Business and the Business Environment

This document discusses the types and purposes of organizations, the interrelationship between various functions, and the PESTLE analysis of John Lewis in the business environment. It provides insights into the impact of political, economic, social, technological, and legal factors on the organization. The document also includes study material and solved assignments related to the topic.

Business and the Business
Environment (Unit 1)

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
P1 Types and purposes of organization.......................................................................................3
P2 Size and scope of different organizations...............................................................................5
LO2..................................................................................................................................................7
P3 Interrelationship between various function and the way they are linked to organisational
structures......................................................................................................................................7
LO3..................................................................................................................................................8
P4.................................................................................................................................................8
PESTLE Analysis of John Lewis.................................................................................................8
Porter's Five Forces of John Lewis............................................................................................10
VRIO Analysis of John Lewis...................................................................................................11
LO 4...............................................................................................................................................13
P5 Swot analysis........................................................................................................................13
P6 Interrelation of external and internal factors........................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES................................................................................................................................1

INTRODUCTION
Business environment or market environment includes individual, institutions and other
factors which are outside the control of an organization but then also it affects the performance
of an organization. All internal and external factors like employees, supply and demand,
customers needs, suppliers, government, technology etc. These factors affect the performance of
an organization and its goal directly and indirectly. John Lewis is an organization which has a
large department store which is operating in Britain. This organization deals in all types of
consumer goods according to their needs. This project includes macro factors like political,
economical, social, technological and legal which affects the business environment of an
organization. It also includes different types, size and importance of organization which is used
to develop an organization. An organization consist of various functions like planning,
organizing, directing, controlling and staffing which are interrelated to each other. If these
functions does not give positive result to a business than it will impact on the organization.
LO1
P1 Types and purposes of organization
The report further are going to discuss the three types of organizations in market which
are private, public and voluntary. The functioning and regulations are different from one another
which is going to be discussed and how do they effect the productivity and helps organizations to
achieve their goals and objectives.
Public Company
Number of shareholders in national health service are more than 200 who are having a
huge impact on the company and the decision making of the business. The regulation and
functioning of a public organization are very different from private and voluntary organization.
Anyone can become a member of this firm in market. The vision of the organization is to provide
the patients with the best of health services at a very low price so that they can make a better
place to stay in (Alotaibi and Liu, 2017). This is a non-profitable organization and all the profit
which is made by the organization is used for making the society a better place.
Purpose
 NHS aims for the best of health services to reach the patients and not for gaining profit
from it. The patient satisfaction level should be high and provide them with a comfortable living.

Private Organization
The shareholders in the company are limited and there are not more than 200 members
which can be included in the organization. The rules and regulations which the company have
been different from private and voluntary organizations in market. The employees of John Lewis
can not become shareholders of the company but anyone not associated with the company can
become the shareholder (Civelek and et.al., 2016). The aim of the company is to earn the
maximum profit in the market and expand themselves as much as possible. John Lewis are
dealing with clothing, cosmetics, furniture, beds and bedding, etc.
Purpose
 The productivity of employees in a private sector are higher than the other sectors. The
quality of the products are maintained because of this factor and is going to make the
company achieve their aims and objectives.
 Focus of private organization is to maintain their sales and to generate high profitability
in market. The focus of a private organization is to get the maximum profit and meet the demands of
the customers from time to time. Control of government is low and the company will be
able to export and import whenever required.
Voluntary Company
These organizations function in market or society so that they can make the living of
people better and increase their standards and aware of the surroundings. Oxfam is a UK
originated company which is making the customers aware of the rights they have so that in future
they can fight for themselves. There are a lot of people who are not aware of the governmental
rules and regulations which have been made for them so that they can have a better lifestyle for
themselves (Kluza and Nalepa, 2017). There are 290 different charities which come under this
one organization and is non-governmental.
Purpose
 Poor people do not know their basic right therefore it is very important for them to know
it so that they can fight for themselves and make their living better. Oxfam purpose is to
do that so that they can make the people's standards better.
 They do not focus on the profitability but only focus on educating and sharing knowledge
so that they are aware of the rights for themselves.

