Impact of Macro Environmental Factors on Decision Making Process of Organisation

Businesses and business environment INTRODUCTION 1 Different types, size and scope of organisation 2 Interrelationship of different functions within company and their relations to organisational structure 3 PESTLE analysis to identify the various macro environmental factors and impact on organisation 5 SWOT analysis of Toyota7 Impact of micro and macro factors on decisionmakingprocessof organisation 8 CONCLUSION 9 REFERENCES 10 INTRODUCTION An organisation is the place and all the activities where goods and services that are exchanged for one to another in order to earn money.

Businesses and business
environment

Table of Contents
INTRODUCTION...........................................................................................................................1
Different types, size and scope of organisation......................................................................2
Interrelationship of different functions within company and their relations to organisational
structure..................................................................................................................................3
PESTLE analysis to identify the various macro environmental factors and impact on
organisation............................................................................................................................5
SWOT analysis of Toyota......................................................................................................7
Impact of micro and macro factors on decision making process of organisation..................8
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
An organisation is the place and all the activities where goods and services that are
exchanged for one to another in order to earn money. Business environment includes the external
and internal factors that impact on an operating situation of company. Internal factors include all
those conditions, entities and all the factors within the organisation which influence its activities
(Barik, B. and Kumar, S., 2018). Toyota is a multinational auto manufacturer, public company.
There are about 369,124 employees work in that company. Its products are auto mobile, luxury
vehicles, commercial vehicles and engines. This study shows the types of organisations and the
interrelationship between of the various fictions within the organisation. The functions like
financial functions, research and development functions how they impact on different
organisational structure like financial structure, matrix structure and divisional structure. It also
shows the positive and negative impact of macro environment on business operations. This
report shows SWOT analysis of Toyota by which the company remains strong in the global
automotive market.
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Illustration 1: Toyota
(Source: Toyota:Car manufacturer, 2016)

Different types, size and scope of organisation
An organisation is the association of the person who work for achieving certain
objectives. Organisation refers a structure that is made up the of group of people that have the
same purpose and work for it.
There are mainly three types of organisation such as Sole proprietor, partnership and
corporation. According to size they are classified as small businesses, medium size business and
large size business organisation.
Sole proprietorship- Sole trader is a type of organisation which is a small business
having one owner. They produce one type of product and has unlimited liability for any claim.
These business serve a community but they are restricted and prohibited to local boundaries
because of their size. The purpose of sole traders is to survive and being in the competition by
earning money. For example: Hair dresses, plumber etc.
Partnership- It is also a type of organisation that is larger than sole proprietorship. All
partners posses similar unlimited liabilities as a sole proprietor. Because of different owners, it
can produce many types of goods and services but it is also prohibited to set a location because
of its size. An example the of partnership firm is John Lewis partnership, UK company.
Corporation- It is the third type of organisation. This type of organisation is much larger
than sole proprietor and partnership. Because of the ability of transfer and stock ownership it can
possess unlimited owners. These type of owner do not have liability regards any claims against
the business.
According to size and scope there are three types of organisation which are small,
medium and large.
Small size businesses- A business that is owned and run by a few numbers of people or
which are privately owned companies, sole proprietorship and partnership. There are generally
fewer than 100 employees work. Employees more than ½ all private sector employees work.
Medium size businesses- A business with 100-999 employees are called medium size
organisation. This type of businesses are well established and track record in that help them in
financing decisions by investors.
Private sector- Private sector businesses are those whose control and maintenance are
not in the hands of government. In other words those businesses which is run and owned by
private owners. Sole trader which is covered into the private sector. Partnership is also covered
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into the private sector. For example- John Lewis Partnership which is an employee-owned UK
company. Partnership is owned, controlled and financed by the partners. Between 2-20 people
can be included in the partnership.
The Public sector- An organisation which is controlled by the government. They provide
services to everyone and do not make profit out of it. These sectors are funded by the
government that is provided by the taxes and fees which all citizens pay. The main aim of public
sector is to offer quality services and products to the people. For example Toyota motor
corporation, a multinational automotive manufacture company (Bull, J.W. And et.al., 2016).
