Business and the Business Environment (Unit 1)

This document provides an overview of different types, size and scope of organisations, the interrelationship between organisational functions, and the impact of macro environment on business operations. It also includes a case study of IKEA and discusses their strengths and weaknesses. Suitable for students studying Business and the Business Environment (Unit 1).

Business and the Business
Environment (Unit 1)

Table of Contents
INTRODUCTION...........................................................................................................................3
Different types, size and scope of organisations..............................................................................3
Difference between micro, small and medium sized enterprises and large organisations..........4
Range of legal structures associated with different forms of business........................................5
Interrelationship between different organisational functions and how they are interlinked with
organisational structure and objectives............................................................................................7
The impact macro environment has on business operations............................................................8
The internal strengths and weaknesses of Ikea and their interrelationship with external macro
factors. Understand organisational purposes of business..............................................................11
SWOT Analysis.........................................................................................................................11
TOWS Analysis.........................................................................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Business environment is consisting of various factors that has huge impact on the
operations and strategies of the organisation. The environment provides a numerous
opportunities to the business and it is necessary to identify the opportunities to improve the
performance to get success within the business. Business can easily identify opportunities and
overcome from the negative impacts if they are aware of all the factors. Within the environment
This report will cover case study of IKEA stores which is a British multinational conglomerate,
who are operating their business in all over the world. They are selling a product such as home
appliances, home accessories, ready meant furniture, and including home services.
This report will explain the types of businesses including their size and scope. this report will
also discuss about the functions within the organisation and there Enter relationship with each
other. this report will conclude past analysis to identify the factors within the business
environment that affect on the company’s operations (Xu, W., 2019). In the end of this report
will determine the internal weakness and strength of the IKEA Company and their Inter
relationship with micro factors.
Different types, size and scope of organisations
Difference between public, private and voluntary organisations
There are various type of businesses within the business environment who have various
roles and way of doing their work. Each of the organisation have their own purpose and their
type. Here is the purpose and type of organisations.
Public organisation
Public companies are created by the government bodies and when they create a public company
then their main purpose is to provide benefits to the public and local communities. most of the
companies work for the non-profit, but some of them are listed as a public company, but they are
earning profits it serves highly regulated areas such as broadcasting and public transportations.
Public companies mainly work to add value for their customers and create product that could be
helpful for the public and useful as well.

Examples- Sainsbury is the public limited company who are second largest supermarket within
the United Kingdom an having a good reputation within the market.
Private company
Private companies are owned by the individual person or the companies group who share we
spend their own capital investment and also take the benefits and liability. companies who are
registered as the private limited work on the purpose to earn profitability by selling their goods
and products to the customers and customers buy product from them because they want to satisfy
their needs. IKEA is an privately owned company who are operating their business in various
countries and they are selling products such as kitchen appliances, home appliances and
providing home services to their customers. this company was founded by Ingvar Kamprad In
year 1943.
Voluntary companies
The main purpose of the voluntary companies is too provide benefits to the society and the work
for the welfare of society (Collier, N. And et.al., 2018). they focus to provide services and help
to the needy people and their main source of income is donations by the NGOs and government
bodies. Age UK is an registered charity firm Within United Kingdom who are Helping the
people with the old age group and they Run a shop and by selling the clothes they earn money
that is spent on the old age people to help them.
Legal organisation
The legal entity is in Group or the individual that has legal rights and duties related to the
agreements, contracts, obligations, transactions, penalties and sues. This term can be applied to
any kind of organization formally constituted according to the particular set of laws governing
the country. UK environmental law Association. it is in legal body that is authorized to make a
law elated to the environment and implement effectively.
Difference between micro, small and medium sized enterprises and large organisations
Basis of
difference
Micro Small Medium Large
Size smallest in size Small but Big in size and Largest in terms of

and employs less
than 10 people
compared to micro
are big and
employs upto 50
employees
employs upto 250
employs
size and employs
more than 250
employees
Scope
Limited scope in
terms of activities
of business
Scope is limited
but can be
increased with
investment in
business activities
Scope of business
is big and
activities and
operations of
business are higher
in terms of number
Large size
businesses largest
scope and involves
several activities in
organisation
Objectives
Earn substantial
profit and running
business with least
investment
Objectives of
small organisation
includes maintain
standard of living
and earning
highest investment
Objective of
medium
organisation is to
increasing profit
and achieving
highest
productivity
Large
organisations have
their objectives in
which earning
profit and
maintaining
competitive
advantage is
important
objective
Range of legal structures associated with different forms of business
Sole Proprietorship- This is type of legal structure in which individual owner of the business
manages all activities of organisation. Micro and small business organisations consist of this type
of legal structure
Partnership- This type of legal structure consists of two or more people who own and operate
business organisation. These are known as partners and a partnership organisation can be created
in any form including micro, small and medium size organisation.
Cooperative organisations- Cooperative organisation is those that are association of people and
these are jointly owned and democratically managed. This type of legal structure is adopted by
small and micro organisation.