P2 Size and scope of different organizations
Basis Micro Small Medium Large
Size There are not more
than 10 employees
in this kind of
organization. These
businesses are small
in scale and require
their own
investment to start
this kind of business
in market. For
example, Boss
Brewing company
which is in market
to earn the
maximum profit and
no long term market
for themselves.
There are only 50
employees in a small
business organization
in market and in
United Kingdom a
small business can not
have a turnover of
more than £6.5 million
otherwise it is not
considered a small
business. Example,
CafePod coffee co.
which is in market to
increase the customer
experience in
consumption of
caffeine (Martins and
Nienaber, 2018).
The number of
employees which
a medium
organization have
are not more than
250 employees
and 0.6% is
medium
businesses in
united Kingdom.
Example,
Pharmacy2U is an
online
organization
which is
following the
customers trends
and demands to
make a larger base
for themselves in
market.
The turnover of a
large organization
should be high
and the number of
employees
working in the
company should
be more than 250.
Example, John
Lewis has 83,000
employees
working in the
company which is
making the
company have a
better functioning
and high
productivity level.
Scope Use of technology is
low in micro and
mostly not present
at all. Focus is on
the local areas of
market.
There are a lot of fresh
ideas which generate
and are the backbones
for the country which
is a great advantage
for the economy.
The ideas are
limited and
mostly are
adapted from the
small
organizations in
Customer
satisfaction is the
most in this
industry which is
because the
productivity level

CafePod have a lot of
ideas which they use
for making the coffee
and make the
customers have a
better experience
which will make the
company penetrate the
market better.
market.
Technological use
is a lot but not as
much as a large
business in
market.
is high. There is a
lot of technology
which is used in a
large organization
which is a very
good factor for the
organization.
Objective  Making the
living of
people better
and
increasing
the income
level but
they are not
in the market
for a long
run.
 There is a
stable
profitability in
market and
there is a huge
future growth
for these
organizations
in market
(Rialp-Criado
and
Komochkova,
2017).
 They have a
mission and
core value so
that they can
have a better
direction for
functioning.
 Expanding
the current
business in
market is
the
objective
of a
medium
organizati
on.
 Attracting
more
customers
in market
so that
they
company
can have a
maximum
of profit in
market.

LO2
P3 Interrelationship between various function and the way they are linked to organisational
structures
Organization has large number of people and department working together for
achievement of common objectives of company. Different department of company such as
marketing, finance, sales, production and research and development are specialized in
performing particular function that needed to be coordinated for achievement of organisational
goals (Rundgren, Eriksson, and Chang Rundgren, 2016). Such as marketing department
influence customers to buy specific products but it had to coordinated with production
department to know about features and benefits of product manufactured in john lewis.
Therefore, various interrelationship between department of john lewis are as follows:
Marketing department: It is responsible for marketing of products and services of John lewis
company to enhance its sales and profitability. Therefore it plays important role in growth and
success of business but without coordinating with other department of John lewis it is not able to
achieve desired goals (Matysiak and Roess, 2017). Such as marketing department after
identifying needs of customers forces production and research and development department to
manufacture new products in order to satisfy needs of customers. It also helps production
department in setting price of product by informing about disposable income of customers or
their willingness to buy a particular products and services. Thus, it can be explained that
coordination between department increase sales and profitability of John Lewin.
Human resource department: This department also plays important role in John Lewis
company by recruiting and selecting right person for right job. HR manager of company not only
hires people but plans and organize training and development programmes to enhance
knowledge and skills of people. HR manager of John Lewin also have to coordinated with
production department to know requirements of number of candidate and function to be
performed in order to select candidate as per required skill and knowledge. HR while deciding
compensation plan, organising training and development program has to integrate with finance
department to know budget of company.
Finance department: It is heart of any organization as it main function is to arrange fund for
effectively operations, establishment and expansion of business in the industry. Finance
department identify, analysis and evaluates various sources of finance and choose best among

