Introduction to Business: Types of Business, Internal Factors, Porter’s Five Forces Model, and Pestle Analysis

This report provides an introduction to business and covers different types of business such as sole-trading, partnership, and private limited company along with their advantages and disadvantages. It also explains internal factors that impact start-up business performance and functionality as well as Porter’s Five Forces model in the context of Revolut company. Additionally, Pestle analysis is mentioned that helps business to understand external factors that affect organisational performance in positive and negative manner.

Introduction to
business

Contents
INTRODUCTION...........................................................................................................................3
Types of business:............................................................................................................................3
Internal factors that may affect the start-up:................................................................................4
Porter’s five forces model............................................................................................................5
Pestle analysis:.............................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Business is defined as the organisation or entity that is engaged in commercial, industrial or
professional activities. Business engages in the activities of generating money through producing
or buying and selling products. Owner of business is liable for debts that are incurred by the
business. In this report chosen start-up organisation is Revolut which is British financial
technology company that offers banking services. Company founded in the year of 2015 by
Nikolay Storonsky and Vlad Yatsenko and headquarter of company situated in London, UK.
Company provides current accounts, stock trading, foreign exchange, insurance and currency
exchange services. This report covers different types of business such as sole-trading, partnership
and private limited company along with their advantages and disadvantages. Internal factors that
impact start-up business performance and functionality as a sporter’s five forces model in the
context of Revolut company are explained. Along with that pestle analysis is mentioned that
helps business to understand external factors that affect organisational performance in positive
and negative manner.
TASK
Types of business:
Sole-trading: Sole-trading is also termed as the sole-proprietorship that is a simple business
structure in which one individual own as well as run entire business. Sole-trader keep all profits
and liable for all losses that incur in business (Aleksandrova, Aleksandrov and Vasiliev, 2018).
There is low cost is required to start-up sole-tradership and the process of starting up business is
easy on the other hand; owner is liable for all organisational debts and it is very hard to separate
business finance from organisational finance that are disadvantage of this type of business.
Partnership: Partnership is defined a formal agreement between two or more parties to
manage as well operate business and share its profit in determined ratio. Advantages of starting
business in partnership is that it is easy to establish, risk is shard among partners and easier
dissolution. Unlimited liability, uncertainty and difficulty in decision making are its
disadvantages.
Company: Company is defined as the legal entity that is formed by the group of individuals to
operate business enterprise for the purpose of generating profits. Advantages of private limited
company are as there is less personal financial risk and protected by personal liability. Whereas,

it requires high investment to start-up business and there is less privacy because every one can
see organisational financial accounts and reports (Sort, and Nielsen, 2018).
Revolut is private limited financial technology company that provide banking services to
other organisations.
Internal factors that may affect the start-up:
There are various external and internal factors exist in business environment that may
impact business performance and operations in positive as well as negative manner. Internal
factors are defined as the factors that exist in business and controlled by organisation.
organisation change these factors according to decisions. some internal factors are mentioned
below:
Human resource: As Human resource is related to the people who work in organisation.
performance level of business is getting affected by the quality of employees. In start-up
organisation like Revolut organisation two types of employees are worked such as managers and
employees. Managers are the human resource that impacts overall performance and efficiency of
business. As managers take organisational decisions that directly impacts on business
productivity, profits and employee’s motivation. Managers are responsible for developing policy,
hiring and firing employees, setting budget as well as conducting appraisals. All these activities
impact business efficiency and effectiveness (Blachetta and Kleinaltenkamp, 2019). Employees
are another human resource of business that impacts start-up through their productivity, ability to
perform job, training, ability to satisfy customers. Each of these areas impacts business
performance in positive and negative manner. Bed performance of employees affect business
reputation and sustainability.
Finance: Finance is the internal resource that is important for business to survive and
grow successfully. Customers needs and demands are changing so, business requires sufficient
amount of finance to meet these changes in efficient manner. Without having proper finance,
start-up held back and struggle to survive. Revolut organisation needs finance for upgrading
software, hiring new staff, expanding business existing premises, buying machinery and
equipment’s as well as opening new branch.
Current technology: Technologies are important for business to start operation and run
them in efficient manner. Revolut organisation requires specialist software, high quality
hardware, control of social media and various application (Delen, Moscato and Toma, 2018).

Technology improves organisational efficiency and profitability. Start-up business uses social
media platform for promote brand in market and attract customers. For maintaining
organisational efficiency, it is important to update this software on regular bases that improves
business operations. If business do not update these software and hardware that competitors of
business affect Revolut organisation performance through investing in technology.
Porter’s five forces model
Porter’s five forces is defined as the tool that concentrates on determining the profitability of
product and service and balance the power in specific market place. It involves some forces that
shape industry. Forces of porter’s five forces model are mentioned below:
Competitive rivalry: Competitors are defined as the organisations that provides similar products
and services to customers at competitive prices. Banking industry is considered as highly
competitive industry. Revolut organization faces high competition from existing organizations
that provides financial services that impacts business performance, market share as well as
profitability in negative manner (Hänninen, Smedlund and Mitronen, 2018). Respective
organization offer lower financing, investment services and provide greater convenience to
customers better than rivals to gain competitive advantages.
Bargaining power of supplier: Suppliers are defined as the person who provides material to
organisation and poses power to impact business profitability. suppliers power depends on
number of suppliers, switching cost and quality of material. Capital is the primary resource of
bank and there are four major suppliers such as customer deposits, mortgage-backed securities,
mortgages and loans and financial institutions. Power of suppliers fluctuate between high
medium to high for Revolut organization because organization has limited suppliers and
switching cost is also low in market.
Bargaining power of buyer power: Buyers are defined as the person who purchase products and
service from organisation. An individual do not pose much threat in banking industry but the
major factor that impact on buyer power is high switching cost. If buyers have higher power than
it impacts organisational profitability ration negatively (Senyo, Liu and Effah, 2018). Revolut
organization has smaller and powerful customers that enhance their ability seek discounts and
offers. To reduce bargaining power of customers, respective organization bring innovation and
effectiveness in organizational services.

