Business Environment Report

This report analyzes the business environment of H&M, a multinational clothing retailer. It examines different types of organizations, their purpose, size, and scope. The report also explores the impact of macro-environmental factors (political, economic, social, technological, legal, and environmental) on H&M's operations. A SWOT analysis is conducted to identify H&M's strengths, weaknesses, opportunities, and threats, and the report interrelates these factors with the external macro environment. This report is available on Desklib, a website that provides past papers and solved assignments for students.

BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Different types and purpose of organisation..........................................................................3
P2 Size and Scope of different types of organisation.................................................................6
TASK 2............................................................................................................................................7
P3 Interrelate different organizational functions and associate them with organizational
objectives and structure...............................................................................................................7
TASK 3............................................................................................................................................8
P4Identification of positive and negative impact of macro environment on operations of
H&M...........................................................................................................................................8
TASK 4..........................................................................................................................................11
P5 Internal and external analysis of H&M in order to identify their strengths and weaknesses.
...................................................................................................................................................11
P6 Interrelate strengths and weaknesses with external macro factors......................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Business environment is accumulation of different factors, some of which may be
controlled by organization but leaves their impact on performance, profitability and growth of
organization. Internal and external factors create a impact on functionalities of organization.
Internal factors include customers, suppliers, employees, shareholders whereas external factors
are economic conditions, government rules, technology, competitors (Anıl and Ficici, 2017).
This report is based on H&M which a Swedish multinational organization. It is a retail industry
which is known for their fast fashion clothing for children, teenagers, women and men. This
report includes three different types of organizations with their purpose, size, scope and legal
structure. It also contains association among different working departments. Moreover, it also
analyses macro factors along with their strengths and weaknesses with respect to business.
TASK 1
P1 Different types and purpose of organisation
There are many different types of organizations performing their functions with a separate
purpose with a motive to satisfy consumer need an earn profit. Organizations performing there
functions in different types of organizational heads not only aid in satisfying every essential
needs of consumers but also benefit a country to strengthen its economy. There are different
types of organisations mentioned below with their purpose:
Private Organisation:
Organisations performing their business activities in Private organisations are mainly
owned and run by an independent person or in a partnership with a common purpose to earn
more and more profit (Anıl and Ficici, 2017. Companies run business activities in private sector
helps nation to strengthen its GDP by creating more and more job opportunities. In context with
this H&M is a multination clothing retail store engage in the process of creating fast-fashion
clothing for men, teenagers, women and teenagers.

Purpose: Hennes & Mauritz( H&M) is a multinational and leading clothing retail organisation
perform their activities with a purpose to drive significant and positive change by investing in
people, innovative ideas and communities and simultaneously improve their living standards.
Legal Structure: Mentioned below there is a legal structure of private sector organisation:
Sole Proprietorship: Organisation working in this form of structure are wholly owned, managed
and controlled by a single person who is mainly termed as sole proprietor.
Partnership: Partnership is a formal written agreement in between two or more individuals those
who willingly come together to start a business with a motive to generate profit or any other
mentioned reason ). There are mainly two types of partnership namely, limited partnership and
general partnership.
Company: Organisations performing there functions in this form of private legal structure run
their business activities with a motive to run more and more profit and did not offer their or issue
their share to general public through a mode of Initial public offer.
Public Organisation:
Organisations working under private sector are governmental funded groups or
companies perform their business functions with a motive to serve people in best possible way
rather than to generate profit. In context with this, Crown Prosecution Services situated in
England and Wales is mainly a public prosecution agency offer legal advices to police and other
related investigative agencies.
Purpose: Crown Prosecution perform their activities with a core purpose to provide correct and
effective advices to police and other investigative agencies and bring right prospective in a right
criminal proceeding.
Legal Structure: Organisations running their business operations in public sector are those
whose formal rights are owned and controlled by government. There are three different types of
government structure in an economy namely, state, national and local government (Burayidi,
2013).