them to raise fund for business (Kim and Kim, 2016). Finance department of John Lewin also
has to interact with marketing department about various budget it needs to market products and
services of company. It coordinates with production to decided cost of production and capital
required to manufacture goods and services to customers. Thus, interrelationship between
finance other department in helps in reduction of cost of production and enhancing profitability,
sales of John Lewin .
Advantages and disadvantage of interrelationship between organisational function and its
impact on organisational structures of John Lewis
There are various advantages of interrelationship between organization function in John
Lewin such as strong interrelationship helps in effective coordination and specialization of
products and services. As each function is performed by particular department that is specialized
in performing particular function. It also reduces conflict between people and motivate them to
work effectively for growth and success of business in the industry. It also helps in brining new
changes, innovation and ideas within organisation thus helps John Lewin in gaining competitive
position in the market. Function of each employee can be better controlled due to expert
knowledge and continuous supervision of various functional manger (Sarim, Shamshad and
Akhter, 2017). On the other hand interrelationship between department of John Lewis affects
adversely on functioning of business and organisational structure. Such as it create complexity
and confusion among employees of company regarding function to be performed as it received
instruction from number of functional heads. Another disadvantage of interrelationship between
department is that limited perspective that hinder growth and success of John Lewis as head of
each department performance is focused to achieve goals of its department and is not concerned
about goals of company. Sometime interrelation may arises conflict between heads of
department regarding decision-making thus lead to delay in decision-making of company.
Therefore, it can be explained that interrelationship impact adversely on organization function
and structures of John Lewis.
LO3
P4.
PESTLE Analysis of John Lewis
It is an analytical and strategical tool which help to understand the market trends by
analysing different market factors effectively. It is very essential for business to analyse all the

external market factors as they are not in control of business in performing activities. It also can
impact the business growth and reduce the market share. With the analysis of this factor
organization can formulate effective strategies and reduce increase efficiency of organization
effectively. With the help of this tool it will help John Lewis to understand its current market and
other market in which they want to expand with help of all the market factors to increase its sales
and profitability in market effectively.
Political Factors
This Factor involves the degree of government intervention in the business operation
which can impact in growth of business (Ramadan and Ahmad, 2018). John Lewis has positive
impact on it sales due to entry in UK market due to Brexit as it reduces competition in market
and increases high quality of customer base to increase profitability. However, Brexit also has
negatively funding sources of John Lewis as many investors has disinvented from UK market.
Economic Factors
Economic Factors helps business to identify the factors which have direct impact on
economy of country thus reduce potential of business gradually. These factors are inflation rate,
GDP rate, Taxation rates and unemployment rates which impact the economy and business
activity. Due to increase tax rates the profit margins of John Lewis has negatively reduced and
also slowed the growth movement gradually. Although, with the help of low unemployment rates
company reduced its labour cost in operation of its activities effectively.
Social Factors
Social factors are the variable factors which changes with the customer behaviour,
attitude and it is linked with their, social beliefs, cultural values, ethical considerations, friends
and society. Increase in health awareness from various health care institutions customers in UK
have changed their preferences and became more health conscious which impacted the sales.
However, this also created a new opportunity for John Lewis to increase product innovation and
provide health benefits to attract more customers.
Technological Factors
Technology factors are the tools which are used to analyse the different medium of
resources which reduces cost and increase efficiency of business effectively (Belas and et.al.,
2019). Due to increase in e-commerce and online stores it has impacted the market share of John
Lewis and also reduced the potential of company to attract them with different offer in the offline

