Impact of Business Environment on Firms

This assignment delves into the crucial role of the business environment in shaping firm success. It examines both macro-environmental factors (economic conditions, political landscape, social trends) and micro-environmental aspects (competition, customer behavior, technological advancements). The goal is to analyze how these elements collectively impact a firm's ability to operate effectively and achieve its objectives.

BUSINESS
AND
BUSINESS ENVIRONMENT

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Types and purpose of organisation...................................................................................3
P2. Size and scope of different range of firms.......................................................................4
M1 Structure, size and scope linked with different business objectives................................5
TASK 2............................................................................................................................................5
P3. Relationship between different organisational functions.................................................5
M2 Advantages and Disadvantages of interrelationship........................................................7
TASK 3............................................................................................................................................7
P4. Positive and negative effect of macro environment on business.....................................7
M3 PESTLE analysis of Marks and Spenser.........................................................................9
TASK4...........................................................................................................................................10
P5 Internal and external analysis of Marks and Spenser......................................................10
M4 SWOT analysis of Marks and Spenser..........................................................................12
P6 Interrelation of strength and weakness with external factors..........................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14
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INTRODUCTION
Business is considered as the association of the people who have gathered with common
motive. Various activities are conducted so as to gain profit from it. On the other hand
environment is considered as the atmosphere that is surrounding the business of the firm.
Business environment is of two kinds namely internal and external. Both these type of
environment is driven by various factors (Drucker, 2017). There is impact on the business
environment is severe. It is important for the firm to manage these factors so that they can
easily carry out their activities and their sustainable growth can be ensured. Marks and
Spenser is one of the biggest retailers of world which is a British multinational firm. It was
established in the year 1884. It is a type of public limited company. This report highlights
the ways in which various factors are affecting the business of the organisation. It also
illustrates various types of organisation their purpose of establishment and the size and
scope they have in their future. It provides the picture of the relationship that is present
between different organisational units.
TASK 1
P1. Types and purpose of organisation.
There are many kinds of business entities that are present inside the UK. It is categorised
basically on the purpose for which they have been set for. In Britain there are mainly three
type of organisation namely Public, private and voluntary. All these companies have
different set of purposes.
Public sector companies are those which are operating their business so as to make profit
and distributing it with the general public. These companies are monitored by the
government and somehow have their influence in firm’s governance. It has many people that
are responsible for making its decisions and hence the process becomes slower (Klapper,
Lewin and Delgado, 2011). There decisions are always made by checking that whether these
decisions will have positive or negative impact on the common people. There legal structure
in Britain suggests that two or more people must be present so as to open this type of
company. NHS is one such company that is operational in UK.
There are some of the organisations that are set up for making most of the profit from
their operations. This profit is shared with only few people mainly owners. Only few people
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are responsible for making decisions and hence making the process faster. It is important for
these organisations to make decisions at much faster rate they are in the larger danger
towards any changing factors of environments. It legal structure suggests that there are very
less number of people that are present at the top of the management. There are various kinds
of private companies like sole traders, partnerships, franchise etc. Franchise is one of the
most common type of private organisation in Britain. Marks and Spenser is one such kind of
company that is operational in UK.
Apart from these two there is third kind of company that is known as voluntary
organisations. They have been set up with the purpose of serving any community, language,
animal etc. Generally there are no specific people who are owners of these firms but some
group of people are responsible for making decisions. They are funded by external people
and still they do not become their stakeholders (Commander and Svejnar, 2011). These are
not set up for making any kind of profit from their operations. Their legal structure differs
from country to country. They get many kinds of tax exemptions with respect to other two
types of company.
P2. Size and scope of different range of firms.
It can be seen that there are several kind of organisations that are present in UK. These
firms have different size and scope. Size depends on the amount of resources that company
has as well as the number of stakeholders that are associated with company. On the other
hand Scope is referred to as the chances of growth it has in the future. It is somehow
dependent on the resources company has. In order to understand the size and scope of the
organisation example of NHS and Marks and Spenser has been taken.
