Business and the Business Environment

This report explores the different aspects of the business environment and its impact on organizations. It discusses the differences between profit and non-profit organizations, legal structures associated with different forms of business, and the interrelationships of organizational functions. The report also includes a macro environmental analysis using the PESTLE framework and a micro-environmental analysis using Porter's Five Forces model.

Business and the Business
Environment
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Table of Contents
INTRODUCTION ..........................................................................................................................1
ACTIVITY 1....................................................................................................................................1
Differences between organisations for profit and not for profit, and non-government
organisations (NGOs)..................................................................................................................1
Differences between micro, small, and medium-sized enterprises (SMEs)................................2
legal structures associated with different forms of business e.g. sole traders, partnerships and
private limited companies...........................................................................................................3
Critical analysis of the interrelationships of the different organisational functions and how
they link to organisational objectives and structure....................................................................5
ACTIVITY 2....................................................................................................................................6
Macro environmental analysis (PESTLE framework) identifying the positive and negative
impacts upon business operations...............................................................................................6
Micro- environmental analysis using Porter’s Five Forces model, identifying the positive and
negative impacts upon business operations.................................................................................8
VRIO, identify organisation’s internal strengths and weaknesses..............................................9
SWOT analysis of the organisation...........................................................................................10
Interrelation among strengths and weaknesses of company with macro factors,.....................10
TOWS matrix, Justify how strength and weaknesses interrelate with the external macro and
micro factors and influence strategies business decision making.............................................1
CONCLUSION................................................................................................................................2
REFERENCES................................................................................................................................1
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INTRODUCTION
Business environment is composed of two different words i.e. Business and Environment.
Business means human activities such as production, sales and purchase of service and products
that are performed to earn amount of capital. Environment means the entire aspects of
surroundings. Therefore business environment means all the external and internal factors that
have direct affect on business's functions such as customers, employees, management, business
regulations and, supply & demand (Chaouk, Pagliari and Moxon, 2020). In addition, business
environment introduces to the surroundings and the external and internal factors which impacts
the business. Internal environment includes management, machinery, money, man and material
that are called 5M's. On the other side, external environment includes political, demo-graphical,
geo-physical, legal and many other factors.
This report is based on three organisations which are profit, not for profit and non-
government. There are example of these organisations such as Sainsbury's is a profit based,
Cancer research is a not for profit and Equal Rights Trust is a non-government organisation. For
conducting this report, these are chosen organisations. This report is divided into two activities in
which first activity is based different types of organisation and interrelationship between
different organisational functions. Second activity is based on macro and micro factors and their
impact on business objectives and decision making process.
ACTIVITY 1
Differences between organisations for profit and not for profit, and non-government
organisations (NGOs).
There are three types of organisations such as profit, not for profit and non-government.
Difference between these organisations will be explained as below:
Basis of comparison Profit Not for profit Non-government
Meaning A profitable
organisation is one
that earn maximum
amount of capital than
it expends
It is a type of business
that do not earn more
profits for its own.
Cancer research is not
for profit
This is another type of
organisations that are
not dependent of any
government. Equal
Rights Trust is non-
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(Chattopadhyay, U.
and Bhawsar, 2017).
Sainsbury's is a chosen
profit based
organisation.
organisation. government
organisation.
Objectives Maim aim and
objective of profit
based enterprise is to
increase number of
sales and maximise
customer based by
giving them best
services.
Main objective of
non-profit
organisation is to give
resources or help to a
target customers with
a particular need.
Objective of voluntary
organisation is to
accomplish their
mission and also work
towards the better in
some way, rather than
to generate a profit.
Sources of revenue Sale of product and
services is a best
source of revenue for
profit based
organisation .
Donation,
subscription,
membership fee etc.
are consider more
effective ways of
revenue sources for
not for profit
organisation
(Fernandes, 2017).
Dividend distributed
by government-owned
organisation, fees
charged against the
provision of public
health services etc. are
consider effective
sources of revenue for
such type of enterprise.
Differences between micro, small, and medium-sized enterprises (SMEs)
There are mainly three types of enterprises which are small, micro and medium-sized.