Limited company- In this type of legal structure ownership is based on ownership of
organisational shares. These are managed and operated by people selected by shareholders of
organisation. IKEA is example of this type of legal structure.
P2 Scope and size of different type of organisations
There are mainly 4 type of organisation that are public private voluntary and legal, this all types
have their own size and scope that are limited.
Public company scope and size
The public organisation embarrass is of all types of activities by the government. hands
as an activity the scope of public organisation is no less than the scope of state activities.
Companies within the sectors get the support from the government and also get some reliefs
from the government side.
According to the size market capitalization: large-cap ($10 billion or more), mid-cap ($2
billion to $10 billion), and small-cap ($300 million to $2 billion). Example- Sainsbury has
around 16% of the shares within the supermarket sector. this company has more than 1400 shops
in all around the world and there are 116400 Employees currently working for this company
(Henry, J., 2019).
Private companies scope and size
Scope of the private company is that it is an separate legal entity with the limited liability.
This type of companies can raise their funds and it is not require any minimum capital so anyone
can open their own private company.
On the basis of Size there are many companies who are privately owned and it has
directly benefits to the owner of the company. Hey guys operating their business with in all over
the world and they are having their locations around 433 Within the 50 two countries.
Voluntary company scope and size
A voluntary group or the union is the group of individuals who enter into an proper
agreement, usually as volunteers, to form a body to accomplish a purpose, size and the scope of
the Voluntary companies depend on their expansion within the country or internationally
expansion. this kind of companies have huge scope in their business it provides a satisfaction to

the person who are the owner of this business. Age UK is an registered charity firm Within
United Kingdom who are Helping the people with the old age group and they Run a shop and by
selling the clothes they earn money that is spent on the old age people to help them.
Legal organisation scope and size
Legal organisation does not require any kind of scope because they are working for the
government and follow the all order of the government. their main purpose is to provide a help to
the society by making a law so they can get a justice immediately through the law (Myhre, S.,
Engen, S. and Falk, K., 2020). The United Kingdom environmental law Association is an charity
from that is registered within the England and it was made to improve the environmental loss
with the UK. Its implication it’s to understanding and awareness of the subject and networking
among lawyers and non lawyers with an interest in the area.
Interrelationship between different organisational functions and how they are
interlinked with organisational structure and objectives
There are various functions within the workplace of the IKEA company who are helping
company to take competitive advantages and they are directly linked to the company’s objectives
and structure (Xu, W., 2019). Here are all the functions that helps to improve IKEA Position
within the market where they are operating their business.
Marketing
Marketing is the top most Department of this company, it is because marketers are
responsible to Identify the customers who can buy product sale by the IKEA company so
company can and probability. earning a probability is one of the major objective of the business.
marketing team not only identify the customers but they also research about the customers needs
and demand and give this information to the operational team of the company that helped to
produce a new product by using that information. Marketing also has interrelationship with the
other department for examples- They obtain useful information from the market related to the
customers and give to the Finance for related to the funds, To the Hrm for the employees and
production related to the customers needs.

Finance
Finance played the major role within the IKEA, it is because finance manager of the company is
responsible to identify the source of finance and they also provide a budget to each of the
Department within the company so they can run smoothly and achieve that objectives (Brandt,
A., 2019). Finance manager is connected to the whole structure because they are responsible to
ensure the proper use of finance within each and every Department. It helps to Fulfil the primary
objective objectives of the company and provide higher growth within the market. Finance
department is interlined with the other department because they every department need funds to
run their daily activities and finance manager is responsible to provide funds to each department.
Human resource management
It is the Department that is responsible to bring a talent within the workplace of IKEA. they also
play major role in planning, Organising and controlling the workforce For the company. Each
and every Department need employees who can run day to day activity and HRM irresponsible
to provide each Department employees with the effective skill and knowledge. They also provide
a training and development programme where employees learn about new skills and taken
knowledge about the industry so they can improve and help company to achieve success within
the market where they are operating their business. it increased the efficiency of the employees
and they give their best within the task and help company to achieve their goals and objectives.
The impact macro environment has on business operations
In order to understand positive and negative impact of macro environment on business
pestle analysis can be utilised. Pestle Analysis of IKEA is as follows-
Political
IKEA is a multinational organisation and this is the reason that it becomes subject political
conditions and political stability of different countries. Different countries and for political
situations offers different opportunities and threats for IKEA. It is important that for its effective
performance it abides to conditions of all countries in which it operates (Ehsan Ullah, Karlsson
and Dada Olanrewaju, 2016). Political stability and favourable attitude of government for
multinational and non-local organisations is an opportunity for IKEA. But there are countries