Local Government: Organisations working in this sector are controlled and administered by local
governmental authorities.
State Government: Companies performing there functions in this sector are owned, controlled
and managed by state governmental authorities.
Central Government: In this sector, organisations are duly managed and embarrassed by central
governmental authorities.
Voluntary Organisation:
Voluntary organisations are non-profit groups perform their activities as to provide
welfare to individuals and serve needy people (Charfeddine, 2016). In context with this, Oxfam
which is a non-governmental organisation mainly run their welfare services in drought prone and
famine prone areas.
Purpose: Oxfam is a combination of 20 different charitable organisations performing their
functions with a purpose to erase poverty from all around the world and raise living standards of
the people simultaneously.
Legal Structure: Voluntary organisation performs their functions in mainly three different legal
structures that are:
Unincorporated Association: In this form of voluntary organisation there is an agreement in
between group and set of individuals those who all willingly come together to work for a
common purpose and motive rather than to earn profit.
Trust: Trust is a form of voluntary organisation in which there is formal agreements in between
mainly three different parties and a trustee hold right to property.
Company limited by guarantee: In this type of voluntary organisation, there is a limited number
of members, shares in an organisation (Hacioglu, Dincer and Celik, 2012).

P2 Size and Scope of different types of organisation
There are mainly three types of organisations namely, private, public and voluntary
performing there functions with different their size and scope which is discussed below in
descriptive manner:
Public Organisation: Organisation working in public sector is wholly and partially owned by
governmental authorities (Hussin and et. al., 2017). In relation with this, Crown Prosecution
Services is a form of non-ministerial organisation department that engage in the service of
providing legal advices to police and other investigation agencies in England and Wales.
Size: Crown Prosecution Services offer their advices in the regions of England and Wales with
an organisational structure of 14 different regional team headed by Chief Crown Prosecutor. CPS
owns more than 6000 employees.
Scope: Crown Prosecution Services have a scope which is to improve their quality of advising by
taking advantage of digitalisation as to provide faster flow of information.
Private Organisation: Organisations in this form of organisational structure enjoy their
functions less untouched by government interventions (Otoo and Drechsel, 2018). H&M is a
multinational fast fashion retailer offer men, children, women and teenagers clothing.
Size: H&M is a multinational retailing organisation founded in the year 1947 and headquartered
in Sockholm, Sweden. Company offer their services worldwide and employees more than
148,000 members.
Scope: H&M hire skilled and potential employees those who posses competent skill to take
company towards new height in terms of delivering effective services. H&M employees can
speak in 50 different languages. Company have a scope to expand their services in those areas
where they are still unreached.
Voluntary Organisation: Organisations formed under this structure are owned and managed by
certain group of persons who willingly come up with a purpose to provide welfare to society
(Sood and Sukthankar, International Business Machines Corp, 2013. Oxfam is a confederation of
20 different charitable organisations run with a motive to eradicate poverty.

Size: Oxfam perform their operations in 14 different countries all around the world with a
number of volunteers from different location offering their services to uplift society.
Scope: Oxfam can raise their scope by providing these services in remaining untouched and
unreached area by offering their welfare services.
TASK 2
P3 Interrelate different organizational functions and associate them with organizational
objectives and structure.
Each organization have their own working structure in which responsibilities and power
of all individuals are defined in appropriate manner. In context of H&M they have opted for
corporate culture within their work premises. This culture is segregated into different functions
and departments such as HR, Marketing, Research and Development, IT, Finance and many
more. Relationship among above departments is mentioned below:
Research and Development and Production Department: R&D department of H&M
conducts market research y which they can acknowledge customers behavior and understand
their requirements. It is basically conducted to know what customers expect from specific
organization. Moreover, with this company also acquire knowledge about latest trends and
technologies which are being used within market (Burayidi, 2013). They can adopt those trends
to have competitive vantage within market. Furthermore, this department also provides furnished
information to production department about needs and requirements of customers. This will add
them to provide enhanced products which are as per customer’s requirements. They implement
those changes in their products by which they will be able to have high productivity and
profitability.
Human Resource and Finance Department: HR department of H&M is responsible for
recruiting competent, talented and skilled employees who have sufficient knowledge about tasks
they have to perform. Moreover, it is essential that training is provided to new employees so that
they can get to know about working culture of organization. Furthermore, training is also
provided to existing employees of H&M on basis of advancements within market. For
conducting these activities, HR department needs funds which are evaluated by finance