Marks and Spenser is one of the biggest retailers of Britain. It has made revenue of around
10,622 million pounds and a profit of around 690 million pounds. It is having a workforce of
around 8300 employee. With the operation of around 133 years it has made a large customer
base. Presently this company has around 1200 stores all around the world and 959 alone in UK.
It is having large number of stakeholders both bigger and smaller. For understanding the scope f
the company it can be understood that it has capture large part of the global market of retail.
With its bigger brand name it is not very difficult for the company to expand into new markets.
This company has higher scope in countries of south East Asia and South America. Its food
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product business has very wider scope in UK as approx. 615 stores in deals in the business of it
only.
While considering a public sector company, its size can be understood by the fact that it is
the main medical and health provider of UK. It is operational in Wales, England and Scotland. It
is providing health services to millions of consumers. It is operating with the workforce of 1.6
million workers according to the report in 205-16. NHS on a whole has a combined budget of
around 136.7 billion pounds. It does charge for medical services to the citizens of UK. Its scope
of expansion outside Europe is difficult as it is governed by Government of UK. But after the
trade negotiations done between UK and other EU countries in the Brexit, this company has its
scope outside Britain where it can make more profits (Chow and et. al, 2011).
M1 Structure, size and scope linked with different business objectives
It is necessary for the firms to understand the relationship between business objectives and
size or scope. The operating structure of the company plays a vital role in shaping the work
process as per the requirement. It also assists in achieving of task in much easier way.
Private organisations generally have simpler structures which help in increasing the speed of
decision making which is important for resolving many issues and leading towards
achieving organisational objectives (Bryman and Bell, 2015). The size of the organisation
states about the amount of resources it has for accomplishing its business objectives. It also
showcases its growth potential. On the other hand scope describe the path that it will take to
achieve the pre-set objectives.
TASK 2
P3. Relationship between different organisational functions.
In any organisation there are several functional units that working together so as to achieve
the set targets of the firm. It is important for the organisation to make effective relationship
between all its functional unit so as to bring smoothness in its work process. Some of the
organisational units are finance, IT, marketing, sales, production, research and development
etc. Effective relationship helps in achieving the objective in a better way.
 Human resource is one of the primary units whose major function is to manage the
staffing requirement of the firm (Boons and Lüdeke-Freund, 2013). They select,
recruit and train staffs according to the requirement of different organisational
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function. Other organisational units gives their requirement to the HR department,
they act on this to fulfil all those. They also have the role of managing staffs and
understanding their need so that best performance off the staffs can be achieved in
different organisational units. In the companies such as Marks and Spenser there is
always a requirement of quality staffs so as to conduct their operations in a better
way.
 Finance department is the heart of the whole working process as they have the role of
managing the financial resources which is important for working of the firm. They
have to manage various monetary requirements of all other functional units so that
they can achieve the higher profits by their operations. They work with every other
department so as to manage the finance in such a way that cost reductions can be
made which is important for increasing the profit margin of the Marks and Spenser.
 Marketing team works will other department so as to produce products that are
according to the demand of the market. Marketing department helps other
department to understand the market mood which is essential for designing the work
process of all functional units so that resulted product at the end is according to the
demand. They work with sales department to increase the presale of company’s
product. Marketing works with IT department to reach to maximum number of
people for promoting their products and services (Babatunde and Adebisi, 2012).
 Sales department on the other hand has a role of increasing the sale of the company’s
product. They work with marketing and customer care departments so as to increase
the revenue of the company by convincing people to buy firm’s product.
 IT department assists every other department in making their work easier. They save
the data that is generated by operations of different functional units which is essential
for making decisions. This department also helps in setting up effective internal and
external communication between different organisational units.
 Production department has the role of manufacturing product in which it takes help
of every other department. They work with marketing department to balance the
demand and supply chain for the company.