that have strict regulations for non-local and multinational organisations and this is negative
impact of macro environment. In order to overcome this negative impact IKEA can use its
goodwill and also following regulations adequately can help it in establishing in such countries.
In addition this, changes in policy of international operations can also help in dealing with this
challenge.
Economical
This involves factors that are involved in category of finance and economics and factors involved
in these are GDP, per capita income, inflation, cost of operations, and interest rates. In this
environment IKEA gets affected by recession and inflation. These element reduces purchasing
power of customers and because of this customers and sale of IKEA both gets negatively
affected. However, because offerings of IKEA are affordable and because of this it can deal with
this challenge based on recession and inflation.
Social
This environment involves factors that are related to customers of IKEA. IKEA has managed
increase its market share by its offerings and changing consumer behavior is a threat for IKEA
(Shtal and et.al., 2018). This means that consumer’s preferences and buying behavior have
significantly changed and IKEA requires adhering to these in order to remain competitive.
Additionally, IKEA as a multinational organization also gets affected by varied customer
preferences and tastes of customers of different countries and different region. In this online
shopping behavior of consumers has an effective opportunity for IKEA to attract more
customers. Other than this, ethical consumers are also an opportunity that IKEA can attract
through its ethical and responsible practices. To deal with frequently changing behavior of
customers IKEA can use its capability to frequently design and create new products. This means
that this factor is very valuable for competitive advantage of IKEA.
Technology
Technology has become centre of competitive advantage and sustainability of organisations.
Technology had enabled IKEA to effectively carry or its organisational operations and also to
reach different segments of customers. Factors that affect IKEA in this environment involves

technological development in industry and by competitors of IKEA. On this basis innovation is
an opportunity for IKEA through which it can create long term advantage for company.
Technology is a highly valuable factor in present times and IKEA can deal with challenges of
this factor with its capacity however large scale operations can create challenge for IKEA.
Legal
This environment includes factors that regulate and govern different operations of the company.
This involves employee regulations, equality law, diversity law, standard of operations,
consumer safety regulations (Rastogi and Trivedi, 2016). All these laws and standards are
different in all countries and IKEA has to conform to these laws and regulations in order to
ensure its successful performance of organization. Difference in these laws and regulations also
create difficulty for IKEA. It is very important that it has adequate knowledge of laws and
regulations of the country in which it aims to enter to ensure that it does not make any negative
impact on IKEA.
Environment
This is another factor of external environment. This is concerned with safety and protection of
environment. Because of negative impact of industrial practices on environment, it has become
subject to social consciousness. People are conscious regarding whether they are buying from a
environment friendly firm. Additionally different regulations have also been adopted by different
countries regarding safety of environment and this also creates challenges for IKEA. However
being environmentally responsible it can create positive brand image and attract customers. In
present times this factor has become highly important for organizations and IKEA can deal with
challenges associated with by identifying and developing environment friendly practices and
products.
The internal strengths and weaknesses of Ikea and their interrelationship with
external macro factors. Understand organisational purposes of business
Internal and external analysis involves identifying strengths and weaknesses of
organisation that are internal to an organisation. Strengths are elements that facilitate and support
achievement of organisational objectives. Weaknesses on the other hand create difficulty in

achievement of organisational objectives (Phadermrod, Crowder and Wills, 2019). Analysis of
external environment involves identifying opportunities and threats for organisation.
Opportunities are those elements that contribute in growth and success of organisation whereas
threats are those that can negatively affect growth and success of organisation.
SWOT Analysis
This is a tool through which IKEA’s micro environment can be analyzed. Application of this is
as follows-
Strengths
 IKEA undertakes strong market research - This means that IKEA is able to understand
varied requirements of customers on different countries
 IKEA has effective number of product designs that are easy for transportation and
assemble
 Strong brand image of the company in international market - This is a very important
strength of IKEA that enables its effective performance in international market
 Strong brand recognition of IKEA - This means that its brand is effectively recognized by
international customers (Wu, 2020).
 Affordable and stylish products of the company - Products of IKEA are affordable and at
the same time are stylish that makes it first choice of customers
Weaknesses
 Negative image created by controversies of IKEA
 Low quality of products because IKEA had strong focus on cost leadership
 Company faces difficulty in articulating and communicating its environment policies to
its stakeholders and employees
Opportunities
 Expansion in more international markets - IKEA has its limited presence in international
market and hence expansion is an opportunity for further growth of IKEA