stores. Nonetheless, increase in technology has also increased the efficiency of company to store
data by adapting new management information system to reduce cost.
Environmental Factors
This Factors helps to analyse the factors which are related to environment and has
impacted the business activity. Increase in the environmental policies all over the world about
impact of products on the environment has reduced the growth opportunities for John Lewis
company and it has also reduced the customer base due to increase in policies and regulations.
Adoption of CSR by John Lewis and also inventing in research and development of product's
raw material with eco-friendly raw material impact the goodwill of the company positively.
Legal Factors
This Factor provides brief understanding about all the legal regulation which are also
covered in political factors. Employment laws and health and safety laws has impacted the
potential growth and practices of John lewis as it has to pay many fines and penalties due to
many cases.
Porter's Five Forces of John Lewis
This Tool helps the business to understand level of competitiveness in the market and all
the other threats which can reduce the competitiveness in the market and reduce brand value.
Porter five is a strategic framework which help John lewis to analyse current competition in the
market to achieve core competency.
Bargaining Power of Buyer (High)
This is the factors in which the power of buyer is very essential in deciding the
competition (Prajogo and Oke, 2016). As buyers are the king of the market and every business
needs more buyers to survive in any market. John Lewis has high bargaining power of buyers in
UK market which reduces the profit margins and survivability in the market gradually. This also
increase the competition and companies has to reduce prices as there are many options available
in clothing industry in UK for customers.
Bargaining Power of Suppliers (Low)
This is the factors which impact the business due to change in prices of raw material from
suppliers (Fernandes, 2017). It is very essential for John Lewis to analyse the cost of raw
materials as it is very low due to many suppliers in the industry which provides the same quality

of raw material at low cost. Due to brand value and size of John lewis many suppliers are willing
to supply to company and increase their sales in low profit margins.
Threat of New Entrants (Low)
Threat of new entrants is the common threat which every business faces but the degree of
threat changes with the change of size of business and capital invested. John Lewis is having low
threat of new entrant as the size of business is very large and has large customer base which
increase the profit margins and sales of the company. New entrants will be discouraged to invest
in the same market as John Lewis has invested a huge capital in the market to increase market
share and also achieve core competency.
Threat of Substitute Products (Moderate)
The market has large range of products available by different competition which
increases the risk of John Lewis's products by substitutes. However, the threat of substitute
products is very low as the company provides different quality of products and adopts innovation
to attract customers and increase their satisfaction effectively. Although there are many
competitors in clothing industry in UK which also has many innovative products to increase the
satisfaction of the customers. This decreases the efficiency of the company and can impact the
market share with substitute products. Increase in new product segment can reduce the threat of
substitution in the market effectively. It is also very essential for the business to become more
effective in understanding the customer behaviour to attract them.
Market Competition (High)
Competition if retail industry is very high in UK market which has also impacted the
sales of John Lewis negatively (Martí, 2018). Due to diversification strategies by competitors are
increasing the competition in day by day and also decreasing the room for growth rapidly. Tesco,
Asda, Marks and Spencer are the leading competitors which have the potential decrease the
market share of John lewis gradually.
VRIO Analysis of John Lewis
VRIO analysis is the tool which helps business organization to identify the uniqueness in
products of the business organization to attain higher profitability and core competency
effectively (Evans and et.al., 2017). John Lewis analyses different resource analysis which
according to four criteria which help to increase the efficiency of the company. The four factors

are valuable, Rareness, Costly to Imitate, organization to identify the potential of business
according to available resources and increase quality.
Valuable
This factors helps to understand that resources which add value to the product and brand
value of the company by doing different activities effectively. This also helps the business to
understand all the factors which are having effective resources effectively. From the analysis
company identifies that employees, capital, technology and Intellectual properties of companies
are valuable and has the potential to increase the profit margins of the company effectively.
Capital helps the company to increase the value of infrastructure and products. Employee helps
to increase the perceived value of customers to make them loyal.
Rareness
Rare resource are those which are not easily acquired by competitors or only few
businesses has access to the resources which help to increase advantage of the company to gain
more profit margins. John Lewis has effective network of stores are very effective and also few
market player has. Company also has patents and innovation which are rare and no other
business can use that to increase their profits.
Costly to Imitate
This factors help the business to understand that degree at which resource can be imitated
by the competitors. John Lewis has effective employees who are highly skilled and
knowledgeable to increase value of customers effectively this is very costly for competitors to
duplicate as training and development increases cost. John Lewis uses innovating technology
which reduces issues and increase efficiency to gather more information about market
effectively.
Organisation
This factors help to determine the level of organised structure of any business in attaining
objectives (Sodeyfi, 2016). John Lewis uses effective management information system to
increase process of company to formulate effective strategies and policies to understand all the
factors and increase the potential to compete in the market effectively.
VRIO Framework of John Lewis