department (Charfeddine, 2016). When technically sound persons are employed by organization
then this leads to generation of large revenue.
TASK 3
P4Identification of positive and negative impact of macro environment on operations of H&M.
Higher authorities of H&M must take into consideration both micro and macro factors
while carrying out their functionalities and operations. These factors have both affirmative and
pessimistic impact on working of organisation. Macro factors which affect H&M are mentioned
below:
Political Factors: This factor shows extent up to which government interferes in
functionalities of organisation. These interventions are in terms of rules, policies and regulations,
legislations that are set by government of every nation. There positive and negative impacts are
illustrated below:
Positive: Though Sweden have instability due to change in power and Brexit, but they
are also rendering their services in other countries also and they do have stability in their
policies, rules and regulations, which provide them opportunity for expansion and growth.
Moreover, Management of H&M adhere to laws which are made by countries in which they are
operating.
Negative: Changing powers in USA, Asia and Europe may lead to change in rules and
regulations, laws and policies. This means that H&M will have to make new strategies by which
they can remain stable within market.
Economic Factors: These are factors which will directly impact economic conditions of country
in which different organisations are operating in various sectors (Hacioglu, Dincer and Celik,
2012). These factors comprises of interest rates, inflation rates, foreign exchange rates and many
others.
Positive: In spite of negative impact of Brexit which has been on currencies around Europe,
H&M has reported that their sales have been enhanced by around 7% on local currency basis
with respect to previous years. They have grown nearby 10% when currency was converted into

Swedish currency i.e. Krona. This means that market of their products has been significantly
enhanced (Hussin and et. al., 2017).
Negative: As they are operating in many countries, they need to maintain competitive
pricing strategies. Fluctuations in inflation, currency and interest rates make it complicated to
maintain stable pricing strategies.
Social Factors: These are the factors which deal with trends in market and society. This
also includes demographics like age, occupation, salary, population and many other elements.
Their positive and negative impact on H&M is shown below:
Positive: H&M is providing opportunity to women by whom they can showcase their
talent; they have appointed more number of women in their offices. They are rendering their
services along with International Labor Organisation by which they provide hygienic working
conditions and provide good salary to employees. By this they are able to provide job satisfaction
to their employees, thereby increases their productivity.
Negative: Due to advancement in trends means that demands and preferences of
customers are changing due to which they have to design their products. For this they need to
make continuous interactions with people, though this is a time consuming process but it is
mandatory to have stability within market.
Technological Factors: Technology is rapidly changing with change in needs of customer. This
means that with alteration in demands they need to execute new technologies by which they will
be able to meet those requirements (Otoo and Drechsel, 2018). There positive and negative
impacts of these factors on H&M are shown below:
Positive: They have provided mobile application for their customers. In recent times,
H&M have unveiled club function by which they give rewards to customers when they purchase
their products either online or instore, for this they have to use their mobile devices. Moreover,
they are using third party logistics by which they can track logistics operations which assists
H&M.
Negative: When updation is made within H&M in terms of technology then it becomes
difficult for employees to work on those as they have been adapted to their existing working

environment. This may lead to decline in productivity of organisation as they may not be able to
work with latest technologies. For this H&M must provide their employees with adequate
training.
Legal Factors: This factor comprises of various policies, laws and regulations which are
formulated by government of different countries. This is done to take into consideration health
and safety of employees, to avoid any kind discrimination which occurs within work
environment, safeguard employability laws and many others (Sood and Sukthankar, International
Business Machines Corp, 2013). They give advantage to employees but in context of
organisation they have some positive and negative impact. It is shown below:
Positive: H&M makes sure that they abide all the rules and regulations of Countries in
which they are operating. This is done to provide their employees with safe working
environment and ensure that their health and safety is at priority. Furthermore, H&M provides
employees with benefits, leaves and wages that they deserve as per their capabilities and job role.
Negative: If H&M do not follow these laws then they will be penalised and fall into legal
troubles. This will possess high threat to them in terms of brand image and it will make it very
difficult for them to stay within market for longer run of time.
Environmental Factors: It is necessary for every organisation to visualise what impact
they are creating on environment and depending on that they need to formulate strategies so that
they can opt for environment friendly techniques to carry out their functionalities and operations.
These factors include waste management, pollution emitted by their production department and
many others (Toedt, 2014). Nature and resources are limited which means that it is essential for
to use them so that it can maintain their integrity in future perspective also.
Positive: H&M is aiming to be 100% renewable and circular by 2030, this means that
their products will be produced from old products of the organisation. They will be using only
durable and recycled materials for manufacturing their products. By this they will be ensuring
that they are not creating any kind of damage to environment.
Negative: For H&M to remain sustainable within market they need to formulate
strategies by which they can work on them. They need to focus on increasing their productivity

