Impact of External Factors on Business Operations

The assignment emphasizes the importance of considering various internal and external factors in business operations. It highlights the need for companies to develop effective plans and policies to respond to changing political, economic, social, technological, legal, and environmental conditions. The report provides a detailed analysis of each factor's impact on business and discusses how companies can adapt to these changes to achieve their objectives.

Business
Environment

INTRODUCTION
Business environment refers to the surroundings in which firm operates. It consists of
internal and external forces that affect functions of company. Factors includes in it are
customers, suppliers, government, competitors, political, legal, cultural, social and technological
conditions. Both the factors, internal as well as external put positive or negative impact on
business operations and functions. So, it is necessary for firms to consider all these factors in
order to successfully attain business objectives (Asif, Garvare and Ahmad, 2011). Consideration
of these factors helps managers in formulating effective plans & policies. In the present
assignment, chosen organisation is Nestle which is a private business enterprise and deals in food
& drink products. This report also includes public & voluntary organisation, i.e., NHS and
Oxfam. Types, purposes, size, scope of different types of business enterprise are defined.
Relationship among various functions of organisation and their link with its structure and
objectives are included in the report. Apart from this, positive & negative influence of macro
environment on business operations are identified as well as internal and external analysis is
conducted for determining strengths & weaknesses of firm.
TASK 1
P1 Different types & purposes of business organisations
In business environment, three types of organisations are operated, i.e., public, private
and voluntary sector. Each one of them has its different legal structure & purpose which
differentiates them. Management has the duty to comply with all the laws and regulations made
by government. This assists in effective development of operations in various countries &
attainment of firm's objectives. Different types, purposes and legal structure of organisations are
defined below:
Private organisation:
The firms that are owned, operated & controlled by single individual are referred as
private organisation. Such companies does not require to fulfil any conditions that are made by
securities & exchange commission. On private sector firms, many restrictions are imposed such
as, these organisations are not permitted to trade their share in public stock exchange. The
operations of such firms are not under control of government. Major purpose of private
organisation is to earn huge profits. Best example of private sector company is Nestle.
Overview of Nestle:
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Nestle is one of the largest Swiss Transnational food & drink company in the world
which is known by its high quality products. The firm is headquartered in Vevey, Switzerland
and is considered by largest company by its revenues. Different products provided by Nestle are
ice cream, bottled water, baby food, snacks, chocolates, coffee, tea, dairy goods etc. The
company administer their products in around 194 countries and 339000 employees are
employed by it.
Purpose of Nestle:
 Similar as other organisations, main purpose of Nestle is to earn large amount of profits
by administering high quality products to its customers.
 Contributes in providing healthy future and enhance life style quality of customers.
 To inspire people for living healthy life. To work for welfare of society and attain high position as well as long term sustainability
in market.
Legal structure of private sector organisation:
The legal structure of private sector organisation is categorised into three types which are
defined below:
Partnership: In this, two or more individuals come together and sign a partnership deed
in order to establish & run business. With the mutual consent of partners, an organisation is
formed which is known as partnership firm. In such kind of companies, profits and losses are
equally distributed among all the partners. The parties eligible for partnership includes
government, businesses, individuals, schools, interest based organisations etc.
Sole proprietorship: The firms which are owned, operated & controlled by a single
individual are termed as sole proprietorship. There is no legal differentiation among owner and
business entity. Owners of the business are solely responsible for all the profits & losses bear by
firm.
Limited companies: These firms can be categorised into 2 types, that is, limited by
guarantee & shares. Members of such companies has limited liability as per their investment in
business.
Merits and demerits of private sector organisation:
Merits Demerits
These organisations are not interrupted by Private sector firm are not thinking about
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government authorities. society welfare. They only run their business
for earning high profits.
Earn high amount of profits for the welfare of
stakeholders.
These firms are restricted to trade their shares
in public stock exchange.
Public sector organisation:
These are the firms which are established under company law of United Kingdom;
Republic of Ireland & commonwealth jurisdictions. Government or legal authority have full
control over such organisations. These companies have separate legal entity and their main
purpose is to earn profit as well as work for welfare of society and administer benefits to them.
