Impact of Macro Environment on Business Operations

This report analyzes the positive and negative impact of macro environment on business operations. It discusses the influence of political, economic, social, technological, environmental, and legal factors on business. The report focuses on Santander Bank and its operations in the UK.

Business and business
Environment
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Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1. Explaining about different types of organisation, their advantage and disadvantage and
comparing them...........................................................................................................................3
TASK 2............................................................................................................................................5
2. Two types of organisational structure and interrelationship between organisational functions
and show their relation with organisational objectives................................................................5
TASK 3............................................................................................................................................8
3. Analyse both positive and negative influence/impact of Macro environment on business
operations.....................................................................................................................................8
TASK 4..........................................................................................................................................11
SWOT Analysis of organization and its interrelationship with external macro factors............11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
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INTRODUCTION
Business environment plays an important role in assessing that whether an organization will
be able to derive adequate amount of profits from its activities or not. The report makes
comprehensive discussion regarding different types of organisation, their advantage and
disadvantage and establishing comparison among them. The report will also prepare an
assessment of types of organisational structure and interrelationship between organisational
functions so that its impact can be ascertained. It, the, focuses on, performing Pestle and SWOT
Analysis so as to assess the performance of the business and its impact on business functions. In
the end, its interrelationship with external macro factors will also be ascertained in the report.
TASK 1
1. Explaining about different types of organisation, their advantage and disadvantage and
comparing them.
To establish a business entity, there are different options available like sole trader,
partnership, private, public and voluntary. This depends upon the size, circumstances, objectives
and scope.
Sole Trader
This form of business is operated by only one person. It is one of the simplest forms of
business. The requirements are minimal and easy to set-up as it is the least costly. The owner of
business can choose either its own name or can use “d/b/a” which means doing business as. But
major drawback of sole trader i.e. owner faces unlimited liability. In case of repayment of debts
owner's personal assets are been used. Even though sole proprietorship is among top choices for
small business as they are economical and cheaper start-up. Sole trader is less subjected to
government involvement and taxation like other forms of businesses (Aithal, 2016). But under
the law owner and business are treated as same and there is no distinction between them. The
scope of business is small and objective of sole trader is to earn profit for their family members.
Partnership
The formation of this form of business takes place when two or more individuals form a
written agreement. It can be established in between one forms of business with another form.
Partners divide their profits of share and their liabilities into agreed ratio in between them. It is of
two types; in general partnership liabilities of partners are unlimited while in limited partnerships
creditors cannot claim the personal assets of partners. In UK, partners are not considered as an
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independent legal entity and payment of tax is done similar as that of limited partnership. The
merit of partnership firm is that there is limited external regulations. It increases the borrowing
capacity of firm and thus, more capital is available. Further, it is easy to establish as start-up cost
is low. But, demerit of partnership firm is that there is a risk of disagreements and conflicts may
arise in between them (Babatunde and Adebisi, 2012). If partners join or leave the firm, assets of
organisation is revalued which is costly. Lastly, each partner is an agent of other. Thus, he/she is
liable for actions by others.
Private
It refers to that form of company which held privately by small business entities. The
liability of members is being restricted to the amount of shares held by them. The members of
private limited companies are not allowed to publicly trade their shares. The formation of
company starts with its registration till it get professional certificate of incorporation. The merit
of forming a privately ow ned company is that they have less legal formalities in comparison to
public companies (Beske and Seuring, 2014). They are not subjected to compulsion of disclosing
their information to other parties. Less number of shareholders provide advantage of quick
decision and fewer complications within organisation. Moreover, they are being benefited in
treatment of tax. The demerit of forming of private companies are; It cannot be operated by any
sole entrepreneur. The procedure of winding up of company is complicated, costly and time
consuming (Brewster, 2017).
Public
It is the legal name used within the UK and some Commonwealth cities for Limited Liability
Company. These PLC's can be owned by various entities like individuals, trust, other LLC's and
corporations. These are in hybrid forms of business which means that it has characteristics of
both corporations and partnerships. The owner of these companies enjoyed limited liability and
taxation is done according to partnership firms. To ensure partnership form of taxation, it is
required to provide legal documents. The formation of PLC's start with two or more people
forming a company and its filing the Articles of Association. The stock of limited companies can
be acquired by anyone through an initial public opening or through trades or stock (Cascio,
2018). The scope of PLC's is big and it include all those companies who are listed on London
Stock Exchange (LSE). Example; the British Oil Company i.e. known as BP PLC's. The major
advantage of forming a PLC's is the ability to raise required amount of capital through public
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shares. The risk is divided among the shareholders and thus, there are greater chances of
expansion and growth. Being listed on LSE can attract investors like mutual funds, and other
financial institutions. The demerit of forming PLC's would result in risk of takeovers and higher
financial contribution at initial stage. The corporations are required to hold annual general
meetings every year. Further, it is been subjected to more regulations and have risk of high
amount of transparency.
