Business and the Business Environment Report - ALDI Strategic Analysis

This report provides a comprehensive analysis of the business environment, focusing on ALDI as a case study. It begins by exploring different types and purposes of organizations, including public, voluntary, and private sector entities, and their respective sizes and scopes. The report then delves into the inter-relation of different organizational functions, such as finance, marketing, operations, production, sales, and human resources, and how they contribute to achieving organizational objectives and structures. A significant portion of the report is dedicated to PESTLE analysis, examining the positive and negative impacts of political, economic, social, technological, legal, and environmental factors on ALDI's operations. The report also includes an internal and external analysis of the organization, along with an exploration of how strengths and weaknesses interrelate with external macro factors. Overall, the report offers a strategic overview of ALDI's business environment and the challenges and opportunities it faces.

Business and the business
environment
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Table of Contents
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
P1 different types and purposes of organisations...................................................................3
P2 Size and scope of a range of different types of organisations..........................................5
Task 2...............................................................................................................................................6
P3 Relationship between different organisational functions and their link to organisational
object and structure.................................................................................................................6
Task 3...............................................................................................................................................8
P4 Positive and negative impacts of macro environment upon business operations.............8
Task 4...............................................................................................................................................9
P5 Internal and external analysis of organisation...................................................................9
P6 Inter-relation of strengths and weaknesses with external macro factors.........................11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13
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Introduction
There are many factors and dimensions that affects business operations. These include
external stakeholders of business such as customers, government, suppliers, competitors,
investors, etc. Combined force of all of these together is known as business environment
(Hansen, 2016). Analysis of environment is necessary for a company to formulate correct
strategies that will help them achieve their organisational objectives in a dynamic and ever-
changing market conditions. These strategic decisions affect overall performance and
sustainability of the business as it help them identify opportunities and threat present in the
environment and prepares the organisation accordingly.
This report is being prepared with the perspective of ALDI. It is a retail and discount
supermarket chain which operates in more than 20 countries and offers customers a wide range
of products including fresh food, bakery, drinks, household, health & beauty, pet care and whole
foods. The report presents information about various types of organisations, their sizes, scope
and purpose of differentiation. Also, discussed below are positive and negative impacts of
internal and external factors of environment upon the operations of the ALDI.
Task 1
P1 different types and purposes of organisations
A company is incorporated with various objectives and gets its structure defined in legal
sense according to the same objectives. Below mentioned are various types of incorporations:
Public sector organisation
These are usually those organisations which have governmental share in ownership
and/or management. Thus, are also called state owned enterprise (Chatterjee, 2017). These are
not incorporated with an aim to make profits and exists to provide services to public in general.
These are registered under Companies Act or derive their powers from Royal Charter. For
example, British Council which is governed by a Royal Charter.
Purpose – Every public sector organisation is incorporated with a specific objective such
as British Council works to promote educational opportunities and cultural relations. It
encourages wider knowledge of UK and English language in cultural, scientific, technological
and educational co-operations with the UK.
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Voluntary Organisation
These organisations includes the likes of organisations such as non-profit organisations or
civil society which are incorporated to help and serve the society (Dutu, 2016). These are
registered as Not-for-profit organisation under Companies Act and are not allowed to carry
activities which are commercial in nature. For example, Amnesty International is a non-
governmental organisation with its headquarters in UK. It focuses on human rights.
Purpose – They have a well defined service objective. For example, Amnesty work to
protect people wherever justice, freedom, truth and dignity is denied.
Private Sector Organisation
Private Limited by Shares are registered under Companies Act. It has a share capital with
a limited liability of the members up to their investment amount. They cannot offer its share to
general public. It has to use 'Limited or ltd' after its name. For example, Greenergy International
Ltd. It works as distributor of petrol and diesel for motor vehicles in the UK market.
Purpose – These operate with a motive to earn profits for its shareholders such as
Greenergy produces and sells bio-fuel all over UK.
Public Limited Company (PLC)
These are also commercial companies like private sector companies which operate to
earn profit. This is a type of company that has its share capital and liability of the members is
limited to the amount of unpaid shares. They can issue their shares to the general public on stock
exchange. It has to use 'PLC' after its name. For Example, ALDI.
Purpose – They operate with a purpose of wealth maximisation for its stakeholders.
ALDI is a public limited company and focuses on offering groceries at discounts to gain a
competitive advantage over its competitors.
Sole Traders
These are the businesses that are set up by an individual who owns and manages the
business themselves (Rezaee, Bland and Osterwalder, 2019). They have all profits to themselves
and also all the risks of having unlimited liability. They are registered with HMRC and has to
maintain proper books of accounts for tax and other reporting purposes.
Partnership
It is a business structure in which two or more people pool together their monetary and
intellectual resources to start a business. They could enter into both limited liability partnership
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or unlimited liability partnership. They are registered with HMRC under Acts depending upon
the type of partnership they choose and also, are taxed accordingly.
P2 Size and scope of a range of different types of organisations
Different types of organisations are classified into different categories depending upon
their sizes, market reach, mode of operations, etc. (Holloway and Humphreys, 2019) Following
is the classification according to various categorisation:
On the basis of size – On the basis of size, different organisations are classified as small
and medium enterprise (SME) and large organisations which are as below:
 Small sized organisation – In UK, organisations having less than 20 employees &
turnover under £10mn are termed as small business
 Medium-sized organisation – In UK, those organisations which are having less than 250
employees and turnover under £50mn are termed as medium-sized business.
 Large organisation – All the organisations which are over and above the limit of SME are
large organisations.