The example of public organisation is NHS.
Overview of NHS:
National Health Services (NHS) is a public funded healthcare organisation which
administer their services throughout the world. Major aim of organisation is to provide basic
medical facilities to everyone.
Purpose of NHS:
 To enhance health & well being of sufferers or patients.
 To deliver basic facilities of medical to poor people. Bring excellence as well as innovation in care promote business & clinical practices.
Legal structure of public sector organisation:
Central government: The power is delegated at different levels and includes central as
well as state government departments.
State government: This authority assists in functioning of activities related to state
government & agencies.
Local government: This agency administer functions related to handling of public firms.
Local government works at local level, i.e., in domestic country.
Merits and demerits of public company:
Merits Demerits
The main purpose public company is welfare
of society.
Need to comply with regulations made by
securities & exchange commission.
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Government provides support to public
organisations in terms of finance. Various
activities of such firms are financed by
government.
Interruption of government is high in functions
of firm.
Voluntary organisation:
These are non profit organisations which run for the single purpose only, i.e., welfare of
society. Basic characteristics of such organisations are as follows:
 Rather than earn profits, these organisations work for society welfare.
 Governance by unpaid trustees board.
 Autonomy from states.
These firms needs to take permission of government & fulfil all conditions prescribed by
them for running their operations. Example of such kind of organisation is Oxfam.
Overview of Oxfam:
Oxfam is a voluntary firm which works with the purpose of reducing poverty from world.
Operations of company are run by the assistance of Volunteers. It also administer food to poor
people and provides them support for their survival.
Purpose of Oxfam:
 Bring solutions for poverty removal. Administer food and other necessities to needy people of society.
Legal structure of voluntary organisation:
Trust: It is governed by trust deed that sets out its objectives, trustees name and gives for
administration of trust. It is formed by group and doesn't need membership structure. The actions
of trustees are not approved through others.
Unincorporated association: For charity, these associations are inexpensive structure. It
is governed by non prescribed constitution, though will require to involve certain characteristics
like prohibition on funds distribution to members.
Company limited by guarantee (“CLG”): This firm or association have limited liability
and are registered and incorporated at company's house. Its all the activities are governed by
articles of association.
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Charitable incorporated organisation (“CIO”): It is a new form of legal structure which
is particularly designed for charities. In some ways, this structure is similar to limited firm,
provides provides protection of trustees on personal liability.
P2 Size and scope of different types of organisations
There are three different types of organisation, i.e., public, private and voluntary. As
these firms differ, their size and scope also differs. Scope involves description of diversified
activities of business and size consists of number of places where firm administer their products
& services. Size and scope of different kinds of firms are defined as follows:
Nestle
Size of Nestle: The company deals in food & drink products and supply them worldwide.
Nestle is considered as a largest firm measured by its revenue. Various products are
manufactured by company and there are around 447 factories run under brand name Nestle.
Business activities of the firm are operated in approximately 190 countries. The company
employed large number of manpower in order to satisfy various demands of customers. Business
operations of firm are perfectly handled by around 339000 people. By their successful operations
throughout the world, revenue generated in year 2017 is 89.80 billion. In year 2016, assets
owned by company is 131.9 billion.
Scope of Nestle: Scope includes detail about diversified goods that are provided by
company. The firm manufactured various variety of products like cold tea, coffee, bottled water,
maggie, breakfast cereals, dairy products etc. Frozen products, Ice cream, snacks and pat foods
are also provided by Nestle. All these products are supplied by the company worldwide.
Vision: The vision of Nestle is to administer safe & high quality food products to
customers. They mainly emphasize on providing such food to customers which contains
optimum nutrition and satisfies their physiological requirements.
Mission: To manufacture high quality food which assists in enhancing lives of people.
NHS
Size of NHS: It is a public sector firm of United Kingdom which administer health
services to public. The countries in which organisation administers their services includes
Scotland, Northern Ireland, England, Wales etc. The major purpose of firm is to bring social
reform. In NHS, there are around 1.6 million people are working and provide good quality
services to public.