Voluntary
It refers to organisation whose motive is to serve and enrich the society with their
products/services. There is little or no government intervention. The voluntary business consists
of members that are neither inherited nor prescribed. They have autonomy from state and are
self-governance through board of unpaid trustees. The advantage of forming a voluntary business
are; It is being rewarded with intrinsic values as the work performed by non-profits organisation
are done to enrich society and make it a better place (Christopher, Payne and Ballantyne, 2013).
These corporations have greater amount of employee commitment as they are more attached to
their works. Though it has certain demerits like, these corporations suffer from problem of
limited funding which forces them to discontinue their work. Further, they suffer from issues
like, social pressure and government involvement that hampers their work.
TASK 2
2. Two types of organisational structure and interrelationship between organisational functions
and show their relation with organisational objectives.
The list of business clients for Santander Bank are numerous as it provides wide range of
services to many people across UK. The two most trusted clients of Santander Bank are,
Elgood's brewery and Tyrrell's potato chips.
The Elgood's Brewery was established in year 1878 in Cambridgeshire. The company
expands it business with the help from Santander bank. The organisational structure followed
within company is; Board of Directors: They are elected with vote of all brewery members. The team consist of
5-9 people and it is composed of brewers and owners of Elgood's. The duty of BOD is to
perform duty f organising vents and take necessary decision which is been required within
organisation. Further, BOD elect presidents and vice-presidents for their company (Goetsch
and Davis, 2014).
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 Executive Director: The next in hierarchy is the executive director he is responsible for day
to day operations. It helps Elgood's to achieved it set objectives within prescribed limit or
assigned budget of company. Further, director is accountable to BOD and it held meetings to
discuss issues of companies. Finance manager: It helps in formulation of budget for company. Ensure proper tracking,
monitoring and accountability of funds for the organisation. This team is lead by board
treasures. They provide reviews regarding different sources of finance. Further, ensures
adequate control of financial assets of company (Grunig and Grunig, 2013). Legislative: This team in company monitor and assures healthy brewing of Elgood's within
industry. It helps in developing a consensus within organisation. It assists company in legal
and government affairs. Marketing: It is responsible for overseas development of Elgood's. It formulates and
implement marketing plan that includes, potential needs of present and new markets. It
assists on how to meet those needs/demands/preferences of their customers. The Elgood's has
effective marketing team which helps organisation to expand and flourish.
 Technical manager: The team of Elgood's technical department assures proper placing of
pipelines and assist in safely handling of technical issues regarding to companies.
The Tyrrell's potato crisps were established in year 2001 and after being succeed in this
business the owner of company shifted to making of potato distillery. It created Chase, vodka
and it was being awarded as the Best Vodka of the world. Organisation structure followed by
company is; Functional organisation Structure; Board of Directors: The BOD of company consists of owner and the elected members by the
shareholders of Tyrrell's. The team is responsible to take necessary decision regarding
company. They elect managers for different functional department within company. Finance: This department within Tyrrell's is responsible in accumulating necessary funds
required for operations within company. They are accountable to BOD in finance related
matters. Further, they formulate budget for other functional departments (Ho, 2014). Human Resource: The HR. professionals in company are accountable in hiring, maintaining,
transferring employees of organisation. They are responsible for providing training required
by employees. The HR. professionals of Tyrrell's effectively handle the grievance of their
labourers which help company to achieve desired objectives.
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 Marketing: The marketing team of Tyrrell's forms plan and policies for the promotion of
products of companies. It formulates strategies for organisation to expand it business.
Tyrrell's has innovative marketing team that assist companies with new ideas and resources. Research and Development: Company has R&D team that promotes various research
projects. It provides opportunity to company to enter into new ventures. The shift of Tyrrell's
from chip manufacturing unit to distillery was supported by their R&D team (Iyamu and
Mphahlele, 2014).
 Operation Manager: It is responsible for managing of raw materials required in for
producing various forms of alcohol. The manager ensures possible and smooth functioning of
production of company and provide efficient services to meet the demands of customers of
Tyrrell's.
Business organisation consist of number of departments and functions. These
departments are interdependent and perform various functions together to achieve desired
objectives. Production department: The responsibility of production function is to perform planning and
scheduling of raw materials. They are responsible for maintenance of plant and equipment.
They decide the best production method to achieve the target. It is important to have
collaboration of production department with other functional heads. For instance; the R&D,
is concern about implications of product design and production method. Marketing
department shows desired product quality, functionality and durability. Finance, help in
purchasing new product equipment, etc. Research and Development: The activities of R&D should be closely linked to other
organisation as they help in ensuring that organisation is providing according to their
customer’s needs (Khan, Alam and Alam, 2015). Marketing Function: It is important to have proper relationship with marketing department
as it helps in developing strategies for business. It helps to promote products of companies to
widespread customers. Human Resource: The HR. professionals are responsible for recruitment, selection and
hiring of competent workforce. Organisation is dependent on their employees. Thus, it is
important to carefully recruit and select staff for business. Efficient employees plays a key
role in achieving goals of company and help in meeting quality standards.