Difference between these enterprise will be explained as below:
Basis of comparison Micro Small Medium-sized
organisation
Meaning Micro business is
a kind of small
organisation that
This is an independently
operated and owned
organisation that is limited
Medium sized
organisation are
independent, non-
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employs fewer than
10 employees.
in revenue and size. subsidiary business
that employ fewer than
a acknowledged
number of workers.
Objective Main objective of
micro business is to
create large-scale
employment in the
economy.
Main objective of small
organisation is to reduce
ongoing business expenses.
Main objective of this
type of business is to
increase their growth
and profit to expand
current business
operations.
Examples There are some
examples of micro
business such as
house cleaning,
computer service,
childcare etc.
Brightstar Financial, Pure
Planet, RedRock
Consulting, Equilibrium
Asset Management etc. are
consider main examples of
small organisation.
There are some
effective examples of
medium-sized
organisations such as
Captify, John Good
Shipping,
Checkout.com etc.
legal structures associated with different forms of business e.g. sole traders, partnerships and
private limited companies.
Sole traders: It is a self-employed and individual person who runs and owns their own
business individually. This type of business doesn't have any type of legal identify separate or
individual to its owner (Guo-rong, 2018).
Partnerships: It is a type of business that is run and own by two and more people and
have rights to share profit and loss. There are mainly three types of partnerships which are
limited partnership, general partnership and joint venture.
Private limited: It is a type of business that have a limited number of workers which
normally is 50. In private limited company, members liability is limited to the amount of share.
Basis of comparison Private Public Voluntary
Meaning Private sector is a type Public sector is owned Voluntary groups are
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of businesses are
mainly owned and also
run by private
individuals. Examples
of this type of business
are franchises,
companies, sole
traders, partnership.
Sainsbury is a best
example of private
organisation.
as well as run by the
authorities for the
people. They pay taxes
to the regime and this
amount of capital is
utilized to finance
most of the public
organisation. Cancer
research is an effective
example of public
organisation.
also consider another
type of organisation
that are not owned as
well as run by any
individual person.
Equal Rights Trust is
an example of
voluntary group.
Objectives Main objective of
Sainsbury is to earn
maximum amount of
capital by providing
better product and
service quality to the
customers (Hamilton
and Webster, 2018).
Main objective of
Cancer research is to
provide better health
care service and to cut
down the number of
deaths from cancer.
Main aim and
objective of Equal
Rights Trust is to
combat discrimination
as well as promote
equality as a
fundamental human
right.
Size and scope Sainsbury is a private
organisation that was
founded in 1869.
Approximately
116400 employees are
working in this
organisation.
Company has broad
scope because of their
products and services.
Cancer research is a
public organisation
that was founded in
2002. Around 3964
employees and 40000
volunteers are working
in this company. This
organisation has broad
scope because it is
world's biggest
independent cancer
Equal Rights Trust is a
voluntary organisation
that was incorporated
in 2005. it is a private
Limited organisation
by guarantee without
share capital usage of
'Limited' exemption.
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research charity.
Products and services Sainsbury provides in
store, delivery and
guide services to the
customers. Company
provides their products
across the world.
Company gives
information or data
regarding the cancer
and also runs
campaigns for aim to
raising accurate
awareness of disease
as well as influencing
public policy.
Main work of this
organisation is to
promote equality as a
key human right and a
value of social justice.
Legal Structure The most common
legal structures of
private organisation
are sole proprietors,
partnerships,
corporations and
limited liability
companies.
Legal structure of
public organisation is
divided into two parts
which are general
government and public
corporations. Under
general government,
state government, local
government and
central government are
main parts.
There are number of
legal structure that
used by voluntary
sector such as an
unincorporated
Association, company
limited by guarantee
and a Trust.
Examples Sainsbury follow
corporation legal
structure.
Cancer research comes
under central
government.
Equal Rights Trust
comes under Trust.
Critical analysis of the interrelationships of the different organisational functions and how they
link to organisational objectives and structure.
Different departments working in an organisation are interrelated and they have to work
with each other for accomplishing the organisational goals and objectives. In context of
Sainsbury's, there are various departments working in effective manner for providing better
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services and products to people (Hillary, 2017). Several departments and their interrelationship
with other departments is explained below:
Finance and marketing: Marketing department of Sainsbury's is involved in developing
several plans and strategies to increase sales of company. Strong and effective market research
are organised by Sainsbury in order to attract large number of customers. Along with this,
finance department of Sainsbury creates proper budget for research plan and market plan.