Voluntary sector organisation- An organisation which is controlled by an individual
and companies and which are not part of the government. They are made up of two groups
charities and non- profit organisation. They do not exist to make profit. The main aim of these
type of organisation is to promote a particular viewpoint such as National trust. For instance,
Oxfam, independent charitable organisation which headquarter is in England (Hamilton and
Webster, 2018).
Background details of the organisation
Toyota is a Japanese multinational automotive manufacturer which headquarter is in
Japan. It was the world's 1st auto mobile manufacturer which produces more than 10 million
vehicles per year. The founder of this company is Kiichiro Toyoda. The mission of this company
is to attract more customers and then retain them with higher value services and products. The
vision of Toyota is to become the most successful and respected car company in America. As a
global firm in the automotive industry, it deals with several stakeholders with various
stakeholders with disparate interests and demands. There are some significant groups of Toyota's
stakeholders which are separated and arranged on the basis of significance in affecting the
company such as employees, customers, investors, environment and community. Toyota's
organisational structure is based on the varied business operation of the company around the
world. It defines the pattern and arrangement in the firm's resources and processes.
Interrelationship of different functions within company and their relations to organisational
structure
The structure of the company determines the modes in which it operates and performs.
There are many types of functions which every organisation follows for achieving an
organisational goals like financial functions, HR functions, marketing and sales functions,
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administrative functions and research and development function. Structure of different types of
organisations are as follows:
Private: Privately hold companies often consists of complex organisational structure. For
example, LEGO who is a privately hold company and this company follow flat organisational
structure. It is beneficial for the manager of this company as it helps them in making effective
and accurate decisions.
Public: Public sectors companies are wholly owned by the government. Organisational
structure is all depends on the size and scope of the company. For example, Bank of England is a
publicly held company that follows functional organisational structure. It is beneficial for them
to follow this type of structure because company can manage their employees and all the
processes of functional units in an effective manner.
Voluntary: This type of organisations and non-governmental organisations and charities
use hierarchical organisational structures. For example, OXFAM charity follow geographical
and hierarchical structure because this team work around the world. It has to follow various
functions and for that it has various departments like customer services, HR, finance etc. All the
members of functional units work according to this structure and manager can easily manage all
the processes effectively.
Finance function- Financial functions include all the transaction regarding money
received and paid out by the Toyota. All these informations help company in producing several
financial statement for tax purpose and legal requirements. All these informations help Toyota
manager to plan and review business strategy.
Human resource function- The main functions of human resource is to recruitment,
selection, training and development of employees. Human resource requires complying with
legal factors like legislation of the country in which they are situated. For instance, Employers of
Toyota require maintaining right and correct personal records in the specific and effective
manner which can be compliant with UK data protection (Hamilton, L. and Webster, P., 2018).
Marketing and sales functions- Marketing functions of Toyota research customers
needs to develop strategy & goods which can satisfy their needs. The marketing department
collects all the data regarding customers needs while producing products. The Strategy of the
sales department of company involve travelling sales representative, telephone sales etc.
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The Administrative function- It involves all tasks related to administrative which
include handling of mails, dealing with problems etc. It holds the organisation together. This
department is important because without it, customer's complaints can not be solved, their orders
may not be processed.
Research functions- The main objective this function is improving existing products,
create innovative and new effective products and improve production method. This enable
Toyota to reduce costs and increase profitability.
Global growth opportunities
Toyota is an auto mobile manufacturer company who operates worldwide. In context of
global operations and opportunities, it is one of the biggest player in this industry. It directs
compete with other biggest companies like Ford, Tesla etc. It is more focusing and has invested
in global business through joint ventures. It has been stated that this company has more than
360,000 workers as of March 31, 2018 worldwide.