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Scope of NHS: Basic medical facilities are administered by the organisation to poor
population of society. Optical and dental services are also provided by them. Main scope of NHS
are as follows:
Management of funds related to budget which are administered for health care facilities.
Communicate information to society related with health care facilities.
Vision: To administer good health care facilities to the people living in society.
Mission: To administer high quality services on day to day basis.
Oxfam
Size of Oxfam: In order to provide their services, a combination of 20 charitable
organisations which are independent utilize the name of Oxfam. The company render their
services all over the world. Main purpose of organisation is to eliminate poverty from different
areas of world.
Scope of Oxfam: Various services are administered by Oxfam such as disaster relief,
policy research, advocacy, reduction of poverty, pro migration etc. By the assistance of large
number of volunteers, food relief services are also administered by them to poor people of
society.
Vision: To eliminate poverty from throughout the world.
Mission: Oxfam's main mission is to work for welfare or betterment of society and
improve their standard of living.
Stakeholder Analysis:
It involves evaluation process of various stakeholders. In Nestle, the main stakeholders
are government, employees, investors, customers etc. Taking approval of shareholders assists in
getting their support in business operations. For this, management requires to prioritize their
stakeholders according to the interest of firm which are as follows:
 High power – fascinated people
 Low power – less fascinated people
 High power – less fascinated people
 Low power – fascinated people
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TASK 2
P3 Relation among different organisational functions and their link with objectives & structure
The main objectives of company to generate large number of revenue in order to
maximise profit of company. Nestle is strong brand which provide different type of products
and services in whole world. Company put its efforts to fulfil the desire of customers. There are
various department in the organisation such as performing operation, human resource department
, proper distribution of funds, marketing and many other department (Bhaduri and Ha-
Brookshire, 2011). All these department have different types of responsibility in order to
accomplish different types of functions but these department have the common goals. These
department of Nestle are linked with each other in order to accomplish different task in effective
manner. The collaborative efforts of these department aids to attain goals and objectives of
company. The coordination of these department aids to accomplish the different task in
stipulated time period (Cavusgil and et. al., 2014). Coordination in performing various types of
functions in order to attain objectives are describe below: Human resource department: This department is most important department of
organisation. It concerned on to recruit new employees as per the requirement to
accomplish the different task in effective manner. HR manager of organisation conduct
various training session in order to enhance skills and knowledge of employee working in
the organisation. It also monitor performance of employee in order to give appraisals
according to there performance. It also control various department of organisations and
appoint different employee as per the requirement in these department. Finance department: This is also one of the most essential department which arrange
the funds in order to complete different task (Chetwood and et. al, 2014). The most
important functions of this department is to estimate the budget for completion of
venture of Nestle. It provide abundant amount of funds to the different department of
organisation by which various functions of these department is accomplish in stipulated
time period. Marketing department : This department plays a significant role in order to perform
different types of research in effective manner. It take help of different promotional
strategies in order to advertise their products which helps to attract large number of
customer. Market research is performed by the marketing manger of Nestles perform
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these research in order to know the demand made by customer. Manager of Nestles also
gain feedback from different customer to get aware about their choices which they were
expected from the company.
 Production department: This department deals with manufacturing of different products
as per the demand made by the customer. It also make coordination with different
distribution department and marketing department to supply different products in the
marketplace (Crane and Matten, 2013).
Structure of organisation
The structure of Nestle company is divided into four parts which are describe below: Function based: This division is based on performance of different functions like
human resource department, marketing, production department, and finance department. Geography based: this division is based on the basis of various region of nations. It
helps to fulfil the demand made by the customer and also recognise number of demand
made by the customer of different region of nations (Gharajedaghi, 2011). Product based: It is related with segmentation of different product according to choice
of customer. Taking example of drinking water to the customer at large number. So the
organisation made separate department to provide water to its customer.
 Consumer based: this division is based on behavioural approach made by different
products. In order to fulfil the desire of customer, organisation manufacture new and
innovative products.