Finance department of company is mainly associated with maintaining total money and funds
related problems of the marketing function. Marketing campaigns of Sainsbury are planned and
designed and the finance department arrange an accurate amount of capital to organise the same.
Therefore, interrelationship supports company to use proper fund for different market researches
in effective manner.
Human resource and marketing: Main role of HR department in companies is recruiting
and selecting knowledgeable people who can work more effectively. In Sainsbury, human
resource manager post vacant job vacancies in various offline and online portals. Marketing
department of Sainsbury have role to increase sales of company. There is interrelationship
between marketing and human resource department of company. Marketing managers of
company give information to human resource department regarding the abilities and knowledge
which must be exist in the candidates. Thus, interrelationship between these departments will be
beneficial for Sainsbury as it help them in achievement of its long term goals and objectives
easily (Hilton and Platt, 2018).
Organisational Structure: Sainsbury follow hierarchical organisational structure because
there is levels of people. This structure helps an organisation by creating clear lines of
communication as it will helps each department of company to communicate accurate
information about the business to each department. Proper floe of information will also support
an enterprise in achievement of its long term objectives and goals within a given time period.
ACTIVITY 2
Macro environmental analysis (PESTLE framework) identifying the positive and negative
impacts upon business operations.
In order to analyse the external environment, Sainsbury's can effectively utilise PESTLE
Analysis which consists of different factors and all of these are presented underneath:
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Political factor: This factor incorporates tax related strategies, work laws, administrative
arrangement, foreign exchange approach and many more. Brexit is also said to be one of the
crucial element of political factor, which impacted Sainsbury's performance level within United
Kingdom (Talamini and et. al., 2013). Positive impact: Due to open trade conditions, Sainsbury's has raised number of
opportunities for itself at the time of conducting business within United Kingdom. Negative impact: Uncertain business nature due to Brexit brought various risks in
relation to following new policies developed by government of United Kingdom.
Economical factor: Crucial business element which impacts upon Sainsbury's
profitability. Since, it is a UK brand where nation have solid monetary position. Including this, it
will create increasingly more income for the organization. Positive impact: Since, UK's economy is strong enough, it will lead Sainsbury's to gain
competitive advancements. Negative impact: Recession faced by Sainsbury's could go through different problems in
relation to it's financial position.
Social factor: In setting of Sainsbury's, social factor can create both positive or brand
image in front of it's consumers. Alongside this, social consider helps fulfilling requests and
necessities of clients, which may lead company to bring a number of alterations right on time. Positive impact : Strong image in front of society would lead Sainsbury's to gain
competitive advancements (Zahari and Romli, 2019).
 Negative impact : Any negative action done by company against society would lead firm
to go through different issues.
Technological factor: In the context of Sainsbury’s, management team of the
organization upgrade their technology in every three years, so that they can minimize the
competition level available at the marketplace. Positive impact: Better system execution can be developed in relation to deliver options
with the help of upgraded technology. Negative impact: Higher cost of training may lead Sainsbury’s to increase it's expenses/
Legal factor: Sainsbury's, administrators execute these enactments developed by
government of UK inside their association in a successful way. This therefore, give security to
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the staff individuals working in the association and prompts improves productivity of staff
members. Positive impact: Too many laws, would lead Sainsbury's to develop it's own policies,
which may lead company to stronger it's relations with government and with staff as well. Negative impact: Complicated legal structures can create complexities for Sainsbury's
where any sort of penalty will be much more high (Thompson, Strickland and Gamble,
2015).
Environmental factor: In context of Sainsbury’s, managers adopt such technologies
which produce Eco-friendly products and services to their customers. Positive impact: Utilisation of natural resources would lead Sainsbury’s to connect itself
with biodegradable systems.
 Negative impact: Heavy investments of CSR activities would lead company to go
through or generate number of risks of itself.
Micro- environmental analysis using Porter’s Five Forces model, identifying the positive and
negative impacts upon business operations.
