Business Environment: Types of Organization, Organizational Structure, and Macro and Micro Environmental Factors

This report provides an in-depth analysis of the business environment, including the types of organizations, their organizational structures, and the impact of macro and micro environmental factors on business decision making. It covers topics such as the interrelationship of different functional areas, complexity of organizational structures, and the critical evaluation of political, economic, social, technological, and legal factors.

Business Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
PART 1- Essay.................................................................................................................................3
Different types of organization....................................................................................................3
Difference between different types of organization based on size and scope.............................4
Organizational structure and functions........................................................................................5
Complexity of organizational structures......................................................................................6
Interrelationship of different organizational functional areas......................................................7
PART 2 – REPORT.........................................................................................................................8
Critical evaluation of macro and micro environmental factors on business decision making.....8
Interrelation of strength and weaknesses with macro factors....................................................11
CONCLUSION..............................................................................................................................11
REFERENCES................................................................................................................................1

INTRODUCTION
Business environment is the collection of internal and external factors which includes
customers, suppliers, owners government, economic, political factors etc. For example, health
and safety which is and external factor that influence the internal environment. In this report
Tesco is taken as an organization. It is a British multinational retailer, headquartered in
England,UK. It provides diversified products such as books, clothing, electronics, home products
etc. This report covers the different types of organization and comparative analysis based on the
size and scope. The interrelationship of different functions in an organization and their link to
organizational structure. It also includes positive and negative impact of macro and micro
environmental analysis. Also, it includes interrelation of strength and weaknesses with the macro
environmental factors.
PART 1- Essay
Different types of organization
Organisations can be described as groups or structures set up with the purpose of
achieving certain goals or objectives (Hamilton and Webster, 2018). There are different types of
organization and a detailed analysis of the same is done below.
Basis of comparison Profit Organization Non- profit
organization
Non- governmental
organization
Meaning It refers to the
organization which has
been set up with the
core objective of
generating profits
(Clampitt and Dekoch,
2017). Such
organizations
generally operates in
the private sector.
These are the
organizations which
are established with
purpose other than
profit making (Worth,
2018).
These are the
organizations that are
operated
independently by the
government even
though they still
receive funding.
Objective The objective is to
generate profits.
Their primary
objective is to work
The purpose is to
achieve social or

for public benefit
(Zhu, Wang and Bart,
2016).
political goals.
Legal structure and
purpose
They are subject to
financial and legal
framework set by
relevant authorities.
For example: Tesco is
a private retail
company in UK and is
owned by the
shareholders who fund
the company. Its
purpose is to provide
high quality provides
to its customers with
the aim of increasing
profits.
These are the
voluntary association
and governed by the
NPO laws. For
example British heart
foundation which is an
NPO in UK, It is a
registered charity in
England. The purpose
is to reduce the fear of
heart and circulatory
disease.
These are formed
voluntarily and usually
have a document
setting out their
mission and objective
(Walker, 2019). For
example: The Aegis
Trust UK, which is an
independent group
formed to fight
genocide.
Difference between different types of organization based on size and scope
Basis of
comparison
Micro
Organization
Small
organization
Medium
Organization
Large
organization
Meaning Micro
organization
refers to a
business in which
number of
employees are
fewer than 10 and
either their
Small
organization are
those in which
number of
employees are
less than 50 and
either their
turnover is up to
Organizations in
which number of
employees are
less than 250 and
either their
turnover is up to
€50 million or
total balance
The large
enterprises in UK
needs to fulfil at
least one of the
two conditions,
that is, having at
least 5000
employees or