TASK 3
P4 Positive and negative influence of macro environment on business operations
Business transactions of Nestle are operated in around 195 countries. Business
surroundings of all the countries are different and influence operations of firm in both positive &
negative way (Gilboy , 2016). Various factors that are included in external environment of
business are economical, social, legal, political, environmental and technological. It is important
for management to consider all these factors. In Nestle, consideration of these factors assists
manager in formulating effective policies and strategies which assists in attaining objectives of
firm. Positive & negative impact of macro environmental factors are as follows:
Political factors
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Because of having operations of company in various countries, the influence of political
factors on functioning of business is high. Political factors includes tax policies, government
stability, excise duty, legislations etc. Due to such factors, many risks are raised which needs to
be manage by firm.
Positive impact: Consideration of political factors assists in preparing effective policies
& strategies that administer directions to managers for attainment of goals and also contributes in
improving sales.
Negative impact: Strict government regulations put adverse impact on business
operations. High tax rates also affects profitability of company (Kian Chong, Shafaghi and Leing
Tan, 2011).
Economical factors
Level of development is different in each country where firm provides its services. This
shows that every nation have distinct economy. Factors includes in it are inflation rate, cash
flow, deflation rate, income etc.
Positive impact: Economic condition of developed countries is good which assists in
development of business of firm & also enhance sales figure (Li, and et. al., 2011).
Negative impact: In many countries, individual's income is low and inflation rate is high
which directly influence the product demand of Nestle.
Social factors
These factors involve culture, values, beliefs, age, behaviour of customers etc. All these
directly influence operations of firm. Education of individual is also a factor that have positive as
well as negative impact on business.
Positive impact: If number of youths are more in country, then it put positive influence
on business. It assists in improving sales of products & expanding operation of business with the
assistance of online technology.
Negative impact: Lack of education put adverse impact on transactions of business.
Technological factors
The factors includes in it are change in technology, new machinery, techniques and
methods etc. It is important for the company to keep updated with new technologies in order to
gain competitive advantage in market. Adoption of new technology assists in enhancing
productivity as well as quality of product.
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Positive impact: Assists in improving quality of product which ultimately increase
productivity of firm.
Negative impact: Use of old or obsolete technology in business operations may increase
production cost and at the same time reduce efficiency of manpower (López-Gamero, Molina-
Azorín and Claver-Cortés, 2011).
Legal factors
These factors includes legislations, laws and regulations made by government of
country. Each country has different legal environment in which businesses are operate.
Positive impact: Fulfilment of all the regulations made by government assists in running
in smooth operations of business and ascertainment of society & government support.
Negative impact: If such regulations are not fulfilled by firms then it put negative impact
on business operations. For example, if employment laws are not adopted by the company, then
they are not satisfied and support the firm (Meiners, Ringleb and Edwards, 2014). This will
ultimately reduce the capacity of company.
Environmental factors
Keeping clean surroundings is the main duty of organisation. Firm needs to adopt waste
disposal system and follow all the regulations associated with this.
Positive impact: fulfilment of all the regulations related to environment assists in
enhancing brand image of company.
Negative impact: If organisations not keeping in view the environment then firm will
face society criticism which results in negative image of organisation in minds of public.
TASK 4
P5 Internal and external analysis for identifying strengths & weaknesses
Internal & external analysis assists the firm in determining those factors which put
negative impact on operations of business. It assists the management in identifying strengths,
weaknesses, opportunities and threats of firm (What SWOT Analysis is in simple words, 2016).
This will help in maintaining strong position of company in market. Nestle is one of the
multinational firm which deals in diversified products. In order to attain sustainability in market,
firm needs to conduct SWOT analysis which assists in exploitation of opportunities that are
available for the company in future. SWOT Analysis of Nestle is defined below:
Strengths
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Strong geographic presence: The company has strong geographic presence as it provides
their products in many countries or around 194 countries (Sekaran and Bougie, 2016). This
shows that the firm covers almost all areas of world. Business activities of company are operated
in 3 geographic segments, which are Asia, Europe and America. This assists firm in earning high
profits.
Research & development capability: It is a major strength of Nestle that it has good
research and development capabilities. The financial department of company assigned good
amount of budget for R&D department. This assists research team in conducting proper market
research and knowing the demands of customers.