Micro environment is refers to the operational and functional business environment outside of an
organisation. It is involvement with the several forms of model which studies the micro
environment that is discussed as follows:
Porter's five force model: Porter's five force model is used to examine the micro
environment and this affect the Sainsbury's which is described as under:
Threats of new entrants: it is refers to the new entry into the market. It further includes
the pricing strategy, reducing costs and gives new values to its customers. In context to
Sainsbury's it could innovate new products and services for attracting the new customers to
increase the productivity and profitability. It is low because the entry of new company lead to
impulsive industry which accepted the players of Sainsbury's. The competitors of this company
is Aldi, Lidl etc which are small markets.
Threat of substitute: it refers to alternative products within the existing products. It is
high because it could offers high value which involves unique and specific offerings within a
company. It also understands the needs and wants of customers rather than what a customer is
buying and hence it increases switching costs for the end users (Lu and et. al., 2015).
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Bargaining power of buyers: it defines the demands of buyers. They want the products
with less price and best quality which is possible for the business. It is high because it includes
the accessibility of small markets like Tesco, Asda, Morrisons etc. which offers related products
at related costs. In context to Sainsbury, the innovation of new products which is continuously
going and could boundary the bargaining power of buyers.
Bargaining power of suppliers: It refers to the bargaining of raw material from the
number of suppliers. It is low because due to presence of lot of suppliers in small markets retail
industry which could easily arranged with another suppliers. Sainsbury's designs their products
with innovative ideas by using various resources in order to rise up price for the raw material that
replace from one to another (Deasy and et. al., 2016).
Rivalry among existing companies: it refers to the competition among various
companies. It is high because the competition is done among Tesco, Morrisons and so on. Which
provides similar products and services that lead to low switching costs. In context to Sainsbury,
it has the cooperation between the competitors to increase the market share within the
supermarkets.
VRIO, identify organisation’s internal strengths and weaknesses
It consists of the synthetic tool and technique that recognised the abilities and available
resources of a company. With reference to Sainsbury's the manager of this company identifies
the internal strength and weaknesses.
Resources Valuable Rare Inimitable Organised
Global existence Global existence - - -
Distribution
channels
Distribution
channels
Distribution
channels
- -
Financial
resources
Financial
resources
Financial
resources
Financial
resources
-
Competent
employees
Competent
employees
Competent
employees
Competent
employees
Competent
employees
Valuable: The abilities which profits values and beliefs that able to company for finding
threats and their opportunities. Distribution channels of Sainsbury are valuable for the company
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which involves variations of products. This includes global existence across all over the world to
increase the productivity of a company.
Rare: in context to Sainsbury's, the financial resources are found to be rare on the basis
of analysis of Sainsbury's. This provide local food products which is recognised by the Sainsbury
as VRIO analysis (Belás and et. al., 2015).
Imitable: the employees of Sainsbury's are not so costly to identify by this company as
VRIO analysis. This is done by offering better packages, work environment etc. The distribution
network of this company is very high costly on the basis of VRIO analysis.
Organised: The patents of Sainsbury's are not organised as recognised by this company
as VRIO analysis. This means that the existence of appropriate competitive advantage are
expired before the sold of patent products. Financial resources are organised to the value which
is identifies by the analysis of VRIO (Stott, Stone and Fae, 2016).
SWOT analysis of the organisation
It is defined as the process which involves strategic planning for identifying the
companies strengths, weaknesses, opportunities and threats that is affiliated to business
competition. It further refers to the study interpreted by an organisation for the analysis of
internal and external strengths of a company. The SWOT analysis of Sainsbury is described as
follows:
Strength Weaknesses Opportunities Threats
 Right
increasing of
small grocery
stores.
 It involves
brand
switching
costs.
 It provides
growth in the
villages.
 The
competition is
very high.
 Wholesale and
retail financial
services
 It involves low
amount.
 Growth in the
small markets.
 Main
competitors
include Resco,
Aldi and so on.
Interrelation among strengths and weaknesses of company with macro factors,
Interrelation Strengths Weaknesses
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Political factors: United Kingdom's political
structure is reasonable and
stable that is quality for
Sainsbury's as it helps in
appropriately seeing all
arrangements and actualizing
functions in like manner with
no changes (Lee, 2017).
At the point when a few
principles or arrangements are
changed out of nowhere by
political framework, at that point
it is soft spot for Sainsbury's as it
includes hazard factor
authoritative activities.
