SKODA's Business Operation and External Factors

The provided document is an in-depth analysis of SKODA's business operation, focusing on both internal and external factors that impact their activities. The report discusses how the company prioritizes customer satisfaction over sales maximization, while also emphasizing the importance of complying with environmental regulations. It explores various factors such as stakeholder influence, economic considerations, and legal requirements in shaping SKODA's business decisions. The document draws on research from academic journals to support its findings, providing a comprehensive understanding of how external factors can impact a company's operations.

Business and the Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
P1. Different purposes and types of organisations......................................................................1
P2. Size and scope of different types of organisations................................................................3
P2 Size and scope of different types of organisations.................................................................3
TASK 2............................................................................................................................................4
P3 Relationship between different functions of organisation and their link with organisational
structure and objectives...............................................................................................................4
TASK 3............................................................................................................................................5
P4 Impacts of macro environment factors on business operations.............................................5
P5 Internal and external Analysis of Skoda Auto with other similar organisation.....................7
TASK 4............................................................................................................................................9
P6. Evaluate how strength and weakness interrelate with the external macro factors................9
CONCLUSION..............................................................................................................................10
REFERENCES .............................................................................................................................11

INTRODUCTION
Business environment is referred as surroundings in which organisation perform its
operations in order to earn profit. There are various forces that are present in internal and
external environment of firm which highly affect working of business. It is essential for an
organisation to identify factors and their impact on operations of firm. Determination of these
forces helps the management team in framing appropriate strategies in order to handle these and
deal with them. In the given project, company chosen is Skoda Auto which operates in auto
mobile sector (Boons and Lüdeke-Freund, 2013). Firm offers a wide range of products to its
customers and is a fully owned ancillary of Volkswagen group. The assignment covers different
scope, types, size and purposes of enterprise. The relationship of different functions of firm and
its link with its objectives is also defined. Besides this, various internal and external forces of
business environment and their effect on the activities of the business are described. Apart from
this, SWOT analysis of the firm to determine strengths and weaknesses as well as their link with
external forces is done.
TASK 1
P1. Different purposes and types of organisations
Main purpose of every organisation is to earn high income by satisfying and fulfilling the
needs of consumers by offering them good quality of products. In the firm, different departments
perform various functions. There are distinct types of organisations and each has different
purposes which are as follows:
Public limited company
Those firms which are owned and operated by legal authority and their ownership is
completely in the hands of government. Such firms are known as public sector enterprise. These
companies emphasise on offering good quality with minimum priced products. Firms issue its
shares so that fund can be raised from the market in order to execute its commercial activities
smoothly and in a proper way. The example of public sector organisation is TESCO which is a
public limited enterprise (Saleem,2017). For taking major decisions, the firm takes approval
from its stakeholders. This government sector is further divided in the following:

Central government: It has the authority to control every affair of the nation. It is
responsibility of central government to deals with all the issues and activities which comes under
government are currency printing and tax collection.
State government: All the issues of state are regulated by this government. For instance,
if need is to encourage higher education in nation then for this, it is responsibility of government
to formulate appropriate policies and plans to implement this.
Local government: All the issues related to a specific zone, area or town are controlled
and regulated by this government. It has less power then state and central Government
Private company
These organisations are those which are owned and operated by single person or group of
people. There is no role of any legal authority in the private sector organisation. These
companies offer high quality products with innovative features in order to get attraction of
customers. Main purpose of these organisations is to earn higher profits and maximise its shares
in the market (Hall, 2011). The example of private sector organisation is Skoda Auto which is a
well-known firm due to its positive brand image in market. It administers high quality products
to its clients. This sector is again divided into the following:
Partnership: In this, the firm is owned and operated by two or more than two individuals.
Maximum 20 persons can operate partnership firms. A deed is signed among partners and all
legal requirements are fulfilled by individuals so that chances of conflicts can be reduced.
Sole proprietorship: The business is fully owned and operated by single person who is
liable for all profits and losses of business.
Franchising: In this,franchisor gives right to franchise to sell its product or brand name
to others. In turn, dealers pay some amount to use its brand name. Here, franchisor is owner and
franchise is person who gets dealership.
Voluntary sector
Main purpose of these organisations is to develop the society. These sectors focus on the
development and welfare of society and satisfy or fulfil their basic needs. This would improve t
living standard of people in society (López-Gamero, Molina-Azorín and Claver-Cortés, 2011).
OXFAM is an example of voluntary sector organisations that work in order to eliminate the
poverty.

