factors that is discussed briefly in this study.
LO1
P1 Types and purposes of organisation and their legal structure
Organisations are divided basically into three categories which are as follows-
Public company
It is the company which are allowed to transfer its shares to public. As per the UK law
Public companies are those which should have minimum paid up share capital of have separate
legal entity £50,000 . These companies may be listed or unlisted in the stock exchange. TESCO
is a broadcasting public company , that has been come into existence through a legal procedure.
(Aithal, 2017)A public company has to file documents like memorandum of association in which
it has to mention name of the company , location of the registered office and the objective of the
company and Article of Association in which a company has to mention all the rules required to
carry out business operation(Bezzina, Borg and Cassar,2017) .
Apart from this every public company has to submit Form 1 that contain detail about the
name address and date of birth of the first director . Along with this TESCO has submit Form 12
that contain declaration of compliance with all the requirement regarding registering and
incorporation of the company. Furthermore TESCO have to send annual return to the respective
authority within 28 days from the date on which return is made. The purpose of a public
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company is to increase shareholder's value , generating profit so that extra capital may be
invested to produce innovative products and expanding new market.
Private company
It is the company that are not allowed to transfer its share to the general public but it can
transfer its share by private agreement between buyer and seller.H&M is a private company that
come into existence by fulfilling legal formalities . For every private company it is required
submit Form IN01 that contain details about the name and address of the first director, name of
each subscriber and officers appointed. Furthermore, legal structure of Hennes & Mauritz
includes submission of Memorandum of association that should be signed by each subscriber in
front of 1 witness who will attest the signature (Blockeel and et.al. 2016). Along with this Article
of Association have to be delivered by private company to the registrar with the signature of all
the subscriber.
Apart from this H&Mhave registered office in UK , that is required to have by each
private company . All the documents and reports are sent to the registered office. In addition to
this accounts of H&M are sent to companies house within 9 months from the ending of
accounting year. Apart from this purpose of private business is to to create monopoly in the
market where it wants to take competitive advantage (Burns, 2016).
Micro,small and medium enterprises-
Micro businesses are those which has less than 10 employees with the turnover within £2 million
, it generally carries its business operation locally .In contrary to this small businesses are those
that should have turnover under £10 million and having less than 50 employees in the
organisation , these companies carry its business in at least more than one region (Blockeel and
et.al. 2016) .In addition to this medium scale businesses are those which a have less than 250
employees in the organisation and having annual turnover of £50 million,.
Voluntary Company
These are the organisations which includes trade associations, professional association,
environmental groups etc. These are the organisation formed for the purpose of serving the
society. Oxfam is voluntary organisation is a voluntary organisation that aims to eradicate the
poverty from the World . It has 20 charitable trust that focus on sustainable livelihood , right to
be heard , right to identity, rights to social service etc. Legally these organisations need not to be
incorporated but it is not a separate legal entity. These are the non profit organisations still they
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earn profit through money left after the donations and charity. But they use profit again for the
social welfare . In addition to this these companies are exempted from paying income tax and
other tax(Burns, 2016). .
P2 size and scope of range of different types of company
There can be broadly three types of size of the company which are as follows-
Small organisations
Organisations are those which has less than 500 employees . Hennes & Mauritz is a small
business as it has started at very low costs and offered few products. Small organisations can be
entrepreneurial where owner is highly motivated. Apart from this a small organisation can
manage their cash transaction and assets and liabilities easily as there are very few and small
transaction takes place(Vintilă and et.al. 2017) . Owner H&M can manage this transaction by
setting its PC system at home. The benefit of small organisation is that owner can have direct
contact through its customer because its supply chain is very short. Along with this for small
organisations direct marketing methods are suitable because they prefer niche segmentation of
the market that requires less efforts for publicity.
Large enterprises
Large enterprises are those that generally aims to serve mass public. These are the
businesses which generally have more than 500 employees . BBC is large scale enterprises that
raises money by selling its shares of stock to the public as needs huge funds . In large companies
staff are mostly work in a team to complete a complex task. They build a strong relationship with
the employees and members to make good cooperation as they have to discharge multiple
responsibilities. BBC provide comprehensive benefits to its employees and higher salary because
they are provided with difficult tasks that needs more skills and knowledge. Apart from this large
organisation more focus on employee retention for having experienced human resources in the
organisation which can contribute in critical decision making .
Scope
Small and large organisation have played important role in the growth of UK
economy ,as small enterprise has provided employment to various educated employed . Apart
from that large scale enterprises are the major source of innovation because it focuses in
research and development for taking competitive advantage .The large and medium organisation
are involved in high contribution to domestic production and they have high capacity to develop
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appropriate technology. Along with this talking about small enterprises , which have high scope
as it needs less amount of investment and having operational flexibility. On the contrary to that
large organisation encourage competition in the international market and small organisation
increases competition in the domestic market (Vintilă and et.al. 2017). These organisations also
helps in contribution towards defense and related production. Also large organisation brings new
technology in the country that helps in making tasks more simpler.
