Business and Business Environment Analysis: Lego Company Report

This report delves into the business environment of Lego, a privately owned company specializing in plastic toys. It begins by defining business and its environment, highlighting the importance of profit generation. The report explores various organizational types: public limited, private limited (Lego as an example), and voluntary organizations, examining their purposes and scopes. It then analyzes the size and scope of the Bank of England, UNICEF, and Lego. The core of the report focuses on the interrelation between different organizational functions within Lego, such as marketing, human resources, finance, and research and development, and how these functions link to the company's objectives and structures. The analysis includes the advantages and potential disadvantages of these interrelationships, demonstrating how each function contributes to Lego's overall success.

Business and Business
Environment

INTRODUCTION
Business is an occupation or trade and buying and selling of goods and service in order to
make profit. It is not possible to conduct any business without earning of profit and for this
purpose a businessman requires to invest money in those segments which will help him in
generation of profit. Business environment is the surroundings in which business survives
(Botha, Kourie and Snyman, 2014). All internal and external factors which affects business,i.e.,
are customers, suppliers, employees,etc constitutes business environment.
This study is conducted to have a detailed study on business environment in an
organisation. Under this study, Lego is a privately owned company which deals in in
construction of plastic toys. The company was founded in 1932 by Ole Kirk Christiansen. The
major aim behind formation of this company is to stimulate and develop children to think
innovatively, act systematically and use their potential to form their own future.
The report describes various types of organisations and their role in different sectors,
which will help in demonstrating the interrelationship between different organisational
departments. The study will analyse the concept of business environment in detail by covering
positive and negative outcomes of macro environment on business, external and internal
investigation of specific enterprise and interrelation of strengths and weaknesses with external
micro factors.
TASK 1
P1 Various types of organisations and their purposes.
Organisation is the form of human association or institution that is structured and
maintained for the attainment of common purpose. It states the relationship between employees
and their work and accordingly assign roles and responsibilities to them. Organisations includes
three forms, they are public, private and voluntary organisations which are discussed below:
Public limited Company - This type of organisations are those whose shares can be
bought by the general public. Shares and Debentures of a public organisations can be freely
traded on stock exchange and can be distributed at a wide range. According to U.S. Securities
and Exchange Commission (SEC), any organisation that has 500shareholders and more than $10
million in assets would be required to make register y with SEC (Brașoveanu and Bălu, 2014).
Its purpose is to make sale of its shares to the general public through a stock exchange and give
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benefits to public. For instance, Bank of England, United Kingdom is a public limited
organisation. It is the worlds eighth-oldest bank which is fully owned by the Treasury Solicit on
governments behalf and has huge amount of responsibilities same as those of most central banks
around the world. It issues currency and oversees monetary policies. One of their major
responsibility is to design and print bill and make sure that they reach to the place they are
required. Its main purpose is to create values for customer, create lifetime loyalty in order to
build maximise profit and build image of the company.
Private Limited Company – This type of organisation are those which can issue stock
and have shareholders, but their shares cannot be sold on public exchanges and cannot be issued
through Initial Public Offerings(IPO). Private company can issue its shares and securities to their
shareholders within the organisation. According to Section 2 of Companies Act, 2013, Private
companies are those organisations whose articles of association limits the exchangeability of
shares and prevent the people at large from signing to them. For instance, Lego is a private
company founded by Ole Kirk headquartered in Billund, Denmark (Cairncross, 2014). The
company deals in constructing plastic building-block toys. The constructed toys can be taken
apart,and can be reused to make new things. The company aims to inspire and omtivate
individuals to shape their future. Its purpose is to create a brand image and make solid strategy
that helps to meet profitable organisation. It is profit making organisation that increases its
earnings by providing or serving their products or services in a large number.
Voluntary Company - A Voluntary Organisation is an organisation which relies on
volunteers for its operations for accomplishment of task. It is also known as Non-profit
organisation that involves working willingly without any pressure or force to anyone. For
instance, UNICEF is an international organisation established in 1946. It was developed to assist
and help to children and mothers (Calabrese and et. al., 2018). The organisation is fully
committed to work with the Government to ensure that each child born in a complex
environment gets the best start in life. It has been working for over 60 years in different countries
all over the world. Major aim of UNICEF is to support for the equal rights of women and girls
and assist them to utilise their full potential in the development of communities. It was created
with a distinct purpose keeping in mind i.e., to overcome the obstacles of poverty, violence,
disease and discrimination in a child path.
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P2 Size and scope of different types of organisation.
All organisation differs on the basis of their scope, structure and size. The size and scope
of any business depends on internal and external structure of the business which are numbers of
employees, size of business, market share and organisational culture (Cavusgil and et. al., 2014).