turnover is up to
€2 million or the
total of balance
sheet is up to €2
million.
€10 million or
total of balance
sheet is up to €10
million.
sheet figure is up
to €43 million.
having annual
turnover of more
than €1.5 billion
and a balance
sheet total of
more than €2
billion.
Market share There are 5.6
million micro
businesses in UK
in 2019.
It has 5.9 million
businesses in UK.
It has 5.9 million
business in UK.
Its market share is
96%.
Profit share The profit share
of micro and
small is 69.7%.
Profit share is
69.7%.
Its total profit
share in UK is
19.9%.
Its profit share is
10.4%.
Growth and
sustainability
It is growing at a
slow pace.
It is increasing at
a higher rate.
It is growing but
at moderate pace
It is growing at
faster pace and
profit.
Organizational structure and functions
There are different types of organizationals structure which are set up in specific way to
meet and achieve the goals and objectives of the organisations. Organization can increase their
sales and profits by matching their needs with the structure. There are three main organizational
structure which are discussed below.
Functional structure: It helps in grouping the different the organization based on the purpose
and to perform the job efficiently. For example, the key functions in Tesco is production,
marketing, sales, accounting, production and personnel. Such functions are used as the basis for
structuring the organization. This organizational structure works well for small businesses as
each department can rely on the knowledge and talent of the workers. The major drawback is
that coordination and communication among the department is restricted or limited by the
organisational boundaries of departments working separately. Another drawback is that people

with similar talent and skills may develop a narrow focus and difficulty in appreciating others
view.
Divisional structure: This type of structure is usually used in large organizations that operates
in wide geographic areas such as Tesco. The benefit of this structure is that it helps in meeting
with the needs more easily and rapidly because each division can operate separately or
independently (Ahmady, Mehrpour and Nikooravesh, 2016). However, the arrangement can
sometimes be cumbersome as employees in the different divisions are not working together. This
type of organizational structure is costly because of its size and scope. This structure can be used
by small business on a small scale. For example, assigning different sales team to different
geographic location.
Matrix structure: It is one of the widely used organizational structure which is a hybrid of both
divisional and functional structure. This type of structure is mostly used in large multinational
organizations. It allows taking benefit of both in one organization. The major advantage of this
structure is that it facilitates using highly specialized staff and resources are shared as needed. In
such situations highly specialized staff divide their time among different projects to achieve
goals. Also, maintaining functional departments helps in taking advantage of functional
expertise. The drawback that arises is because of the dual reporting structure. In this type of
structure, organization needs to take care and establish proper procedures for working on the
projects and also establishing proper communication channel in order to overcome potential
conflict that may arise and proper functioning of different organizational functions. Another
issue is that struggle between the power between functional and product manager may prevents
successful implementation of this structure.
Complexity of organizational structures
The complexity of various organizational structure are given below.
Transnational organizational structure: This strategy allows inheriting the benefit of both
global and multi domestic strategies. In this oversees components are is integrated into corporate
structure through different dimensions. It adapts to all environmental situations and helps in
achieving flexibility and helps in implementing two way communication.
Global organizational structure: It is adopted by organizations with limited product scope.
Head or CEO will look after the business functions identified as critical to business operations.
The disadvantage is that it focus on business functional activity and distracts organizations from

product requirements or customer needs. The top head or CEO acts as arbiter in the functions
and decisions are taking without taking into consideration the close benefit to customers and
understanding of local circumstances.
International organizational structure: It is defined as the formal structure where everything is
coordinated from roles and responsibility to control systems. In this, organizational structure is
of different types. As the foreign operation of business expands there arises the need to adopt the
international organizational structure. It becomes important to set up the line authority so that
work can be performed efficiently because of this reason companies faces more complex.
Interrelationship of different organizational functional areas
A detailed discussion about the interrelationship of different organizational functions and
their relationship with organizations objectives and missions is stated below.
Marketing and finance department: Marketing department carries out their plan based on the
budget given by finance department. Marketing department needs to work in coordination with
finance department as for finding out the cost involved in the marketing the product and its
benefits. Effective management of it will help in achieving the organizational objectives and
mission as a whole.
Finance and production department: In this, production department will start the
manufacturing of the product based on the costing provided by the finance department and
required changes are made if there is change in the price. Both the department works together to
handle the main pat of the business that is the production of the product which is the core
business of the organization.
Marketing and Human Resource: Both the departments needs to work in coordination. If
marketing department requires ton hire personnel with some pre-requisite professional skills then
the team informs the human resource department about the requirement (Winnubst, 2017). Both
the departments work together to draw job description and starts selecting the personnel. So, both
the departments are interrelated to each other and requires proper coordination.
Marketing and research and development department: The R&D team research about the
new and innovative product to be launched as directed by the marketing team. The marketing
department carries out complete market research to identify the needs and preferences of the
customers and the changing trends (Sayles, 2017). Based the information provided by marketing