Advantages and disadvantages of interrelationships between organisational functions
Organisations have a challenge in making a good relationship between the finance
function and marketing function. The finance department is concerned with money and costs and
there are many decisions which marketing manager takes which is related to finance. Services
and goods of the company are sold in the market with higher innovation approaches. In order to
meet all the needs of the customers, financial department requires finance and money. (Hillary,
R. ed., 2017). The financial manager allocate adequate money and finance to the marketing
department. Advantage of this relationship is there is a clarity between manager and they keep
profitable customers and therefore relate its functions directly to cash flow. The disadvantage of
this relationship is that they are dependent to each other, Hence separately they can not do their
work.
Impact the structure of the organisation
There are many organisational structure which every firm follows that are: Divisional
structure, matrix structure and functional structure.
The functional structure separates departments. The main advantage of this structure is
that it provides flexibility and allow them to concentrate on their determined mission by
separating all the departments. The disadvantage of this structure is customers bound to change
their process and strategies according to other department changes.
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Matrix structure provides flexibility in organisational functions. In this type of structure
each and every worker work according to the function based department but they are required to
assign a project under various type of managers like top manager with workers who have
assigned different function. Disadvantage of this function is that the chain of command in this
become cloudy and conflicted (Ibrahim, R. and Primiana, I., 2015).
Toyota has divisional organisation structure in which it spreads function across different
branches. Individual business units do not interact with other units and department and all
communication have to go through the headquarters. The main characteristic of this structure is it
have product based divisions such as: Lexus international, Toyota no 1 for operations in North
America, Europe and Japan, Toyota no 2 operations in all other regions and unit centre. Which is
responsible for transmission, engine and other related operations. This feature.
Complexities in global organisation structure
Companies and Toyota has to face various problems due to global and transnational
organisational structure. Due to this structure they have to face difficulties related power distance
as there are various stakeholders at different locations. The main problem which the company
has to face is coordination and ineffective communication as it has several business functional
units at world wide and at different locations, so it faces problems in operating effectively.
TASK 2
PESTLE analysis to identify the various macro environmental factors and impact on organisation
There are several macro factors that impact company and global automotive industry.
PESTLE analysis shows the Toyota motor corporation's opportunities and threats.
Political factor- This model shows governmental impacts laws and regulations on firms.
There are some political factors which affect company such as: political stability in developed
markets and the support of government for pollution free products. They all are opportunities for
Toyota to develop with minimum political tension. The support from government regarding eco
friendly products is an opportunity for company in improving and focus on products in order to
satisfy environmental expectation (Kemp, E.A. and et.al., 2019). On example of political factor
is it operates in Thailand and it has lost faith in Thailand and their political situation creates
various problems as unfavourable conditions can create riots that is not good for the company.
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Economic factor- There are some current trends related economy which influence
Toyota's organisational development. Some economic factors that affect company are: gradual
growth of US economy and rapid growth of developing countries. Company has opportunity to
grow its business in the U.S. That is the firm's second biggest market. Rapid growth provides the
opportunity to firm to improve revenues based on these markets. Changes in the oil prices, raw
materials impacts on Toyota as it can decrease its sales. Increment in the prices of oil, customers
shift themselves towards the newly built electronic cars, so it can also impact on its activities and
decision-making process.
Social factors- There are some social external factors that effects Toyota that are
increasing interest in hybrid cars and widening wealth gap. Company can take opportunity from
this as it can provide those effective products that can satisfy customers demands. It also affects
in negative way. For example the changes in employees demands can affect the production as it
find themselves to supply of demanded products. It has been stated that most of the people are
now feeling unsafe in order to buy a new Toyota vehicle as it did not make good quality car.
Pessengers also reported that their auto mobiles were going out of control.
Technological factors- There are some technological factors that effect Toyota which
are as follows: Mobile technology trend and cybercrime. Firm has opportunity to increase it
facilities like mobile apps in order to improve customers loyalty and engagement. On the other
hand, cybercrime including corporate cyber espionage is a threat for the company. New
technologies affects the process method of business as they feel need to give training to their
employees and it increases the cost.