They have a crucial role in the development and growth of business. Hence it is necessary to
undertake discussion over classification of all three defined organisation on the basis of their
respective scope, structure and size. The explanation is as follows:
BANK OF ENGLAND
Background of the company : It is the central bank of United kingdom. Earlier the bank
was privately owned from 1694 and since 1946 it is owned by government. It is wholly owned
by the government and has independence in setting monetary policy.
Vision & Mission: Mission is to provide good services to public by maintaining monetary
and financial stability. Also, the vision for being as 'Customers first priority'.
Size & Scope : One of the worlds oldest banks authorised to issue currency with about
0.75% bank rate. It was handled by governors of England ( Charter, 2017). The vault beneath the
city of London, cover a floor space grater than that of fourth tallest building in the city.
Legal Structure : It is owned by govern Mark Carney since 2013. It is headquartered in
London, UK.
Organisational Structure :
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(Source: Organisational Structure of Bank of England, 2019)
UNICEF
Background of the study : Unicef is the United States non-profit organisation formed in
1946 to give health and food services to children and mothers. It relies on contribution of share
from private donors and government..
Business Objective : To provide opportunities for all children to survive, develop and
reach their full potential for the sustained growth and stability of nations and reachat a global
standard for human rights for all.
Vision & Mission : Mission is to implement the protection of childr right, to assist them
in meeting their basic needs and to grow their chances to reach their actual potential (Doh,
McGuire and Ozaki, 2015). And Vision is to reach a world where all children have equal
possibilities to grow and survive.
Size & Scope : It works in more than 190 countries with several volunteers who
contributes in saving and protecting rights of women and children. It is bound to ensure special
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Illustration 1: Organisational Structure of Bank of England

securities for the most dis advantaged children i.e., victim of wars, disasters, and all forms of
violence.
Legal Structure : UNICEF is owned by United Nations General Assembly, which was
started with an aim to provide food and healthcare support to children and women. It is ruled by
executive board, which consists of 36 members (Goss, 2015). It currently has in total seven
regional offices in worldwide areas.
(Source: UNICEF ORG CHART, 2016)
LEGO
Background Of the company : Lego is a leading plastic building block toy constructing
company. The company was launched in 1932 in Billund, Denmark. Its flagship products
consists of colourful plastic bricks accompanying array of figurines, gears and various other
parts.
Business Objective : The major objective of Lego is to achieve maximum number of
customer be it kids, who must have some unique toys to play.
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Illustration 2: Organisational Structure of UNICEF

Vision & Mission : Lego's mission is to inspire, motivate and develop children to think
innovatively and use their potential and skills to shape their own future. And, the vision is of
'Inventing the future of play'.
Size & Scope : This leading toy constructing company has over 132 retail stores in
different regions with about 19000 employees ( Hamilton and Webster, 2018) . It became the
worlds largest toy company by earning revenue with sales of around US$2.1billion. The scope
lies with the development or expansion of their business operation at the global level mainly
covering US. Stakeholders of Lego are well-equipped with their control for effective valuation of
the company.
Legal Structure : This organisation is owned by the Lego foundation. Jorgen Vig
Knudstorp is the chairman of Lego since 2017. The legal structure comprises of line base
(Source: ORGANIZATION CHART & WORK FLOW, 2014)
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Illustration 3: Organisational Structure of LEGO

TASK 2
P3 Relation between different organisational functions and how they link to organizational
objectives and structures
Organisational functions of Lego and how they are connected with objective and
structure :
Marketing : This function helps in enhancing the relationship between the customers and
suppliers. In context of Lego, marketing will help them to increase their customers. As their
customers are kids, so by advertising in such a way which attract children such that the child
force their parents to buy that product, Lego can earn huge amount of profits an increase its
market share (Hansen, 2018). Each employee of Lego is focussed towards the attainment of
organisational goals. The relationship of marketing with other department is unique and centric
towards selling of product to earn high amount of profit which can be done by the usage of
effective human resource.
Human Resource Department : This department helps in increasing the work efficiency
of employees which is critical component for every business. In context of Lego, This
department helps the organisation by providing proper knowledge to new recruited by
controlling proper administration. The relationship of HR Department with that of Marketing is
collaborative, as it provides human support for marketing to generate sales and with finance is to
collect adequate funds hiring an effective employee.
Finance : It plays a very important function for an organisation to know how to
effectively utilise the financial resource in order to perform business activity. In context of Lego,
manager have some responsibilities to manage all the financial activities, he has to offer some
facilities to employees in order to complete task on time. Finance manager provides some funds
to marketing department for the purpose of sale of goods which will help Lego in building a
goodwill and maximisation of profits (Hillary, 2017). Finance manager provides funds various
departments like human resource, marketing, etc. for the conduct of various activities such as
staffing, hiring, sales promotion, development of a new product design, etc. which can be done
only after the approval of senior manager.