P3 Relationship between different organisational function and its link with organisational
structure and objective
All the organisational functions are interlinked with each other for achieving common objective
which is explained below-
Relationship between marketing and production function
There are various marketing trends that have major impact on the production . For
example the online marketing of food is increasing day by day according to which food
production department have prepared the food for its customers. In addition to this marketing is
done with the aim of increasing demand of the product and identifying the type of product
needed by the consumers according to which production department prepare plan for the
particular product and try to add all the features needed by the customer. On the other hand
production function focuses on creating new product for fulfilling the demand of the consumer.
This will help in achieving marketing related objectives of Hennes & Mauritz.
Relationship between human resource and marketing function
Human resource function includes recruiting and selecting the best candidate for the
organisation so that it can make contribution in growth and profit of the organisation. Company
can attract the talented people only when its brand loyalty is high among the audience,
companies can do it by effective marketing among the mass public. On the contrary to that
marketing is done by expert peoples in the organisation, or say, marketers .If human resource
department will not focus on recruiting best market expert then it may affect the effectiveness of
marketing. As a result of which Hennes & Mauritz can achieve objective related to quality of
human resource.
Relationship between customer relationship and production function
Production department focuses on manufacturing goods and delivering service with
quality on time as a result of which customer will get satisfaction after purchasing the product. In
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addition to this customer will cooperate in giving feedbacks and reviews according to which
product will be improved by the production department of Hennes & Mauritz. It will not only
help to achieve objective of production department but it will also help in achieving customer
oriented goals of the company.
There are mainly two types of organisational structure which is discussed below with their
link to organisational function-
Tall organisational structure
These organisations generally have taller hierarchy which has various management
levels. It is similar to military command chain. With the increase in scale of the business
management levels are also increased. Hennes & Mauritz have long chain of command as it has
managers with different ranks on each level of management. In addition to this advantage of this
structure is that because of having narrow span of control , It allows for close supervision of staff
members .
The taller structure of Hennes & Mauritz' organisation will create hurdle between
customers and the management as it will take lot of time in providing feedback or information
because of long chain of command. As a result of which Hennes & Mauritz will unable to make
direcrt relationship with customers. But on the other hand it is helpful for manager of production
department to keep close eye on its staff member because of few subordinates in each team.
Flat organisational structure
This kind of organisational structure has few management levels as a result of which each
level have groups with large number. Organisations with this structure lay emphasis on giving
power to employees and encourage self direction and identifying solutions with collaborating
with other groups or teams (McPake, and Hanson, 2016).
The flat organisation structure will help marketers to take quick decisions related to
market segmentation and targeting as communication process is so faster due to flat structure. On
the other hand it will help in maintaining quality of human resource as it focuses on empowering
employees that will help in creating new ideas as a result of which skills of the employees will
increase.
P4 Impact of macro factors on business environment
There are various external factors that affect business. These may have negative or positive
impact on Hennes & Mauritz-
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Political factors
Negative impact- If government intervention is high in the trading activity of Hennes &
Mauritz then it will unable carry on its business operation smoothly that could result in
expanding its business in various countries. On the other hand if the tax revenue are increased by
H&M then price of its product will be increased , ultimately it will decrease the profit of the
company (Vintilă, and et.al. 2017) .
Positive impact- Political factors will have a positive impact on the business
environment if there is a political stability in the country, which results in balanced growth of the
organisation . That will lead to smooth flow of business operation of intervention.
Economical factors
Negative impact-If there will be an increase in interest rate then it will lead to increase
in rates of bank loan and other sources of capital. It will result in rise in cost of funds taken by
Hennes & Mauritz through shares or debentures. In addition to this increase in inflation rate will
lead to rise in price of goods and services provided by H&M (Vintilă, and et.al. 2017).
Positive impact- Equilibrium in the economy will lead to contribute in the gross
domestic product of the country. In addition to this it will increase national income of the
country that can be used for research and development work.
Social factors
Negative impact- Cultural factor of the social environment will become challenge for
Hennes & Mauritz if it is entering into another market in different country as it have to change
its policies and rules that should be as per the culture of the new country.
Positive impact- Positive attitudes and beliefs of a particular group will help in
increasing brand loyalty of Hennes & Mauritz. On the other hand Hennes & Mauritz sells clothes
for each age group that will create demand among each group of people that helps in generating
profit of the business(Phadermrod,Crowder, and Wills 2019) .
Technological factors
Negative impact- technology and innovation may have negative impact on Hennes &
Mauritz for ex. If H&M do not have expertise human resource to operate new ERP system then it
will unable to take benefit of the new technology.
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Positive impact- If Hennes & Mauritz will use new technology then it can make its tasks
more easier for example Artificial Intelligence . In addition to this new technology can reduce
cost of production as it allows optimum utilisation of resources.
Environmental factor
Negative impact- there are various negative impacts of environmental factors .For
example if H&M do not have proper management of waste material and carbon emission then it
will create water and air pollution.
Positive impact – If Hennes & Mauritz will use organic material in its product then it
will create positive image about its brand and will increase demand of its product in long run .
Another example of positive impact is that proper arrangement of emission of carbon dioxide
will decrease the pollution in the environment(Phadermrod,Crowder, and Wills 2019).