Threat of substitutes: Threat of substitute product is defined as when new product and service
meet similar needs in different manner that it impacts organisational profitability in negative
manner (Huntington, Gordon and Plamping, 2018). Revolut organization faces high competition
because in current environment, various baking organizations provide similar services to
customers that reduce organizational customer base and profitability ratio.
Threat of new entry: Legislations are the most effective barriers to entry that are imposed
by the government on specific industry. Government take decisions that whether or not a new
bank can be opened. New entrants bring innovation in industry that put pressure on existing
organisation. Revolut organization handles this threat through adopting lower pricing strategy,
providing new value proposition and reducing organizational cost.
Pestle analysis:
Pestle analysis is defined as the strategic framework that helps business to identify the
external business factors that are existed outside business boundaries and impacts business
operations. It is important for business to consider these factors in the process of taking business
decisions that lead business towards growth and development. Factors of pestle analysis in the
context of Revolut organisation mentioned below:
Political factors: Banking sector is impacts or influenced by the political interference.
Political instability due to Brexit has significant impact on performance and functionality of
Revolut organisation. It creates various problems for business such as investors do not want to
commit with companies that negatively impact the credit constraints as well as capital
accumulation (Levine, Peng and Xie, 2020). Changes in political parties also the factors that
impact start-up business operations because with the change of government and political parties’
new rules and regulations could be implemented that creates uncertainty in business.
Economic factors: There are various economic factors that impact start-up business like
Revolut organisation operations and efficiency. Economic losses from fraud are very high in
banking sector. Economic conditions of UK drastically impacted by the Brexit that impacts on
banking sector negatively. Joblessness is rapidly increased by the no-deal Brexit that enhances
unemployment and inflation rates of UK. Revolut organisation identifies the economic factors of
country that develop strategies accordingly which help business deal with these consequences.
Social factors: Customer’s expectations are fuelling increased towards digital banking
system in UK that create grate opportunity for Revolut organisation. Customers has used mobile

applications to access their financial services. people are choosing online banking instead of
traditional in-store banking so, demand of online banking has grown sustainably (Milani, 2019).
Respective start-up understands customers need, preference and concentrate on reassuring
customers regarding convenience and security strategies that are implemented for protecting
them from any kind of fraud.
Technological factors: There are various technological advancements and innovations
are taken place in banking sector that impacts its performance and efficiency in positive manner
but privacy and security are the major concerns that create key barriers towards adopting
technology in banking sector. TSB online banking services locking their customers accounts that
impacts on customers mind set towards using digital banking services. Revolut need to reassure
customers regarding their privacy policy and strategies to avoid these issues with effectiveness.
85% people of UK do not prefer to robots during banking process.
Legal factors: Legal factors are related to the laws and regulations that are developed by
the government. These rules and regulations are changes due to Brexit and other conditions
impacts banking sector performance and functionality. New regulations are imposed on Revolut
that could causes high legal issues that the organisation would need to overcome. High growth
start-up in digital banking sector is under scrutiny following allegations of issue like fraudulent
accounting and toxic management culture (Rezaee, 2019). Revolut comply all laws and
regulations strictly to run business operations in smooth manner.
Environmental factors: Environment crisis put pressure on business as well as individual
to reduce their carbon footprints and enhance investment on renewable sources of energy.
Banking sector already has given an option to its customers to go paperless for their statement
and transactions. Revolut reduce use of paper through providing digital banking services it also
led business towards less carbon emissions. Through considering the aspect of environmental
factor, business sustain in competitive environment for longer period of time.
CONCLUSION
From the above report, it can be concluded that business is the legal entity that is involves in
various commercial, industrial and other activities for the purpose of generating profits. Business
environment consists internal as well as external factors that impacts business operations and
performance in positive and negative manner. Business uses pestle analysis to identify these

factors and their impact on business operations. Start-up business considers these factors in
strategies and planning that help business to deals with them in efficient manner and run
operations in right direction. Start-up business understand industry performance and conditions
through conducting porter’s five forces. It is recommended to business conduct proper research
to analyse external factors proper and consider them in business strategies and planning to run
operations in efficient manner. It is also suggested to Revolut to understand needs, expectations
and preferences of customer than provide them financial services accordingly. Organisation is
advised to adopt latest technology and update them on regular bases that resolve issues
efficiently and develop trust and sense of security in customers as well as retail them with
organisation for longer period of time.

REFERENCES
Books and Journals
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continuity management system. In 2018 IEEE International Conference" Quality
Management, Transport and Information Security, Information
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intelligence and advanced analytics on the behaviour of business decision makers.
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CRC Press.
Levine, R., Lin, C., Peng, Q. and Xie, W., 2020. Communication within banking organizations
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Milani, F., 2019. Digital business analysis. Springer International Publishing.
Rezaee, Z., 2019. Business sustainability, corporate governance, and organizational ethics. John
Wiley & Sons.
Senyo, P.K., Liu, K. and Effah, J., 2018, July. Understanding behaviour patterns of multi-agents
in digital business ecosystems: an organisational semiotics inspired framework.
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Springer, Cham.
Sort, J.C. and Nielsen, C., 2018. Using the business model canvas to improve investment
processes. Journal of Research in Marketing and Entrepreneurship.