Environmental factor- In company's case there are some macro factors such as: Climate
change and increasing emphasis on business sustainability. Company can take better opportunity
by providing environmentally products like electric cars that possess better fuel efficiency. It can
also imp[rove its performance sustainability by improving its business procedures efficiency.
Legal factor- There are some legal system which impact Toyota's business. It involves
the laws and regulation that affect business like increasingly complex consumer laws and
environmental laws. Company has the opportunity to provide higher quality products that satisfy
employees requirement based on the environmental laws. By offering safer and more satisfactory
products helps them to fulfil consumers laws so it is also the opportunity to company (Khan,
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E.A. and Quaddus, M., 2015). Because of new laws and regulation, company can not focus on
their work properly.
This analysis of Toyota's macro environment mostly create opportunities for the
company. For example organisation can focus on product development to accomplish
opportunities in the market. It should also focus on threats based on the external factors like the
rising frequency of the cyber crime.
SWOT analysis of Toyota
SWOT analysis shows opportunities and organisational weakness that Toyota need to
address using its strengths. This provides insights about possible influences on the company's
business.
Strength- Strength indicated the capability of Toyota that it has made its position as one
of the leading auto manufacturer in the world. There are some strength of Toyota which make it
able to success in the world they are: Strong image of brand, global supply chain and rapid
innovation capabilities (Kolk, A., 2016). Company has very strong brand in global automotive
industry which is the big strength of firm. It also has an organisational culture that helps it in
rapid innovation. All these strengths make them able to take corrective decisions making. It has
strong image and due to this strength it can predict the rate of its demand and supply level so it
can easily make decisions accordingly. It also provides wide range of products that can also help
them in increasing its sales and profitability.
Weakness- This refers several factors which are barrier in growth of business that are:
hierarchical organisational structure and secrecy in organisational structure. Company has
undertaken many vehicles recall in the last few years which has hurt its financial performance.
The recall process consumes The company;s culture of secrecy is a weakness. It lacks in making
presence in emerging markets that can impacts on its decision making process as it has to face
problems due to competition level. Its competitors take advantage of this and they strongly make
presence in emerging markets.
Opportunity- Opportunities of Toyota is mainly based on technological and economic
trends. There are some external strategic factors that company can use in improving its business.
It has opportunity for Toyota as it presents higher fuel efficiency which is increasing in demands
and by this it can concentrate on its innovation of products. There is an opportunity to grow and
expand into markets through acquire new vehicle companies which add market share and market
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intelligence. It is focusing on satisfying environmental needs so it is a great opportunity for the
company to grow and develop its green vehicles as most of the people also showing interest in
buying hybrid and green vehicles. It can make them able to being in the competition and a
market leader.
Threats- Threats to Toyota is based on the competitive landscape. It faces threat related
to competition which has low cost auto mobiles from Chinese and Indian manufacturers that are
increasing their presence in foreign markets. It has also the threat of rapid innovation of
competitors like Honda and ford. Rising in raw material costs and changes in oil prices are the
big threat for the company. It lack in the market and it can also decrease its sales and
profitability. Competition is also increasing and government is also putting pressure to use
environmentally vehicles so it is a threat for it.
This analysis shows some issues like the effects of competition and the company's
weakness based on its organisational structure and culture.
Interrelationship of strength and weakness with the external macro factors-
There are some major factors that impact organisation and its performance that are
interrelated with the strength and weaknesses of Toyota that are some technological change,
legal factors and political factors. Strength and weakness gives managers option to match
internal strength and external opportunities (Phadermrod, B., Crowder, R.M. and Wills, G.B.,
2019). The strength of Toyota is its provide effective and satisfactory products and the legal
factor of firm is increasingly consumer law are interconnected because it can use its strength for
fulfilling the legal factors. The other interrelation of Toyota's opportunity is that it can increase
revenues by penetrating into markets which can help firm to overcome its threats.