Research and development : It is an essential function to be performed by each and
every organisation. In context of Lego , research and development is a separate department
which will help in having a detailed study about the product launched . R&D relationship with
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other departments such as finance, marketing is focussed towards developing new product in
such a way that long term profitability could be achieved. Also, such relationship will last for
longer span of time
These inter-relationship of one department to that of other has helped Lego in attainment
of desired goals and objectives. It resulted in saving cost at higher rate. As these functions are
linked to organisational objectives, each and every individual contributes their towards the
organisation (Huang-Horowitz, 2015). Advantage of such interrelationship is that it will reflect
in attainment of maximum profits at Lego and disadvantage is that due to this interrelationship
conflict may arise between different departments which will affect the working of Lego. TASK 3
P4 Macro environment is a condition that exist in economy as a whole.
In order to perform business operation worldwide Lego, UNICEF and Bank of England
perform PESTEL framework to identify the external factors and the impact in the performance of
company. Lego is biggest toy making company in the world (Lewis and et. al., 2017). The
external analysis is done to interpret how the six factors namely political, economical,
Social ,technological, environmental and legal impact Lego company's growth.
Political factors: This factor includes government policy,political stability, labour law,
environment law tax as well as trade policy. This factor often have a impact on organisation so
the organisation need to respond to legislation and other policies.
 Positive: Due to multi party culture political climate in Denmark is impressive. As
Denmark is one of the most beautiful place to invest and LEGO has got a benefit from
government friendly support policies.
 Negative: As government of UK is frequently changing and with the change company
has to follow some of the regulation of government.
Economic factors: This factor have significant effect on how company does business.
Factors include are mainly interest rate, economic growth, inflation, exchange rates etc. that
affect the cost , price and profitability of the company.
 Positive: Economic blocs has given the opportunity to company to exchange the product
across other European countries. LEGO acquired the license which allowed it to grow its
territories out of the country.
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 Negative: In 2004, LEGO has faced some trouble where it has lost money and marketing
share.
Social factor: Social elements include the areas of common feeling and attitude of
people and is concerned with population, age distribution, health consciousness, lifestyle and
culture of the people.
 Positive: The LEGO foundation is encouraging the learning through plays, thus
empowering children's as it started investing in kids friendly toys.
 Negative: Lego was last manufacturing toy company in America and new market trends
are much enchanting than their toys so this forced Lego to shift to other country as the
price was inexpensive there, in terms of other location.
Technological factors: This factor refers to new ways of producing and distributing
goods and services as well as proper communicating it to the desired market (Niemann-Struweg,
2014). Changes take place due to advancement in innovation and technology.
 Positive: LEGO has made use of internet programme to market their products. Use of
cyberspace has boost their selling strategies as nowadays it become easy to inform
customers about new product.
 Negative: Cost of bearing and holding the updated technology has become cost effective
for LEGO.
Environmental factors: It plays an essential role within the company as there is
increasing scarcity of raw material and human wants are unlimited. These factors ensures that
business run ethically by making optimum utilisation of resources.
 Positive: LEGO has a business deal with WWF to cut down its carbon emissions and is
on the track to achieve is goal of 100% renewable energy by 2020.
 Negative: As LEGO aim is to produce renewable energy for this it require certain
resources and that would be expensive for the company.
Legal factors: This factors consider well-being and safety, consumer rights and laws an
product safety. It is very important to know what is not legal in order to trade. If organization is
trading outside it is very important to take care of external affairs for effective decision making.
 Positive: LEGO has work with different branded manufacturer to fortify, match as well
as implement the anti fictitious laws. The move was taken as to get protected against
trademark which was difficult as well as expensive.
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 Negative: LEGO has tucked in certain legal issues like a Chinese company named Coko
was coping the same products of Lego, which has impacted them in risky ways by
affecting the financial position of the organization.
TASK 4
P5 Conduct internal and external analysis of specific organisations in order to identify strength
and weaknesses.
A SWOT analysis is one of the powerful tool that helps a company to develop a business
strategy. It uses environmental data and information which help to access both internal as well as
external factors which contribute or hampers the organisation success (Quinlan, and et. al.,
2019). SWOT is an organised list of strength, weaknesses, opportunities and threat.
Strength: This are the internal factor and describe what an organisation is expertise at
and what separates it from competition. Lego has number of strength which enable it to boom in
the market.
 Strong Brand: LEGO is awarded as one of the most powerful brand in the year 2015.
This contribute to the success and reputation of the organisation.
 Customer satisfaction: The company is devoted towards customer relationship
management department through which it is able to achieve high level of customer
satisfaction.
 Highly skilled workforce: LEGO is investing lot many resources in training and
development which results in highly skilled as well as motivated employees.
 Creative expression: LEGO is more than a toy. It has number of alternative available for
creativity and creates the expression that kids who are playing with this toys have fine
skills
 Distribution and range: Lego has so many outlets throughout the world and is also
having strong distribution channel that makes easy for them to avail the product to
customers timely.