 Research department works with marketing department so as to understand the
market department which is important for making the product successful. It takes the
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help of financial department so as to reduce the overall cost of the products. HR
department supplies talented staffs for the company which is essential for making
innovative products.
M2 Advantages and Disadvantages of interrelationship
Advantage:
 It helps in defining the clear line of control for each functional unit.
 It assists in making organisational structure simpler (Wetherly and Otter, 2014).
 It brings smoothness to work process.
Disadvantages
 It hits hard on the autonomy of the every unit.
 Every organisational unit gets depend on other for making decisions.
TASK 3
P4. Positive and negative effect of macro environment on business.
Macro environment has several factors. These factors shape the whole environment for the
company. It affects the overall operational activity of the firm. It is essential for every
company to understand the influence that is posed by the macro environment on their
business. On the business of Marks and Spenser macro environment has both positive and
negative effect.
 Political: The decisions that are made by the government of UK influence the
operations of the Marks and Spenser. The decision related to the tax slabs on various
products influences the revenue of the company. If the taxes are less then it will have
positive impact on the business. On the other hand decision such as Brexit can have
negative impact on their operations.
 Economy: UK is facing the economic surrounding that is very unstable and the past
few years’ record of the financial condition of the country has also not remained
good It has posed negative impact on the company operations (Siewiorek and et. al.,
2012). On the other hand Britain is developed economy and hence it is having
positive impact on the expansion of the company’s products.
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 Social: Society has changed at faster rate after the explosion of population as well as
the changing needs of the people. People now want to shop from the store where
everything is available at the same stop it is positive sign for the retailers like Marks
and Spenser. On the other hand people want everything at lower prices this has
reduced the profit margins of the firm.
 Technological: Advancements in technology have empowered business of Marks and
Spenser in reaching to new heights as they can reach to larger number of people as
well as reducing the cost of operations. On the other hand continuous improvement
in technology results in higher financial expenses.
 Legal: Legalities helps companies in operating its operations in better way. If the
legalities are complex then company is unable to conduct its business in a smooth
way it can have negative influence on the growth of the firm (Belás and et. al.,
2015).
 Environment: Countries are demanding for operating business in a way so that it can
have least influence on the environment. This is having positive influence as
company has to adopt new methodologies for business. On the other hand it also
increases the cost of operations.
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Figure 1Business Environment
M3 PESTLE analysis of Marks and Spenser
In order to understand the macro environment of Marks and Spenser PESTLE analysis can
be highly beneficial,
 Political: There are many political decisions like Brexit that affects the multinational
companies such as Marks and Spenser in their business. All there business in Europe
depends on the trade negotiations made between EU and Britain.
 Economy: Since there are many hiccups in the economy of Europe and many other
parts of the world. It is making danger for the operations of this company (Sena
Ferreira and et. al., 2012). The slowdown in the American economy has put burden
on the firm. Since Marks and Spenser is having large amount of financial resources
which it can use in these economical hiccups.
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 Social: Since the society has changed a lot and people is demanding to buy
everything under the same roof hence the demand of super markets have increased
which is in favour of the business of Marks and Spenser.
 Technology: There are severe changes that took place in the technology which is
used inside the firm. These technological advancements have made the business
reach to many customers as well as it also helped Marks and Spenser in reducing the
overall cost of the operation and hence increasing the profit margins.
 Legal: Legalities related with employment as well as tax foundations have changed
which is to be properly taken care off. Any failure in following it may result in
business loses.
 Environment: Everyone is serious about the degradation of the environment and
hence government all around the world has forced Marks and Spenser to adopt
methodologies that will reduce wastage. Hence company have to look for newer
methods of operation.
TASK4
P5 Internal and external analysis of Marks and Spenser.
In order to understand the external analysis PESTLE analysis can be useful.
 Political: There are many political policies that are changing all around the world.
Company like Marks and Spenser has to make many political tie ups so that there
business shows sustainable growth. For Marks and Spenser most impactful political
decision that is made by the government of UK is Brexit. Marks and Spenser have to
redesign the business plans so that they can continue with their growth.