team, R&D team starts the research and development process. Maintenance of proper
coordination is very essential for the organization.
Everyone in the organization needs to work together because every organization have the
same aims and objectives. So, all of these functions have to work together in coordination with
effective communication channel between them and like that they become a key activity. It is the
responsibility of the organization to maintain the cordial relationship between the various
organizational departments that helps in smooth flow of organisational functions.
PART 2 – REPORT
Critical evaluation of macro and micro environmental factors on business decision making
To understand the macro environmental factors that have a direct impact on the business
and can affect its business operation and decision making process, Pestle analysis is used. A
detailed analysis of the same is carried out below.
 Political factors: This factors refers to government intervention in the business. The
government policies can have both positive and negative impact on the business. The
implication of Brexit in UK will affect the Tesco as if UK is separated from European
Union then the cost of import of material or products may increase which will increase
the cost of production for the organization which will consequently affect the price of the
product. The positive impact will that it will create jobs in UK, as till now most of the
workers in Tesco are from European Union. This factor will affect the business strategy
for achieving the objective and the decision making process.
 Economic factors: It refers to the economic environment which includes economic
performance, change in interest rates etc. The rising fuel cost in UK will affect entire
retail industry (Rastogi and Trivedi, 2016). Also, the implementation of environmental
minded fuel tax will also increase the price of fuel. So, consequently, high price fuel will
make the transportation cost to rise more. The positive impact of this will be that Tesco
and other retail companies will look for implementing system eco friendly fuel system
and also drivers of the Tesco are using short routes to reduce the fuel consumption. The
negative impact will be if companies are not able to implement effective steps then they
have to face heavy taxes and consequently increase the prices of their products or reduce
their profit margin.

 Social factors: It refers to the change in the customer behaviour, trends, attitude,
personality or beliefs. In UK there is an increasing demand for increasing healthy eating
and unhealthy junk is no more in the fashion. Consumers are more health conscious and
prefers salad, snacks and shakes. This change will affect the entire retailer industry. The
positive impact will be companies like Tesco will have an opportunity to grab the market
before the competitors with unique and differentiated products. The negative impact will
be that Tesco will have to completely change its production and procurement strategy
which will affect it's further decision making process. Also, they need to provide
complete information to its consumer about the material used in the production of the
product.
 Technological factors: It refers to the technological innovations and advancement. The
implementation of analytics and increasing use of online shopping has put the pressure on
the organization to introduce the same in the organization. The positive impact of it will
be that companies like Tesco will be able to get customer insights, shopping preferences
and changing needs. Also, online shopping will help in customers to order the products
online instead for going to store. The negative impact will that organization will be
required to hire a professional who is expert in using such analytical tools. Also,
technology implementation may be costly.
 Legal factors: It includes the legal laws such employee rights, customer protection etc.
The introduction of new sugar tax law in UK which aims to reduce the sugar content in
the drinks by 20% by the end of the year 2020. Also, rule has been introduced for
banning advertisement of products with high fat, salt and sugar content for children under
the age of 16. Both these factors will affect the production of supermarket own brands
and also the promotion and marketing strategies of the organization (Policy, 2016). The
positive impact will be that it will encourage or give opportunity to the Tesco to create a
new range of products for children and comply with the law. The negative impact will be
that organization will have to change and formulate new marketing strategy which will be
time consuming process.
 Environmental factors: The increasing pressure from consumers and government to
take initiative for the betterment of the society has forced organization to work more on
their corporate social responsibility. Tesco is committed to reducing the carbon footprint