and reduce carbon footprint. At present they are increasing carbon footprint. Furthermore, if
climatic conditions are not suitable then this may lead to delay in supply of raw materials.
TASK 4
P5 Internal and external analysis of H&M in order to identify their strengths and weaknesses.
SWOT analysis is strong tool by which they can analyse internal environment of organisation
(Vasilcovschi and Georgescu, 2012).
. It stands for strengths, weaknesses, opportunities and threats. With respect to H&M
SWOT analysis is presented below:
Strengths Weaknesses
 They are one of the largest retailers in
global clothing.
 They are spread in around 45 countries
with approx 95000.
 They offer trendy and quality clothes at
reasonable prices.
 They render their services in other
complimentary businesses which makes
them flexible (Warkentin, Sugumaran,
and Sainsbury, 2012).
 They have invested lots of money in
machineries by which they can
manufacture clothes.
 They need to manage their finance
efficiently and appropriately.
 H&M must invest in new technology so
that they can integrate their processes
across the board.
Opportunities Threats
 Emergence in economies will provide
support to H&M for expanding their
business.
 They can opt for providing online
shopping to their customers, by this
they will be able to gain high
profitability within market
 Skilled employees are not present
within global market; this will be a
threat to growth in profits for H&M.
 Increasing pay level movements like
$15 per hour will lead to high on profits
of H&M.
P6 Interrelate strengths and weaknesses with external macro factors.
Macro factors refer to external factors which have relevant effects on activities and
functionalities of entities. They include political, social, economic and technological factors.
With reference to H&M, they need to identify their strengths and weaknesses of macro factors so
that they can gain competitive vantage within market (Anıl and Ficici, 2017). This will also aid
them to make improvements in their operations. They are elaborated below:

Political Factors:
Strengths: This factor aids H&M to formulate enhanced relationship between different inter-
governmental agencies, easily accessible resources and many others. This will lead to positive
role of organisation within country in which they are carrying out their operations. This will
ensure positioning of brand within market and also enhance their market shares.
Weaknesses: Self-governing activities and decision making of H&M are affected by policies
which are formulated by government. Organisations need to make alterations in their working
style accordingly.
Economic Factors:
Strengths: This factor aids H&M to decide their pricing strategies for their different products.
Growth rate and interest rates of organisation are also decided by this factor. H&M have
maintained their position within market with respect to economic decision making (Burayidi,
2013).
Weaknesses: High inflation rates have caused huge impact on management and working process
of organisation. There is high chance of losing job for employees working within H&M, if
inflation rates are high.
Social Factors:
Strengths: Factors like preferences, influence and taste of customers affect decision making of
H&M. This aids in development and welfare of society as well as country. This will also enhance
productivity and profitability of organisation.
Weaknesses: With respect to H&M, these factors decrease morale, vision and values of H&M.
Production process of H&M can get hampered by preferences and choices of customers
(Charfeddine, 2016).
Technological Factors:
Strengths: With respect to H&M, adoption of technology can lead to influence behaviour and
buyers to buy services or products. Updation in technology will engage customer’s thoughts,

interest and mind by which they can influence their decisions (Hacioglu, Dincer and Celik,
2012).
Weaknesses: When technology is updated, it means that prices of products can be raised. This
will lead to decline in purchase behaviour of individual as they influence cost of services of
H&M.
CONCLUSION
From above, it can be concluded that organizations are categorized into private, public
and voluntary organizations. It has been identified that different organizations which are
operating in various economies in terms of their scope, size, legal and purpose of these
structures. It depends on preferences and choices of group or individuals to select the type of
organization where they want to conduct their services. SWOT analysis can be used by
organization for their internal analysis and Pestle can be used for external analysis.

REFERENCES
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