P2. Size and scope of different types of organisations
Public sector organisation
The company of United Kingdom, TESCO is the public sector organisation which deals
in groceries and other household items. The firm earns high profits in every succeeding year.
More than 5600 stores are currently operated by company and administer its goods and services
worldwide. Approximately 1, 40,000 employees are presently working in the organisation which
contributes in generating large profits. For capturing the market share, firm offers high quality
products to its customers.
Private sector organisation
The private sector companies include Skoda Auto which offers high quality products to
its customers. The firm operates in auto mobile sector and millions of vehicles are delivered to
its customers in a single year. The stores of Skoda are located worldwide and serves clients of
every area which it covers. The operating income of firm is £1.2 billion and its revenue is 347.98
billion. Total number of employees working in company are more than 28,300. The reason
behind its positive and strong brand image is its large size of operations.
Voluntary organisation
These organisations work for the development and welfare of society. They do not work
to earn profit, but for the social service. OXFAM is a voluntary enterprise which works to fulfil
basic needs of individuals who are part of a society (Mahmood and Hanafi, 2013). These
organisations conduct various programmes so that the issues related to poverty and injustice can
be resolved. The firm administers assistance to those individuals who are not able to satisfy their
basic needs.
P2 Size and scope of different types of organisations
Public sector organisation
The company of United Kingdom, TESCO is the public sector organisation which deals
in groceries and other household items. The firm earns high profits in every succeeding year.
More then 5600 stores are currently operated by the company and administer its goods and
services worldwide. Approximately 1,40,000 employees are presently working in the
organisation which contributes in generating large profits. For capturing market share, the firm
wants to offer high quality products to its customers.
Private sector organisation

The private sector companies includes Skoda Auto which offers high quality products to
its customers. The firm operates in auto mobile sector and million of vehicles are deliver to its
customers in a single year. The stores of Skoda are located worldwide and serves the clients of
every area which it covers. The operating income of the firm is £1.2 billion and its revenue is
347.98 billion. Total number of employees working in the company are more then 28,300. the
reason behind its positive & strong brand image is its large size of operations.
Voluntary organisation
These organisations are work for the development and welfare of the society. They do not
work to earn profit, but for the social service. OXFAM is a voluntary enterprise which works to
fulfil the basic needs of the individuals who are the part of a society (Fatoki and Smit, 2011).
These organisations conduct various programmes so that the issues related to poverty and
injustice can be resolved. The firm administers assistance to those individuals who are not able to
satisfy their basic needs .
TASK 2
P3 Relationship between different functions of organisation and their link with organisational
structure and objectives
Different functions are performed by an organisation so that the goals and targets of the
company can be accomplished. Effective implementation of all the activities are necessary to
Skoda in order to improve the operational efficiency of business and capture large area of market
share. The performance of the company depends on its structure and objectives. If the structure
of the organisation is simple, then the firm is able to enhance the efficiency and effectiveness of
operations and if the firm has complex framework, then it is difficult for the managers to
increase the effectiveness of operations of the firm in cost effective manner. The functions of
Skoda and its link with organisation structure and objectives are as follows:
Human resource management function: The main function of this department is to
manage workforce and administer them training and development. Human resource manager
plays vital role in the success and sustainability of the organisation. Skilled and knowledgeable
employees contributes in enhancing the competency of the firm (Auzair, 2011). It is the
responsibility of the manager to identify the skills gap and provide them appropriate training
which is required by the employee and facilitates him to perform his duties effectively. The

