The Role of Business Environment in Performance

The present report provides an overview of the importance of business environment in current and future performance. It explains different types of businesses such as sole proprietorship, partnership, private company, and non-profit organization, highlighting the impact of micro and macro business environments on these entities. The report also discusses the influence of economic factors on firms, enabling them to meet short-term and long-term targets.

Business Environment

Table of Contents
Introduction........................................................................................................................ 3
Task 1................................................................................................................................ 3
P1 The type of business, purpose and ownership of two contrasting businesses...........3
P2 The different stakeholders who influence the purpose of two contrasting businesses
...................................................................................................................................... 4
Task 2 ............................................................................................................................... 5
P3 Describe how two businesses are organised.............................................................5
P4 Style of organisation helps them to fulfil their purposes...........................................5
Task 3................................................................................................................................ 6
P5 The influence of two contrasting economic environments on business activities.....6
Task 4................................................................................................................................ 7
P6 External factors are impacting upon the business activities of organization ............7
Conclusion ......................................................................................................................... 8
References ........................................................................................................................ 9

Introduction
Business environment means all of the internal and external factors that affect how
the company functions including employees, customers, management, supply and demand
and business regulations. All business enterprises, functions within an environment, called as
the business environment. An individual business firm survives and grows within the
periphery of its environment. A firm is only a part of a big environment, and so there are only
a few factors which are under the control of the firm (Christopher and Holweg, 2011). The
present report based on Tesco PLC which is one of the largest retail corporation in the United
Kingdom. The present report will discuss about the different types of business structure such
as sole proprietorship, company, public and private and also include non-profit unit and its
size, scope.
Task 1
P1 The type of business, purpose and ownership of two contrasting businesses
A business entity is an organization that uses economic resources or inputs to provide goods
or services to customers in exchange for money or other goods and services.
Sole Proprietorship: A Sole Proprietorship is one individual or married couple in business
alone. Sole proprietorships are the most common form of business structure. This type of
business is simple to form and operate, and may enjoy greater flexibility of management,
fewer legal controls, and fewer taxes (Zott,Amit and Massa, 2011). However, the business
owner is personally liable for all debts incurred by the business.
General Partnership: A General Partnership is composed of 2 or more persons (usually not
a married couple) who agree to contribute money, labour, or skill to a business. Each partner
shares the profits, losses, and management of the business, and each partner is personally and
equally liable for debts of the partnership. Formal terms of the partnership are usually
contained in a written partnership agreement.
Limited Partnership: A Limited Partnership is composed of one or more general partners
and one or more limited partners. The general partners manage the business and share fully in
its profits and losses. Limited partners share in the profits of the business, but their losses are
limited to the extent of their investment. Limited partners are usually not involved in the day-
to-day operations of the business (Othman and Rahman, 2014).
Corporation: A Corporation is a more complex business structure. A corporation has certain
rights, privileges, and liabilities beyond those of an individual. Doing business as a

corporation may yield tax or financial benefits, but these can be offset by other
considerations, such as increased licensing fees or decreased personal control. Corporations
may be formed for profit or non-profit purposes.
P2 The different stakeholders who influence the purpose of two contrasting businesses
Stakeholders are different groups of people that have an interest in the operations of a
business. Shareholders are a prominent stakeholder group for a publicly-owned company.
However, customers, communities, employees and business partners are stakeholder groups
that have taken on more significance in the early 21st century business environment in which
social responsibility is more expected of businesses.
Shareholders: Traditionally, shareholders have been given the most attention of any
stakeholder group by public companies. Shareholders are investors that own shares of
ownership in the company. Maximizing profits for shareholders has been the singular focus
of corporate governance from a historical standpoint (Rossi, Vrontis and Thrassou, 2012). If
shareholders do not make money from dividend payments or increasing share prices, the
stock loses value.
Customers and Community: The early 21st century business environment has led to more
emphasis on building long-term relationships with core customers. Companies more often
view this as the driver of business viability and long-term profitability. Ethical responsibility
to customers and giving back to communities through community involvement and charitable
donations are more common. Straightforward, honest communication and transparent
accounting are among common expectations of customers and communities.
Employees: A changing viewpoint of employees is a primary consideration of the prominent
corporate social responsibility (CSR) business ideology. According to the Sow Foundation,
CSR-adherent companies treat employees as their most valued assets. They provide fair
working conditions and a non-discriminatory work environment. Additionally, employee
involvement has become increasingly prominent, and many employees want a voice in
important business decisions.
Business Partners: Many businesses rely strongly on partners that help them provide the
best value for their customers. Retailers have become increasingly reliant on strong supplier
relationships to provide the best quality products at the optimal price points for their
customers (Lee, Olson and Trimi, 2012). Supply chain partners often collaborate on
transportation and logistics, distribution processes and environmental preservation.