BASIS Value Rareness Costly to Imitate Organization
Capital ✓
Human Resource ✓ ✓
Technology ✓ ✓ ✓
Intellectual
Properties
✓ ✓
LO 4
P5 Swot analysis
Swot analysis is the internal environment analysis where all factors operating within the
company are analysed for building strategies to improve the performance standards (Ahmadi,
Maleki and Ahmadi,2019).These factors are Strengths, weaknesses, opportunities and threats
which determine the operational structure of company enabling managers and leaders to build
strong methods of innovative development among other competitors for performance
enhancement.
STRENGTHS
 Strong goodwill among consumers.
 Large number of stores in domestic as well as international markets
 Large variety of products with high fashionable innovation in clothings
 High brand value globally
 Strong capital resources' fir further expansion into new sectors
WEAKNESSES
 High competition due to new brands entrants on fashion industry
 Low production capacities
 Large dependence on revenues from domestic economy (Ma,2020).
OPPORTUNITIES
 Expansion into new sectors with advanced products
 Advanced technology usage in production equipments
 Training employees to built cost effective technicality in production
 Expansion into new untapped countries markets

THREATS
 Huge competitive growth in global business world
 Increased raw materials prices
 New brands entrants competiton
 Dynamic preferences of customers
These factors have analysed that John Lwesi being global brand has large potentiality of
expansion with high goodwill among consumers worldwide. Brand has high recognized value in
all stores with high fashionable clothing products being one of the biggest strengths. However,
the emergence of dynamic preference and competitive due to new entrants of brand has emerged
as weakness and threat for company.
P6 Interrelation of external and internal factors
 External and internal factors have high correlation among each other as the management
has high responsibility to address the emerging challenges of micro as well as macro
factors. Strengths of Lewis are correlated with company capability to cope up with
external economic factors effectively and build competitive strength for flexible business
performance (Rahman,2019).
 Micro and macro environments have high interrelation because of the factors where
company can enhance its weaknesses by expansion into new sectors and build new
portfolio of products and services. John lewis can use the strength of huge capital
resources to invest in competitive technological equipments, and build goodwill among
new segments of customers where people have divers preferences.
 John Lewis can use strong brand value to attract new segments worldwide and enter nee
paradigms of partnerships globally where it can build strong position in world. Company
can indulge in training employees with advanced technology and production equipments
where they can strengthen their cost effective production capabilities.
 Swot and pestle analysis enable business managers of company to build their strengths in
competitive world and grow with high flexibility towards management principles. John
lewis can expand into untapped markets and countries by expanding the scale of
production into new arenas of development.

 These factors are highly important for company managers and larders to build their
strengths and cope up with the threats and weaknesses with effective performance targets
and set business goals considerably (Pan,Chen and Zhan, 2019).
CONCLUSION
It can be concluded that functions of an organization affects the business environment.
Business environment of an organization is affected by many factors but it should always
maintain their performance. All the functions of an organization are linked to each other. If one
function does not perform well it will affect other functions too, in this way whole business
environment will be impacted. The changes in need and preferences of customers affects the
business environment. All the positive and negative impacts of macro environment affects the
organization in different ways. John lewis also has some strength and weakness of its business
which affects its goal. When functions of an organization does not perform well it affects the
profit of the organization. Macro factors also affect the GDP, inflation, employment, monetary
and fiscal policy of a country. Macro factors which are giving negative impact on the business, it
gives chance to organization to correct their mistakes.

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