Economic factor: Different speculators in UK are
prepared for interest in
Sainsbury's which is one of
solidarity for it to increase
some financial assets.
Increment in return rates or bank
rates in UK are considered to be
some crucial points for the
retailer as it needs to reimburse
more that reduces number of
stores of Sainsbury's (Austin,
Dávila and Jones, 2017).
Social factor: Sainsbury's consists of solid
distribution arrangement with
conveys nearby items
understanding with social
needs that is quality for it to
improve client base.
At the point when social factor
impacts Sainsbury's can't deal
with all the changing mentalities
then it is shortcomings as it
hampers its brand image in
advertising for fulfilling
significant market section.
Technological factor: Working with technological
innovation is strength for
Sainsbury’s as to offer
organisational products in
innovative manner (Dowell,
Morrison and Heffernan,
2015).
In present time, innovative
changes or breakdown of certain
advances are said to be some of
the crucial challenges in setting
to Sainsbury's as it brings about
operational loss related aspects
because of which different
number of activities are
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hampered of the company.
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TOWS matrix, Justify how strength and weaknesses interrelate with the external macro and
micro factors and influence strategies business decision making.
The TOWS analysis is used to examine the internal factors such as strength and weakness
to the external factors such as opportunities and threats present in the work environment. It can
help the Sainsbury's organisation to take advantage of opportunities and help in reducing the
threads present in the work environment, provide a way to overcome the weakness and exploit
the various kind of strength (Bah and Fang, 2015).
It is used as a strategic planning tool to the organisation to add value to its business
operations activities to make best use of available resources in the work environment. This tool
helps an organisation to match its internal strength with the external opportunities present in
environment to develop the maxi-maxi strategies(so) which will lead to the success of the
Sainsbury organisation . For example, the good and strong brand image of the company can be
combined with the opportunities to new provide new product and services to the target market
place. On the another hand, the company tires to reduce its weakness with are matched with the
threads present in the organisation. The company uses mini-mini strategies(wt) to decease the
impact of threads for the company and also reduces the impact of weakness in the company so
that productivity can not be effect at the work environment in the marketplace .for example,
company weakness can be reduce the if manager can take appropriated steps to reduce the effect
of the threads present in the organisation. In between the mini-maxi(W0) and maxi-mini
strategies (ST) are made to strength the weakness of the company at management level and make
best use of available resources and focus is on minimise the threats present in the environment.
The focus of the company is to make best use of available resources in better ways to
increase the profit for the company in the long period of it . Their are various opportunities
present in the organisation which can be beneficial for the company to make use of such activity
in the best manner. The company can increase the profit by improving and investing in the
companies strength and produce the better product and services fort the organisation. The
company can use this as a tool for examining the various different factors which can have
impact on the performance of the organisation in the long period of time. This tool is useful for
the organisation as it help in reducing the impact of its weakness by taking effective step in the
management and business operation activities in the organisation (Khan and Quaddus, 2015).
The main point is to reduce the negative impact on the production activities and profit of the
1

company in long run. It use useful fort the company to strength the positive point of the
organisation in present and work related place and reduce the impact of negative things and
enhance the production of the company in work place.
CONCLUSION
From the above mentioned report, it has been concluded that business environment
consists of all the internal and external factors that have direct effect on business. Different types
of organisations along with their legal structure were described. As this helps in gaining of better
knowledge about the profit, non-government and non for profit organisation. Interrelationship
between different organisational functions helped an enterprises by improving their brand image.
Interrelationship is essential for an organisation as with the help of this, they can easily
accomplish their long term and short term objectives. There are different models and frameworks
such as PESTLE, Porter's five forces, VRIO, SWOT and TOWS. All models are used by an
organisation for identifying impact of these frameworks on their business operations and
decision making. SWOT analysis help in identification of strength, weaknesses, threats and
opportunities of an organisation. PESTLE analysis support an enterprises in determination of
impact of political, environmental etc. situation of country. Furthermore, frameworks like
Porter’s Five Force Analysis support an enterprises in relation to examine the industrial position
of company. VRIO model also used by company for assessing their internal situation such as
resources, competitive implications etc. for improvement in a resources.
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