Comparison of strength and weakness of Toyota's with ford's strength and weakness
Toyota Ford
The weakness of Toyota is it has hierarchical
organisational structure.
The weakness of Toyota is it has limited global
scope of production network.
It has opportunity of increasing demands for
higher fuel efficiency of its products.
It has the opportunity of cost reduction through
strategic supply management.
It has the threat of rapid innovation of
competitors like Honda and ford.
The threat of Ford company is the fluctuation
in oil prices.
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The Strength of Toyota is it make itself able in
making its position as one of the top auto
manufacturer in the world
It has the strength as it has strong financial
position.
Impact of micro and macro factors on decision making process of organisation
It is important for company to keep all the micro and macro factors in the mind while
taking the decision. There are some micro and macro factors that affects Toyota's decision-
making process they are: suppliers, customers, strength and weakness of company, legal factors,
economic factors, technological environment etc. The strength of Toyota is it focus on
innovation and research and development that affects decision making process of quality
management decision by using the strength it can maximize quality. It is the opportunity of rising
raw material prices also affect the decision related to cost for example company take the decision
related to raw material cost and assume some price but the sudden change in price of raw
material like rising in raw material price which is a threat for company, directly affect the overall
cost of organisation (Tsangas, M. and et.al., 2019).
There are some external factors which also affect the decision-making process of Toyota
that are legal factors, economic factors, environmental factors etc. The society environment plays
a good part on the type of cars. The social factor is a change in consumer needs in the society. It
effects on business as changes in the demands and supply impact on the decision-making
process. Economic factors influence on an organisation's development and growth and affects on
the consumers demand. For example consumer now choose cars with smaller efficient engines
based on the benefits of fuel consumption which affect the prices of auto mobiles which may
increased due to inflation.
CONCLUSION
From the above study it has been concluded that different types of organisation with
different size and scope serves people and employees with their products and services. The
company's strength and weakness affects its decision-making process. The external macro factors
like political factors, legal factors, economic factors also affected and interrelated with the
strength and weaknesses of the company. This report showed about some functions' importance
like research and development function, marketing function and their advantages and
disadvantages of interrelationship between the functions. The organisational structure of the
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company effected the organisation in achieving team goal by dividing all the departments
according to products and function which made help to the company in taking decision. There
are some legal factors like employment law and environmental law also affect decision making
process in positive way. Employment law is to offer effective and satisfactory product and
Toyota is known for its good quality product so it can fulfil the legal requirements of employees,
Hence it affects decision making process by increasing productivity and profits.
REFERENCES
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Barik, B. and Kumar, S., 2018. Macro Environment of Indian Life Insurance Business: A
PESTLE Analysis. Bimaquest. 18(3).
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analysis of the ecosystem services framework. Ecosystem services. 17. pp.99-111.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Hillary, R. ed., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
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Ibrahim, R. and Primiana, I., 2015. Influence Business Environment on the Organization
Performance. International journal of scientific & technology research. 4(4). pp.283-
293.
Kemp, E.A. and et.al., 2019. Enhancing the Service Environment: The Effect of Music and
Mood in Service-Based Business.
Khan, E.A. and Quaddus, M., 2015. Examining the influence of business environment on socio-
economic performance of informal microenterprises: content analysis and partial least
square approach. International Journal of Sociology and Social Policy. 35(3/4). pp.273-
288.
Kolk, A., 2016. The social responsibility of international business: From ethics and the
environment to CSR and sustainable development. Journal of World Business. 51(1),
pp.23-34.
Phadermrod, B., Crowder, R.M. and Wills, G.B., 2019. Importance-performance analysis based
SWOT analysis. International Journal of Information Management. 44. pp.194-203.
Tsangas, M. and et.al., 2019. The Application of Analytical Hierarchy Process in Combination
with PESTEL-SWOT Analysis to Assess the Hydrocarbons Sector in
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ONLINE
Toyota:Car manufacturer, 2016. [Online]. Available through:<https://www.toyota-europe.com/>
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