Companies not only have business accountability to partners, but often have ethical
responsibilities toward them.
Task 2
P3 Describe how two businesses are organised
Organizations are set up in specific ways to accomplish different goals, and the structure of
an organization can help or hinder its progress toward accomplishing these goals.
Organizations large and small can achieve higher sales and other profit by properly matching
their needs with the structure they use to operate. There are three main types of organizational
structure: functional, divisional and matrix structure.
Functional structure: Functional structure is set up so that each portion of the organization is
grouped according to its purpose. In this type of organization, for example, there may be a
marketing department, a sales department and a production department (Al-Swidi and Al-
Hosam, 2012). The functional structure works very well for small businesses in which each
department can rely on the talent and knowledge of its workers and support itself. However,
one of the drawbacks to a functional structure is that the coordination and communication
between departments can be restricted by the organizational boundaries of having the various
departments working separately.
Divisional structure: Divisional structure typically is used in larger companies that operate in
a wide geographic area or that have separate smaller organizations within the umbrella group
to cover different types of products or market areas. For example, the now-defunct Tecumseh
Products Company was organized divisionally--with a small engine division, a compressor
division, a parts division and divisions for each geographic area to handle specific needs. The
benefit of this structure is that needs can be met more rapidly and more specifically; however,
communication is inhibited because employees in different divisions are not working
together. Divisional structure is costly because of its size and scope. Small businesses can use
a divisional structure on a smaller scale, having different offices in different parts of the city,
for example, or assigning different sales teams to handle different geographic areas.
P4 Style of organisation helps them to fulfil their purposes
Profit organization: A divisional structure provides some distinct advantages for large
organizations. Each division can specialize and focus its efforts on its particular product,
service or market and not be distracted by competing interests (López-Gamero, Molina-
Azorín and Claver-Cortés, 2011). For example, if you manufacture automobiles, you may
create a car division, a truck division, a minivan division and a SUV division. Alternatively,

you may decide to create different divisions for different geographic markets, such as North
America, Europe and Asia.
Non-profit organization: A functional structure is one of the most common organizational
structures. Under this structure, the organization groups employees according to a specialized
or similar set of roles or tasks. While functional structures operate well in stable
environments where business strategies are less inclined to changes or dynamism, the level of
bureaucracy makes it difficult for organizations to respond to changes in the market quickly.
When companies use a functional organizational structure, people with similar knowledge
and skills are grouped together (López-Gamero, Molina-Azorín, and Claver-Cortés, 2011).
This makes it possible for employees to become specialists in their field. It requires a
performance management system that allows for the promotion, development and visibility of
individual skills within their functional area. The specialization that functional structures
hone helps to bring about in-depth knowledge and skill development among the employees,
and this can help you achieve your company's functional goals. specialization leads to
operational efficiencies and enhances productivity levels. Because of their expertise, workers
with specialized skills can perform tasks quickly, efficiently and with more confidence, thus
reducing the occurrence of work-related mistakes. In addition, the clear nature of the career
path within the functional unit makes it possible for employees to be highly motivated to
advance their careers as they move up within the hierarchy.
Task 3
P5 The influence of two contrasting economic environments on business activities
While small businesses may not generate as much money as large corporations, they are a
critical component of and major contributor to the strength of local economies.
Economic Growth: Small businesses contribute to local economies by bringing growth and
innovation to the community in which the business is established. Small businesses also help
stimulate economic growth by providing employment opportunities to people who may not
be employable by larger corporations. Small businesses tend to attract talent who invent new
products or implement new solutions for existing ideas (Ratten, 2014). Larger businesses also
often benefit from small businesses within the same local community, as many large
corporations depend on small businesses for the completion of various business functions
through outsourcing.
State of the Economy: Now another perplexing question is asked by the vice president, chief
financial officer (CFO). The economy is good at the moment, but leading economic