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 Accounting and Finance: They are concerned with activities like, preparation of budget and
meeting financial needs of company. It provides necessary amount of finance to different
departments. It plays an essential role in achieving the goals of company.
These functional units/ departments are linked to different organisational structure. Functional Structure: Different functions are divided into separate departments that report
to department heads who are accountable to higher level authorities. It provides clear lines of
authority. Divisional: The division for each product line has it own functional groups like, R&D,
Marketing, Accounting, etc. Each division of company has personal to carry out these
functions.
 Matrix: In this structure each employee work in function-based departments. But these
employees can be assigned to projects under different departments and teamed them with
employees who have different functions (Pesonen and Horn, 2014).
TASK 3
3. Analyse both positive and negative influence/impact of Macro environment on business
operations.
To analyse the impact of positive and negative factor on Macro environment on
Santander Bank operations is as follows;
Political
It refers to factor that determines the extent to which government policies can change or
influence certain kind of industry or economy as whole. This includes; tax, fiscal policies or
trade tariffs. The policies issued by Government can change the entire profit earning system of
company. UK is a constitutional monarchy which runs under the parliament. The political system
is fair, stable and provides plenty of opportunities to banking industries within the country. For
instance, the positive impact of political factors on Santander Bank are;
 Strong democratic traditions.
 Split into national and local administration (Plugge and Bouwman, 2013).
 Proactive Government.
The negative impact of UK government policies;
 The impact of Brexit on banking sector.
 Rise of SNP in Scotland.
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Economical
It refers to the impact of economy performance on the industries within country. Economic
factors include; inflation rate, economic growth patterns and foreign exchange rates. The
economic position of UK is strong on relation to other countries. It has diverse economy with
high GDP rate. These factors help banking Industry to flourish and expand their business. The
positive effects of these factors on Santander bank are;
 The inflation rate is 0% which help company to flourish.
 Stable economy of United Kingdom help in maintains of strong position of bank in parts of
UK and Europe.
 Diverse economy that includes, both large corporations and small business units.
The negative influence of economic factors on Santander Bank;
 The slow recovery of loans due to economic recession.
 Slow growth of economy after Brexit.
Social
These includes determinants like, cultural trends, demographic and population of country.
These factors influence social environment of market. The impact of social trends of UK on the
Santander bank is as follows;
 Dense population of UK supports wide services of Santander Bank.
 High standard of living help in expanding business (Rossi, Vrontis and Thrassou, 2012).
The negative influence of social factors is;
 High and increasing dependency ratio of big corporation is destroying the image of bank.
 Decrease in trust of UK population on banking industry.
 Social unrest in the economy due to migrants. This further hamper functioning of bank.
Technological
It refers to factors pertain to innovation in technology. These considerations affect the
particular industry favourably or unfavourably. It includes, automation and number of
technological knowledges and awareness market possess. The advancement in Technology has
positive impact on the UK banking sector. This help in expansion and growth of services
provided by banks. For instance; the positive influence of technology on Santander bank is;
 Quality innovation in skills help bank to provide better services to their clients.
 Effective laws like GDPR ensures protection of data and information of bank.
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 The expertise in field of science and IT help bank to develop better quality services to their
clients.
The negative influence;
 There is a slower growth in the field of technology in compare to other countries.
 This disrupts bank from providing efficient services to their clients.
Legal factors
Legal factors help in analysing any type of changes, with respect to law, taking place in
the environment, that can have stronger impact on stability of organization. Any changes in legal
structure of the country not only bring changes in trading procedure of the organization, but also
affect policies and procedure of the business as well. The positive influence can be stated in the
following manner:
 Any leniency in legal structure can help in elevated generation of revenues of the company.
 It can make the organization free from provisions that are not required by the organization
for its practices (Wetherly, 2014).
Negative influence of legal factors can be stated in the following manner:
 Rigidity in practicing laws can make it difficult for the organization to survive in the
industry.
 Changes in government policies can also reduce overall profits of the business impacting
survival and basic principle of going concern.
Environmental factors
Sustainability and environmental friendliness are the two main factors that has become
quite an important factor in functions of the bank. There are various concerns that are analysed
by the bank, word wide, such as, energy management, analysis of energy consumed, etc. It has
also been able to take step that can help in initiating paperless transactions in the business, with
the aim to conserve paper. So as to control environmental footprints, the organization have also
taken steps to initiate and installed solar ATMs at various location so as to conserve energy.