 Product Portfolio: Lego has a strong portfolio as it is providing wide range of product in
different categories.
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Weakness: Weakness are the negative factors that stops an organisation to perform at the
optimum level and distract from the strength of an organisation (Storey, 2016). This are the area
where Lego needs improvement.
 Expensive: Lego toys are expensive, so middle group and lower class of society are
unable to buy it.
 Price of material: Toys of Lego are made up of advanced class plastic and which make it
more costly.
 Intense competition: Toys are made by other company also which are quite cheap as
compared to Lego and trend of online games result in the loss of market share.
 No proper marketing: Though LEGO is successful company in terms of its product and
sale but it has no proper marketing skills which lead to grow more in the future.
Opportunities are the external factors that surrounds the business (Sangari and Razmi, 2015).
By taking advantage of opportunities one can protect against the threat.
 Film : The LEGO movie which was released in 2014 proved to be great success
worldwide. Popularity of this movie, help the company to understand the taste of
consumer.
 Diversify into other segment: Schools now a days focusing on experimental learning
and this help them to know about fascinating toys which would teach pupil core concept.
This will result the school investing in educational toys.
 Attracting customers through online channels: Company has invested large amount of
money in online platform that helps to open new sales channel. Connecting online with
the customer is a biggest opportunity to know them better and easily serve their needs.
 Globalisation: As globalisation is increasing this does not limit Lego to its home
country. By extending the operations to other country, it can utilise those possibility that
lie in these market.
 E-commerce: This is the new trend by which company can increase its sales. Lego can
open its online stores and make sales through these as it will help it to earn revenue.
Threat are the external factors that hamper the growth of an organisation and have no control
over it.
 Threat of substitution: Being most expensive product, not affordable by most of the
group is facing threat of substitution as customers focus on the product which is often
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cheap (Zelenkov, 2015). Substitute of product are increasing, which results to a threat for
the entire business as consumption of product is lessening.
 New technology: With advancement of technology, kids started finding new forms of
entertainment like video games which will be very hard to compete with. Continuous
development in technology require the manpower to be trained accordingly as inability to
keep up with challenges may lead to the failure of concern.
 Currency fluctuation: As Lego is operating in other countries also, therefore it has to
face different laws and currency fluctuation because of many political factors prevailing
in the market. The fluctuation of interest rates in the country do not provide stable
financial and economic environment.
P6 Explain how strengths and weaknesses interrelate with external macro factors.
PESTEL analysis was done to analyse strength and weakness of Lego with external
environmental factors.
Strength: Political element has strength for the company,as Lego's most of the
production is done in Denmark, while some production with manufacturing and packaging is
done in Mexico and Hungary (Shenkar, Luo, and Chi,, 2014). According to economic
intelligence unit, Denmark remained to be most lucrative place to invest so Lego has got a
benefit from these government friendly investment policies as the company has not to face a
political pressure. The organisation was collaborated with UNICEF to defend and safeguard the
rights of children by getting rid of child labour. Being the leader in market, Lego's responsibility
is toward the child well being and also has promised to give 8.2$ million in coming year.
Technological factors also proved to be the strength as company is best-known in the market of
toy industry because of its constant innovation. The company collaborated with Texas
instruments to build robots which is used for educational purpose. To be environmental friendly,
Lego has taken two actions one is reducing of carbon emission and secondly by consuming
100% of renewable energy by 2020. Agreement with WWF was also signed in support of the
environment.
Weaknesses: LEGO was suffering because of economic crisis in 2008, performance of
the company was not satisfactory because of Euro zone crisis. It has suffered most because
mobile phones has came up with many game applications . Children are more attracted toward
the electronic games rather than playing physical. As regulations on international trade keep
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changing, this require cooperation from the company if they want to expand and operate
globally. One of the famous company named Coko was making the same bricks like Lego, this
has affected the sales and performance of the company. Company has taken some of the actions
in support of the environment and this can only be possible by the use of certain resources which
turns to be expensive for Lego(Verkerk, and et. al., 2015). Though Lego has collaborated with
Texas and is using updated technology but the cost of holding and bearing it for long is very
expensive.
CONCLUSION
According to the above mentioned report it has been concluded that business
environment plays a important role in analysing the internal and external factors which are
responsible for operation of the business. It presents threat as well as opportunities for any
business. It has been found that political, social, environmental, legal and technological factors
have both positive and negative effect on the decision making process of LEGO. Organisation
whether it is public, private or voluntary uses SWOT analysis for determining the strength and
weakness and help the company to overcome external threat and exploit the opportunity. Using
PESTEL analysis assist to make a better awareness and perceptive of the changes that occur as
well as has a impact on the business of Lego. At last, the relationship of strength and weakness
with external factors have brought transparency into the working process of Lego.
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