indicators forecast a downturn in the fourth-quarter of the year - the quarter that includes the
Christmas season during which a large percentage of a firm's annual sales occur. (For more,
see our tutorial on. When the economy starts to slide during the Christmas season, would
Firm A be better off selling shirts at a lower price than the competition, maintaining a profit
that would be lower than the previous year, and attempt to restructure its debt at more
favourable terms (Hall, 2011). Although the economy in general is subsumed
by macroeconomics, its impact on the micro economy must often be taken into account in the
decision-making process.
Task 4
P6 External factors are impacting upon the business activities of organization
A PESTEL analysis is a framework or tool used by marketers to analyse and monitor the
macro-environmental (external marketing environment) factors that have an impact on an
organisation (Zott Amit and Massa, 2011).
Political: Every project has both internal politics and external politics. The internal politics
like team jealousies, cohesive projects, and personal interests occur in all projects and must
be considered and managed by stakeholders. The external politics refer to those which the
stakeholders do not control. These events include all political events like employment laws,
tax policies, trade restrictions, trade reforms, environmental regulations, political stability,
tariffs, etc.
Legal factors: Health and safety, equal opportunities, advertising standards, consumer rights
and laws, product labelling and product safety. It is clear that companies need to know what
is and what is not legal in order to trade successfully (Christopher and Holweg, 2011). If an
organisation trades globally this becomes a very tricky area to get right as each country has
its own set of rules and regulations.
Social factor: Also known as socio-cultural factors, are the areas that involve the shared
belief and attitudes of the population. These factors include – population growth, age
distribution, health consciousness, career attitudes and so on. These factors are of particular
interest as they have a direct effect on how marketers understand customers and what drives
them.

Conclusion
The present report has been mentioned about the role of business environment and its
role in current and future performance. The report explained about different types of business
and its stakeholder such as sole proprietorship, partnership, private company and non profit
organisation. There are various business environment such as micro and macro which having
large impact on business and its current and future business performance. Further, report also
discussed about influence of economic factor on firm, so that company to meet its short and
long term targets.

References
Books and Journals
Christopher, M. and Holweg, M., 2011. “Supply Chain 2.0”: managing supply chains in the
era of turbulence. International Journal of Physical Distribution & Logistics
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Zott, C., Amit, R. and Massa, L., 2011. The business model: recent developments and future
research. Journal of management. 37(4). pp.1019-1042.
Othman, Z. and Rahman, R.A., 2014. Attributes of ethical leadership in leading good
governance. International Journal of Business and Society. 15(2). p.359.
Rossi, M., Vrontis, D. and Thrassou, A., 2012. Wine business in a changing competitive
environment–strategic and financial choices of Campania wine firms. International
Journal of Business and Globalisation. 8(1). pp.112-130.
Lee, S.M., Olson, D.L. and Trimi, S., 2012. Co-innovation: convergenomics, collaboration,
and co-creation for organizational values. Management Decision. 50(5). pp.817-831.
Al-Swidi, A.K. and Al-Hosam, A., 2012. The effect of entrepreneurial orientation on the
organizational performance: A study on the Islamic banks in Yemen using the
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López-Gamero, M.D., Molina-Azorín, J.F. and Claver-Cortés, E., 2011. Environmental
uncertainty and environmental management perception: A multiple case
study. Journal of Business Research. 64(4). pp.427-435.
López-Gamero, M.D., Molina-Azorín, J.F. and Claver-Cortés, E., 2011. Environmental
uncertainty and environmental management perception: A multiple case
study. Journal of Business Research. 64(4). pp.427-435.
Ratten, V., 2014. Future research directions for collective entrepreneurship in developing
countries: a small and medium-sized enterprise perspective. International Journal of
Entrepreneurship and Small Business. 22(2). pp.266-274.
Hall, T.J., 2011. The triple bottom line: what is it and how does it work?. Indiana business
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