which is created due to its business operation. The current change in climate in UK has
gained momentum in UK and brands has to make sure that they are taking relevant steps.
The positive impact will that it will enhance the brand image in public and increase
customer loyalty. Negative impact is that Tesco might need to change its production
process or replace the existing equipments with the new to reduce carbon emission.
All these factors influences the business objectives, strategies and decision making
process. So, it is essential for the organization to regularly analyse these factors and take
corrective steps and formulate strategies that can be helpful in dealing with the changes coming
up.
To know the impact of micro environmental factors on business, Swot analysis is used. A
detailed description is given below.
Tesco Sainsbury
Strengths  It is one of the big giants in
UK, with a global presence.
 Has more than 3400 stores in
UK.
 It is also the biggest retailer
in UK with worldwide
presence.
 It has more than 1400
stores in UK.
 Takeover of Agros has
increased its product
portfolio.
Weaknesses  Increasing debt and low cost
products affecting its
profitability (Gürel and Tat,
2017).
 Poor performance of some of
its stores.
 Lack of technology.
 Prices are higher as
compared to its
competitors.
 There has been decline in
profits.
Opportunities  To enter into Joint venture in
the region where Tesco is not
performing well.
 Has the opportunity to
further grow in UK.
 To acquire small

 Adoption of technology. businesses to increase the
market share (Yu,
Ramanathan and Nath,
2017).
Threats  Impact of Brexit.
 Tough competition in the
market.
 Increasing competition.
 Negative impact of Brexit.
From the above SWOT analysis, it is very clear that all these factors will affect the
decision making of the organization. Both the organization is required to take decision taking
into consideration their benefits and drawbacks.
Interrelation of strength and weaknesses with macro factors
 The strength of having diverse portfolio is interrelated to the social factors. Tesco
because of its diverse product range will help in catering to the needs of the customers. It
will help in meeting the different needs of the customers of every age group.
 The weakness of increasing debt and financial loss is interrelated to both political and
economic factors. In respect to political factors, Brexit may cause increase in price of
imported goods which will consequently lead to increase in price of the product or
reduction in profit margin of Tesco. In respect to economic factor, the increasing price of
fuel and implementation of fuel tax has also increased the price of the products. In order
to save cost, Tesco can reduce or cut the jobs or pay less.
 The lack of technology weakness is interrelated to technological factors. Tesco is lacking
behind implementation of specific technology in its organization which is its biggest
weakness as it is deprived of its benefits that can be added to its organization.
CONCLUSION
From the above it can be summarized that business environment plays a key role
organizations success. The impact of these factors are different for different types of organization
based on their objective. There are different types of organization like profit making, non-profit
making, non-government organization with varied objectives. The organizational structure that is
used by the organization also influence the functioning of the organization. Tesco is currently
using hierarchical structure to manage its business. Also, Pestle analysis is done to know the

different factors that may impact the retail industry as a whole and its influence on the operation
and decision making of Tesco. The interrelation between functional areas of organisation is
carried and their relevance in the business. At last, the relation of macro environmental factors
with the strength and weaknesses of the organization and its influence on the business objectives
and decision making process.

REFERENCES
Books and journals
Ahmady, G. A., Mehrpour, M. and Nikooravesh, A., 2016. Organizational structure. Procedia-
Social and Behavioral Sciences. 230. pp.455-462.
Clampitt, P. G. and Dekoch, R. J., 2017. For‐Profit Organizations. The International
Encyclopedia of Organizational Communication. pp.1-6.
Gürel, E. and Tat, M., 2017. SWOT analysis: a theoretical review. Journal of International
Social Research. 10(51).
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Policy, P., 2016. What is pestle analysis.
Rastogi, N. I. T. A. N. K. and Trivedi, M. K., 2016. PESTLE technique–a tool to identify
external risks in construction projects. International Research Journal of Engineering
and Technology (IRJET). 3(1). pp.384-388.
Sayles, L. R., 2017. Managing large systems: organizations for the future. Routledge.
Walker, R., 2019. Non-UK residents will be subject to UK tax on all gains on direct and certain
indirect disposals of UK property. Property Journal, pp.16-16.
Winnubst, J., 2017. Organizational structure, social support, and burnout. In Professional
burnout (pp. 151-162). Routledge.
Worth, M. J., 2018. Nonprofit management: Principles and practice. Sage Publications.
Yu, W., Ramanathan, R. and Nath, P., 2017. Environmental pressures and performance: An
analysis of the roles of environmental innovation strategy and marketing
capability. Technological Forecasting and Social Change. 117. pp.160-169.
Zhu, H., Wang, P. and Bart, C., 2016. Board processes, board strategic involvement, and
organizational performance in for-profit and non-profit organizations. Journal of
Business Ethics. 136(2). pp.311-328.
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