Weaknesses
High criticism: High criticism is faced by company because of selling of contaminated
food products, over use of water and many other unethical practices. This will create negative
image of firm in minds of customers and reduce its sales & profitability (Tayur, Ganeshan and
Magazine, 2012).
Contaminated food recalls: Different variety of food products are provided by company.
Because of their product's low quality, their goods are recalled in large quantity. This highly
influence the profitability as well as image of firm. Maggie is the good example of it. Because of
quality check rejection, Nestle recall maggie from India. This will influence sales of company all
over the world and bear high loss.
Opportunities
Transparency in material sourcing: It is the duty of firm to administer proper
information about source of food material. It assists the company in gaining customer loyalty.
This also provides an opportunity to firm to maintain their position or sustain in market for long
term.
Clear labelling of harmful goods: Company has the opportunity to utilize clear labelling
of their products. It assists in gaining attention of large number of customers as they prefer to
purchase products with clear labelling. This will also supports the company in developing good
brand image & attaining trust of customers (Türetken and et. al., 2011, June).
Threats
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Increased competition: The company face large number of difficulties due to day by day
increasing competition. This will directly influence sales and profitability of firm. Competition in
food and beverage industry is high.
Poor quality of water: Nestle earn 25% of income from beverage sector. High amount of
water is used in production of drinks. The sales of company declines because of poor quality of
water. By bottled water, nearly 8% of revenues are generated by firm which declines because of
water scarcity.
P6 Interrelationship of strengths and weaknesses with external macro factors
In order to determine strength and weaknesses of organisation. The management of
Nestle implement various approaches in order to identify the weaknesses and took initiative
steps in order to resolve the causes of weaknesses (Vaiman, Sigurjonsson and Davidsson, 2011).
So it is necessary to determine all external factor because it creates opportunity to improve the
performance of company. There are various advantages which are collected by the company such
as enhance productivity, profitability, increase their rate of sales and many other factors.
Determination of different external factor which is identified by the management of Nestle are
describe below:
Political: This factor plays an important role in establishment of organisation. Management have
effective legal team in order to inculcate with different rules and regulation of company (Wack,
2017). The strength and weaknesses of this factor is mentioned below:
 Strength: Organisation able to accomplish different rules and regulation in proper
manner because company have effective legal team which provides an opportunity to it
in political environment.
 Weaknesses: as company provide services in 194 nations so it is very complex to
understand the various rules and regulation of different countries.
Economical: There are different economic condition in different nations. There are some
nations which attain positive impact on organisation and in some nation there is very bad
condition which leads to reduce the profit of company. Strength: In Asian countries the condition of the business is good so the strength of
organisation is to expand business in other area.
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 Weakness: Consideration of various economic factors is necessary for company.
Increase in inflation rate pose negative impact on demand of firm's goods and services.
Social: the main objective of the company is to provide better quality of products in order to
maintain the standard of society.
 Strength: The CSR activities helps to enhance the quality of products and also establish
strong brand image at marketplace.
 Weaknesses: The main weakness is due to production of low quality products, the rate
of sales is being reduce (Yu and Ramanathan, 2013).
Technological: It is very eminent factor in order to increase the productivity and enhance the
quality of products.
 Strength: implementation of new and innovative methods helps to satisfy the demand of
customer it help to produce different products in stipulated time period.
 Weaknesses: The main weaknesses of this factor is employee working in the
organisation do not able to accept the changes
In order to respond the changing business environment, it is very essential for company
to follow all the rules and regulations made by government so that business operations can be run
smoothly and efficiently. Firm also require to consider all the political and social variables so
that they enables to effectively satisfy needs and requirements of customers. Engagement of firm
in CSR activities helps in coping up with various environmental and social changes. This assists
in providing benefit to company in terms of improving its image in market and society.
CONCLUSION
As per the above report it has been assumed that organisation provide different products
and services to its customer in order to maintain the level of profit. Management needs to
determine the various factor such as political, economical, social, technological, legal and
environment it impact the various function of business. It is important for management to
consider all the internal as well as external factors of business environment. This assists them in
developing effective plans and policies so that objectives of firm can be attained.
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