manager should evaluate the skills first and assigned duties to them as per their skills.
Organisational structure highly influence the working of Skoda. The company should develop
appropriate communication channels at workplace so that chances of arising conflicts can be
reduced.
Finance functions: In order to perform day to day operations of the firm, sufficient funds
are needed. Implementation of activities in proper way is done only when the firm has enough
capital. Lack of capital creates unnecessary barriers and delays in the work. In Skoda, it is the
responsibility of the manager to assess the financial needs of the company and allocate proper
amount of fund on each department of the firm. Size of operations determines its financial
requirements. Larger the size of organisation, will require large amount of fund. Smaller the size,
less fund is needed.
Sales and marketing: It is also an important function of the firm as businesses use it in
order to sell their products and services in the market. It administers the way to the organisations
to communicate with its consumers. If the department of sales and marketing running effectively
in an organisation, then it will be beneficial for the company as the sales will increase that results
in higher profitability of firm (Othman and Rahman,2014). The marketing team of Skoda needs
to work efficiently so that sales of the company will increase.
Production and operation function: Innovative and high quality products are offered by
Skoda to its customers. Capital, labour and equipments are the components which are essential
for production process. The managers of production and operations requires careful monitoring
of all the operational activities in order to control the cost of production in an effective way.
TASK 3
P4 Impacts of macro environment factors on business operations
Both Internal and external factors of business environment should largely affect the
operation of business firm. Internal forces arises within an organisation in form of strengths,
weaknesses, opportunities and threats whereas external forces are arises outside of the
organisation in form of political, legal, environmental, social, economical and technological
components. As external environment majorly influences the business operation therefore the
firm has not in position in control of such external factors. So it is required for the manager of
Skoda to examine and determine these factors through which they can perform well without any

interruptions. In order to identify and analyse the external factors the firm should need to use
PESTLE analysis.
PESTLE Analysis:
Political factors: The government implements certain policies and guidelines for
business to run in order to maintain economic stability of the country and such government laws,
policies and guidelines should affect and influence the business operation on large scale.
Therefore the manager of company should need to consider these laws and guidelines that to be
followed by organisation For example in 2010 UK Government implement some laws which
move the country towards financial crisis.
Economic factors: In order to expand the business of Skoda the manager should need to
evaluate and assess the economic factors which influences the business environment in both
positive and negative manner. Such economic factors includes interest rates, inflation, loan rates,
deflation, fiscal policy etc. which may impact on the business operation on highly basis. The
manager of firm should need to take corrective measures in order to handle such situation so that
it cannot affect business operations.
Social factors: In order to achieve organisation's goals and objectives the manager of
firm should need to consider social factors such as needs, demands,beliefs, behaviour, taste and
preferences of the individual and implement actions accordingly to fulfil these requirements

which helps the business firm to attain stability in competitive market. Therefore the firm such as
Skoda should generate high amount of profit only when they consider these factors and taking
some actions to fulfil the customer's requirements in order to maximise the level of satisfaction
of their customers.
Technological Factors: It is necessarily required for company to upgrade their existing
used technology on time to time basis in order to achieve their desired targets. The firm should
need to attract new customers and focus on their needs and demands and it can be possible
through adopting innovative and advanced technology in order to fulfil their customer's
requirements in effective and efficient manner. Therefore Skoda company should need to focus
on using advanced and updated technology in order to attain large number of customers that will
help them in gaining competitive advantage as well.
Legal factors: In order to maintain quality of products the government formulate some
standard and rules which must be followed by very organisation. Through this the company must
produce standard quality of products but on the other side it create hurdles in smooth functioning
of business. For example UK government's strict regulations forced Skoda company to perform
business activity in ethical and standard process of production which may create chances of
facing hurdles in the business operations.
Environmental factors: It is the responsibility of every organisation to perform business
activity and produce products in such a manner that could not damage or harm the environment.
Therefore all such factors which are influencing the business activities either positive and
negative manner should need to determine in order to achieve better future growth and success.
P5 Internal and external Analysis of Skoda Auto with other similar organisation
In order to identify the internal and external factors which affect the business operation
then the company need to make SWOT Analysis which enable them to know about their
strengths, weaknesses, opportunities and threats and therefore company should need to
implement corrective measure to eliminate any hindrances which may occur during business
operations. It enables the company to compete with their rival company in more effective and
efficient manner.
Here is the SWOT Analysis of SKODA and its competitor NISSAN Motors:
SKODA AUTO NISSAN MOTORS