 Economical: Since the UK economy is facing many kinds of challenges hence it has
become difficult for the companies like Marks and Spenser to maintain their profit
margins. The slowdown in the American economy has restricted this company from
any expansion in this region (De Jonge, 2011). This company has large amount of
resources which it can utilise in these kinds of financial crisis.
 Social: Society needs are changing and so is their demands. Marks and Spenser have
to convert these changes into their profit. Culture of large supermarkets has become
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fashion in many smaller economies also which is a great chance for the business of
this company.
 Technological: Shopping has gone digital. These days people want to but many
things from online shopping hence this company also have to upgrade its online sail
and marketing plans. It is the future of the business and hence they have to make
considerable amount of changes in use of technology.
 Legal: There is much legality that has changed over the years. Especially in the laws
related to employment and consumers. It is important for Marks and Spenser to take
care of all these legalities while performing their activities.
 Environment: Factors related pollution and waste management have forced
companies to make their business activities to go green (Cai and Yang, 2014). This
company has to manage the ways in which it disposes the plastic packaging as well
as garbage like waste food products.
Internal environment also has similar impact on the business of the firm as posed by external
factors. In order to understand the internal environment SWOT tool can be beneficial:
Strengths:
 Marks and Spenser is a brand name in the market which it has achieved from so
many years of business.
 It is having a workforce of around 83000 people which is making its work process
smoother.
 Its CSR policies have increased the goodwill of the company.
 Its 1200 stores help in capturing most part of the market.
 It is having quality product as compared to its competitors.
Weakness:
 Food market sale have seen downfall in past years.
 ROI has been on the lower side.
Opportunities
 It can increase the stretch of its online market (Macro Environment of Business:
Economic Environment and Non-Economic Environment. 2017).
 It is having scope in the megacities of south east Asian countries.
Threats
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 They need continues innovation so that they can bring new product range in the market.
 Local markets are reducing the expansion rate.
M4 SWOT analysis of Marks and Spenser
Strengths
 Bigger brand name.
 High cash deposits.
 Large amount of resources.
Weakness
 Marked price is on higher side.
 Food product sale have reduced.
Opportunities
 Online market expansion.
 New markets like developing countries.
Threats
 Many competitors with larger cash reserves.
 Economic instability in many parts of the globe.
P6 Interrelation of strength and weakness with external factors
Strengths and weakness are related with the external factors. It is important for the
organisations to understand this relationship. Strength helps in combating with the negative
impact that is posed by the external factors. On the other hand weaknesses reduce the
chances of Marks and Spenser to have sustainable development in the present business
environment. Strength and weaknesses are the things that company use as tool so as to make
their business plans. External factors shape the business plans. All these factors results in
strengths and weaknesses of the firm (Zeng, Li and Duan, 2012). If all these factors are in
favour then it becomes the strength of the company while if they pose negative effect then it
results in the weakness of the firm. Strength of Marks and Spenser like good brand name
and resources helps in expansion of the company but the success depends on the external
factors impact on the business.
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CONCLUSION
From the above based report it can be concluded that Business is a group formed by people
with common motive. Business environment is considered as the surrounding that is around
the present around the company. There are three kinds of organisation in the company and
have been categorised according to the purpose for which they have been set up. There are
several units inside the firm. They all need to work with each other so as to achieve business
objectives efficiently. External environment influence the company future growth. Company
needs to understand the impact of these factors on the business. Strengths and weakness of
the firm has greater relationship with each other.
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REFERENCES
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De Jonge, A., 2011. Transnational corporations and international law: accountability in the
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Cai, S. and Yang, Z., 2014. On the relationship between business environment and competitive
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Online
Macro Environment of Business: Economic Environment and Non-Economic Environment.
2017. [Online]. Available Through: < http://www.yourarticlelibrary.com/business/macro-
environment-of-business-economic-environment-and-non-economic-environment/23373>.
[Accesses on 15th November 2017].
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