Banks also involve in purchasing yearly environmental reports in order to highlight this critical
achievement being made by the management. There are various benefits of environmental
factors. Some of them are mentioned below:
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 It has helped in promoting paperless society where everything has now been initiand online
or through mobile application. It has assisted in making transactions easier (Iyamu and
Mphahlele, 2014).
 It has helped in reducing overall carbon footprints from the world so that it can act as a
contribution in Corporate Social Responsibility (CSR).
However, there are certain negative impacts that are attached to it as well. Some of them are
mentioned below:
 It can affect normal functionality of the organization, where it is required for the bank to
bring certain changes in its adoptions and functions.
 It can also affect profitability aspect of the organization due to changes being brought
concerning to environment.
TASK 4
SWOT Analysis of organization and its interrelationship with external macro factors
Every organization, whether belonging to public, private or voluntary sector, have its own
strengths, weaknesses, threats and opportunities present with it. There are various common
strength and weakness that can be faced by these organization. Hence, SWOT analysis for the
same can be presented in the following manner:
Strengths
 Organization may be able to have created a brand value that can help in attracting large
number of customers towards it.
 Organization may gain global recognition, where it may be able to have various functional
stores in various countries increasing its overall existence.
 Entities generally opt for various appeals and different types of cultural formats that can help
in attracting maximum number of customers towards it, which may have belongingness to
different cultures.
 Organization generally opt for using upgraded as well as modern technology which helps in
serving customer in better manner and also enhance overall service aspects of the individual
as well (Rossi, Vrontis and Thrassou, 2012).
Weakness
 When an organization is present globally, all the stores may not perform effectively. In this
scenario, there are higher chances that some of them may be in vulnerable condition.
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 High degree of competition available in the market can affect overall outcome of the
company, if it has not opted for effective set of practices.
 Any changes in the economical environment of the country can have greater impact on
personal disposable income of the consumers. It can thereby lead to impact overall sales
aspects of the business thereby reducing revenue aspects to the maximum.
Opportunities
 The organization is open to choose strategic alliances, in the form of joint venture, mergers
and acq1quisition, which can help in drawing out maximum output out of it. It can also be
helpful in promoting brand image of organization resulting in increased customers and
revenues as well.
 There is adequate amount of opportunities in private label market where company can
indulge in preparing its own brand.
 Opting for online business is another effective option that is available in front of
organization, which can help in expanding scope of the business.
Threats
 Economic recession and credit crunch can be two different aspects that can have greater
impact on overall profitability aspects of the business. Hence, it becomes important for the
entities to have prior policies and risk mitigation activities with respect to it (Christopher,
Payne and Ballantyne, 2013).
 Having high amount of competition and threats of new entrants can affect functioning of the
business. It can lead to decrease in profitability and revenue aspects of the business.
 Cut throat competition generally forces companies to cut down their prices so as to survive in
market for longer period. It can also reduce number of purchases made by the client as well.
There is a strong relationship inter departmental aspects and macro environmental functions
of the business. It can have both positive as well as negative impact on business functions. In this
scenario, it is important for the entity to ensure that it is ultimately able to maximize overall
profitability aspects of the business. Constant change in business environment can help in brining
positive alteration to the sector and can then help in allowing growth in maximum possible
extent. Focussing on this aspect, lenient laws and regulation with strong emphasis on effective
pricing policies of the organization can help in generating the maximum with ongoing aspects of
market.
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There are high chances of having negative image in the market which can also lead to take
wrong decisions aspects for the business. It can also affect various functions of the management
as well. Ineffective brand image of the organization can attract less customers towards it which
also impact strategic aspects of the business. Any changes in pricing policies from the side of
government, changes in fuel prices, etc, can also have greater impact on various business aspects.
It can challenge profitability of the business (Goetsch and Davis, 2014). Hence, it can be stated
in the end that, preparing strategies for the organization must ensure that all the external factors,
that have ability to challenge decision making, must be taken into consideration by the
management while framing any decisional aspects for the business.
CONCLUSION
It can be concluded from the above report that, while making any type of strategic decisions,
it is important for the organization to analyse the factors that are available in macro or external
environment. The report outlined, various types of business ventures, such as, sole trader,
partnership, company, voluntary etc. Every type of organization has its own scope and
objectives, which helps in decision overall aim and strategic decision-making aspects of the
business. Further, it is also important to conduct appropriate PESTEL analysis that can help in
analysing the condition of the external environment, which can thereby help in initiating
effective decision-making aspects of the business. SWOT analysis must also be performed as it
helps in assessing, strengths, weaknesses, opportunities as well as threats of the business so as to
indulge in effective decision-making aspects of the business. In the end, it can be stated that,
there are various factors that can affect standing ability of the business, which is required to be
considered by the management while making decisions.
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