Strengths:
 Its main aim to provide maximum
satisfaction to their customers with
respect to their product.
 Implement innovative technology while
producing products such as EBS, MSR,
anti-braking.
 Strong brand image in Europe and UK
market.
Strengths:
 Its main aim to achieve targeted profit
by maximising the sales of their
product.
 Popular brand image of company
globally.
 Used updated technology
 NISSAN deals in manufacturing SUVs
which SKODA is not dealing with.
 Attain strong position in Truck
manufacturing than SKODA.
Weakness:
 Competition is extremely tough
 Low control on emerging economies.
 Maintenance cost is very high as
compared to other AUTO industry.
Weakness:
 Due to high competition market share
is limited.
 It does not deal with luxury segment.
Opportunities:
 SKODA' s main aim is to collaborate
with other auto-mobile industries which
should be beneficial for them.
 Hybrid cars and cheaper variants helps
the company to increase its market
share.
Opportunities:
 Manufacturing fuel efficient and hybrid
cars which helps them to deal in future.
 Focus on expanding its Market share in
future by 8%.
 Joint venture with other auto-mobile
industry brings strong hold position in
geographic region.
Threats:
 Rapid changes in technology.
 Get tough competition from
international rival company.
Threats:
 Due to increase in green cars, the sale
of other cars should reduce.
 Decrease in market share due to

 Their competitors launches new
product at low prices.
competition from other other markets.
 Government rules and regulations
adversely affect the business operation.
TASK 4
P6. Evaluate how strength and weakness interrelate with the external macro factors
With the help of PESTLE Analysis, the company named SKODA AUTO can identify the
inter-relation of its strength and weakness with external factors. It helps in identifying that how
the external factors made impact on the business operations of SKODA AUTO. Therefore
PESTLE consists of:
Political Factors: Political factors includes rules and regulation implemented by
government for the company to operate accordingly which may affect the overall sales and
revenue of company.. Therefore company named SKODA should require to monitor all political
changes related with laws, taxation and accounting standards in order to achieve competitive
advantage across worldwide.
Economic Factors: The business operation of SKODA can be affected through
economic factors which may reduce the overall profitability index of company. Therefore the
manager should need to focus on handling the economic factors such as inflation rate, interest
rate etc. in such a manner that will not affect their business activities in negative way. In future
SKODA has main objective is to merge with other auto mobile company in order to achieve
growth and success in future.
Socio-Cultural Factors: The company should manufacture products according to the
needs and demand of customers so that it maximises the company's sales as well as enhancing
the level of satisfaction of their customers. It also create many employment opportunities through
opening new multiple outlets at different countries and also need to provide training to them in
order to achieve desired results more effectively and efficiently.
Technological Factors: In order to attain high competitor market share than their
competitors then SKODA company should need to use updated advanced technology which
helps to sustain in market for longer period. Company named SKODA can use advances
innovative technology in manufacturing anti-skid braking, EBS, MSR cars which helps them to

give tough competition to their rival company's product. They need to modify their technology
according to the dynamic changes which helps in enhancing and improving their capabilities in
producing products that will also help in generating huge profit.
Legal Factors: In order to comply with laws related to the environment, discriminatory,
health safety, it can effect the business operation of firm. In terms of manufacturing innovative
product SKODA is posses all rights associated with the nature of business entity.
Economic Factors: The company should need to practice their business activities for the
welfare of the environment. They should ensure that their production activity and use of their
products cannot harm or damage the environment. For this they need to set aim to produce fuel
efficiency cars effectively.
CONCLUSION
As per the above report it can be concluded that internal and external factors plays an
important role in influencing business operation. In order to achieve competitive advantage an
organisation whether public, private or join venture perform in similar way. As per this report It
is clearly understood that SKODA has perform their production activity to maximise the level of
satisfaction to the customers rather than maximising sales ratio. The company is focusing on
demands and needs of the customers and implement actions accordingly. The external factors
includes stakeholders such as government bodies, suppliers, competitors etc. should influences
the business operation and demand and supply of company through which the company may get
directions to achieve growth and development and also find some hurdles in achieving desired
goals and objectives.

REFERENCES
Books and Journal
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