 Increasing customers through different customer channels - Online channel also has
increased demand for products of IKEA
 Rise of ethical consumers provide opportunity to IKEA to attract those customers by
ethical organizational practices
 Green business model also have an opportunity because of increased focus on
environment - Increasing environmental consciousness is basis for this, green business
practices will attract those customers looking for environment friendly products as well
as retain existing customers (Dudovisky, 2019).
Threats
 Intensifying competition in market - This means that competition for IKEA is increasing
and additionally model of IKEA has also been copied by other organisation
 Recession affecting buying capacity of customers - This means that when buying
capacity and purchasing power of customers have affected, IKEA’s sales might reduce
 Increasing cost of operating resulting from inflation – This means that increasing cost is
not good for cost leadership strategy, in this either company will have to increase price or
reduce its margin
In order to identify relationship between internal and external factors like strength and
weaknesses with opportunities and threats TOWS matrix can be utilized.
How strengths and weaknesses interrelate with macro factors
Strengths and weaknesses are strongly interrelated with macro factors. This is because
strengths and weaknesses affect whether the company is able to utilise its opportunities or not
and whether the company is able to avoid effects of threat and reduce impact of threats on
success and growth of organisation. Opportunities and threats are found and available in macro
environment of the company and this is why macro environmental factors has a strong
relationship with strengths and weaknesses of the company (Dandage, Mantha and Rane, 2019).
In context of IKEA as a multinational organisation company operates in a highly complicated
and complex environment and this is why it is important that IKEA has strengths to deal with

these factors and their impact on the organisation. This means that political environment of
IKEA is highly complicated and it is important that it can deal with and compensate effect of
political factors through its strengths. Like strengths weaknesses also affect opportunities and
threats and ability of organisation to deal with these strengths and weaknesses. For example-
controversies of IKEA has build negative image of the company and this can create difficulty for
IKEA while entering a new market. This can further be affected when new market does not have
positive attitude towards multinational and non-local organisations. This means that several
countries are focusing on strengthening position of domestic organisation and in such case
negative image and controversies are not good for IKEA. In order to identify and understand
relationship between internal and external factors like strength and weaknesses with
opportunities and threats TOWS matrix can be utilized.
TOWS Analysis
Internal Factors
E
xt
e
r
n
al
F
a
ct
o
rs
Strengths (S) Weaknesses (W)
Opportuniti
es (O)
(SO)
Using its strong market research
can provide support and assistance
in developing business of IKEA in
new markets
Affordable and stylish products of
IKEA can create opportunity for
IKEA in emerging market
Effective supply chain and products
that are easy for transportation can
further facilitate expansion of IKEA
in different international markets
(Mugo and et.al., 2017)
(WO)
In this negative image created by
controversies of IKEA can affect
its opportunity of entering into
new market
Difficulty of IKEA can affect its
opportunity to adapt to green
organizational practices
Threats (T) (ST)
Cost leadership is a strength of
IKEA however can be negatively
affected by its low quality
Increasing cost of operations can
also affect its cost leadership
practices
Strength of IKEA is that its products
are affordable but recession can
negatively affect this quality of
(WT)
Intensifying competition of IKEA
can be more affected by negative
image of the IKEA in certain
markets
Low quality products can also
affect competitive position of
IKEA in market and also its long
term advantages

IKEA.
This matrix outlines how strengths can increase effect and add value in opportunities that
are available for IKEA. This matrix also outlines how weaknesses affect utilisation of
opportunities for IKEA and further outlines relationship between threats and strengths and
threats and weaknesses in context of IKEA (What is the TOWS Matrix? And how it is used?,
2019). This has managed to identify opportunities and threats in macro environment of the
company and what relationship they have with internal factors as strengths and weaknesses.
CONCLUSION
As per the report has been Covered case study of IKEA company to understand the effect
of business environment. It has been explained the types of businesses including their size and
scope. This report also has been discussed about the functions within the organisation and there
Enter relationship with each other. This report has been concluded past analysis to identify the
factors within the business environment that affect on the company’s operations. In the end of
this report has been determined the internal weakness and strength of the IKEA company and
their Inter relationship with micro factors.

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Online
What is the TOWS Matrix? And how it is used? 2019. [Online]. Available Through: <
https://tradebrains.in/tows-matrix/#:~:text=TOWS%20Matrix%20can%20be
%20interpreted,%2C%20Opportunities%2C%20Weaknesses%2C%20Strength. >.