Legal factors
Negative impact- If Hennes & Mauritz is doing any unfair trade practice then it will
have to bear penalties imposed by the law .In this case company will have bad relations with the
government . It is showing negative impact of legal factor in the organisation.
Positive impact- If company is abide by all the rules made by the government for
carrying a business ethically and legally then it will have good relations with government. That
can result in good impact of legal environment over Hennes & Mauritz (Nandonde, 2019).
P 5 Internal and external analysis of specific organization to identify strengths and weakness
Internal analysis:
SWOT analysis is the tool which can be utilised by manager of H&M for doing the
situational analysis of the firm. It is the technique to evaluate the strength, weakness, opportunity
and threats which is facing by company in its current environment. H&M is one of the leading
organization in the retail industry (Venkatachalam, 2018). SWOT analysis highly interactive
procedure and requires effective coordination between different departments within firm.
Strength:
As one of leading firms in the industry, Hennes & Mauritz has many strengths which aid
to thrive the marketplace. It has built culture between distributor and dealers where dealers are
not only promote products of firm but also invest in training sales team to explain to the
consumers. It has powerful base of reliable suppliers of raw material therefore allowing firm to
reduce any supply chain bottlenecks. Selected company has powerful free cash flow which gives
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resource in the hand of firm to expand into new tasks (Vintilă and et.al. 2017). H&M with its
dedicated consumers relationships management division has able to accomplish large level of
consumer satisfaction.
Weakness:
Weakness are fields where H&M can improve upon. Company reduce the weakness and
build competitive edge and strategic planning by utilising the SWOT analysis. H&M is one of
the leading company in retail sector. It has faced challenges in moving to other goods segments
with its present culture. Company needs more investment in new technologies by given scale of
expansion and various geographies the firm is planning expand into (Vintilă and et.al. 2017).
Selected firm needs put more money in technology to incorporate the procedure across the wide.
The financial planning is not done properly and efficiently. Organization structure is only
compatible with present business model therefore limiting expansion in close product segments.
Opportunities:
The new taxation policy can importantly impact the mode of doing business and can open
new opportunities for setting players like H&M to raise profitability. Government green drive
also opens chance for acquisition of H&M goods by the state and federal government contractor.
Company has wider invested sum of money into the online platform. This investment has opened
new sales channel for select company (Phadermrod, Crowder and Wills, 2019). The low inflation
rate bring more stability in the market which allow credit at lower interest rate to the consumers
of H&M. The new technology gives chance to practices differentiated pricing strategy in the new
marketplace. It will allow the firm to maintain their loyal consumers with great services and
attraction new consumers through other value oriented propositions.
Threats:
Shortage of skilled employees in certain international market represents threat to regular
growth of profits for Hennes & Mauritz in those markets. Stable profits has raised the number of
players in industry which has put downward pressures on not only profitability but also on
overall sales. Company has developed number of goods but those are rarely response to the
growth by other players (Goffee and Scase, 2015). The supply of new goods is not regular
therefore leading to high and low activities in the sales number of over time period. H&M can
face lawsuit in different markets given in which different laws and constantly fluctuations
regarding products standards in those marketplaces.
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P 6 Strengths and weakness interrelate with external macro factor
The strengths and weaknesses are interrelated with external macro factors such as
consumer taste and preferences, government rules and regulations, technology advancement and
so on. If the company has high level of brand image, so that consumers are highly attracted
towards their products and services. This can help to increase satisfaction level of consumer and
their expectation within the H&M. It can help to increase competitive advantages within the
retail industry (Goffee and Scase, 2015). Also, this can aid to raise the sales and profits of
business. This can be positive impact on the company. If the company has lack of technology, so
that they are not provided goods on online, so that this can impact negatively on business in
relation to lack of online presences of firm. This can reduce the sales and profits of business.
In order to that, if the company adopt the technology advancement, so that it increases
number of consumer towards products and services of firm. This can aid to raise sales and profits
of business as well as increase competitive advantage within retail industry. The management of
H&M needs to explore the strengths for achieving the objectives and goals of business. The new
taxation policy can importantly impact the mode of doing business and can open new
opportunities for setting players like H&M to raise profitability (Hazzan and et.al. 2017). The
financial planning is not done properly and efficiently which can negatively impact on business.
Selected company has powerful free cash flow which gives resource in the hand of firm to
expand into new tasks. This can be more profitability and productivity of business. It can help to
increase competitive advantages within the retail industry. It will allow the firm to maintain their
loyal consumers with great services and attraction new consumers through other value oriented
propositions.
CONCLUSION
This report has summarised that different types of organizations such as Oxfam as
voluntary, Tesco as public and H&M as private and its size and scope. It can be concluded that
relationship between different organisational function and its link with organisational structure
and objective. It can be discussed that Impact of macro factors on business environment which
involves government regulations, consumer taste and preferences, environmental rules and
employment laws which impact on business. It can be discussed that Strengths and weakness
interrelate with external macro factor within the business. Also, this can aid to raise the sales and
profits of business.
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