All the above three types of organisations set their goals and objectives according to the
resources available to them. Market share in absolute number is bigger of a large company but as
per size segment, most of the UK market is captured by SMEs. Large companies have better
market reach and brand value and thus have better profit share. Yet, growth and sustainability is
a relative factor and all three types of companies enjoy it according to their decisions and
objectives.
On the basis of market reach – On the basis of market reach, different organisations are
classified as below: Domestic Organisations – These are organisations that operate in only one country. They
produce products according to host country's social preferences and laws (Suri and et.al.,
2017). It has much simpler business model and requirements but also have restricted
market, resources and profit opportunities in comparison to transnational and
multinational companies. Transnational Organisations – These organisations have complex operations with a
centralised structure. They combine domestic and global strategies to achieve economies
of scale. They have uniform products in all countries they operate in. For example, a
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company has a headquarters in UK, manufacturing facility in China and research facility
in Germany; Nestle is a well known transnational company.
 Multinational Organisations - These organisations also have facilities in multiple
countries of the world like transnational organisations (Pruzan and et.al., 2017).
Difference is that rather than having centralised structure, they invest in host countries as
subsidiaries. Subsidiaries are allowed to tailor product according to local preferences. For
example, ALDI.
On the basis of mode of expansion – Organisations use various modes to expand their
operations such as mergers and acquisition, joint ventures, management contract, etc. Few are
classified below: Franchising – It is strategy for business expansion. In it, franchisor licenses its brand
name, business model, know-how, intellectual property etc., according to the franchise
agreement to franchisee in lieu of license fees and other developmental charges. There
are no franchise-specific laws in UK but the agreements need to be compliant with BFA
Code of Ethics. Joint Ventures – It is a business expansion strategy in which two or more entities enters
into an agreement to share ownership, returns, risks and governance for a business or a
particular project.
 Licensing – It is a legal relationship that is entered into for use of a trademark or
technology and unlike franchising, there is no underlying requirement to carry out
business operations according to the licensor.
Task 2
P3 Relationship between different organisational functions and their link to organisational object
and structure
Every organisation comprises of various departments which work in cohesion to achieve
organisational objective (Dembek, York and Singh, 2018). They depend upon each other for
smooth operational activities.
Inter-relation between finance and marketing department
 Finance department is entrusted with procuring and managing revenue, funds and
finances for company and distributing them between various departments according to
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the budget. Main source of revenue for a company is sales receipt. Marketing department
is entrusted with making strategies to maximise the sales. They work together to set a
promotional target for the improvements in sales and then design strategies that would
help in achieving that target.
 Finance and marketing managers of ALDI regularly interact with each other to aid each
other's activities. ALDI is known for its discounts. Finance department works with
marketing department to decide on the benefit promotional strategies would possibly
offer in revenue increase or brand promotion which helps in increasing profit margin.
Marketing department designs various promotional strategies accordingly, which require
funds. Those funds are sanctioned by finance department.
Inter-relation between operations and production department
 Operations department is responsible for managing all the operations of business from
back-end (Newell and et.al., 2016). This includes ensuring smooth operations by
production department. It helps production department in managing the production of
quality products in right quantity. On the other hand, timely services from production
department makes it easier for operations department to support other departments and
achieve their goal.
 Operations department and production department of ALDI works together to manage
timely procurement of goods from suppliers and their processing in a quickly to deliver
products and services to the customers in an orderly manner. Quick and timely services
from ALDI has become one of its factors to have a competitive advantage.
Inter-relation between sales and human resource department
 Human resource department of any company is responsible for hiring, training and
managing its most important resource, human resource i.e. employees (.Huckle and Wals,
2015). Employees form organisational culture from the front of which sales are the end
result. Sales department is responsible for creating budgets that would have to be
achieved by human resources of the company.
 ALDI is a sales based primarily trading company which means that its sales staff is its
most important resource for they are the face of the company. They interact directly with
the customers and help it achieve its sales target. Therefore, human resource department
takes special care in while hiring them and provides them regular training.
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Task 3
P4 Positive and negative impacts of macro environment upon business operations
PESTLE analysis helps a company in identification of the macro environmental factors
which have the potential to have an effect over its operations (Holsapple and et.al., 2018).
Timely analysis helps in making appropriate changes in the strategies to deal with those effects.
Political factors
These are the factors related to the business policies of the government. ALDI is a
multinational company and thus, it is naturally affected by the policies of the multiple
governments. Sometimes, they are favourable and sometimes, hurt the fortunes of the company.
Thus, businesses have to adjust their policies.
Advantages – Situations like Brexit restrict the availability of varied fresh products from
all over European Union. This allows supermarkets to rise prices of fresh goods which is a
favourable opportunity coming out of change in policies of the government.
Disadvantages – Situations like weakening of pound and the price war in supermarkets
due to Brexit creates threat for ALDI and leads to drop in its profit.
Economical factors
These are the uncontrollable market factors such as interest rates, inflation, etc. which
force companies to change their policies regularly (Bennett and Chorley, 2015).
Advantages – ALDI has a smooth transition to adjust its policies according to the change
in market conditions. It generates lot of employment opportunities in UK regularly.
Disadvantages - UK has a high skilled population which results in its high labour cost.
This has a negative effect on the profits of the company.
Social Factors
These include all the factors that have an impact over the society. Lifestyle, education
level, etc. form buying habits of the people and therefore impacts a company's decision-making.
Advantages – ALDI changes its products ranges according to their host geographic
location to attract long number of customers.
Disadvantages – Changes in social fabric in all localities forces ALDI to change their
practices and regularly indulge in CSR activities to stay connected with society.
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Technological factors
This includes all the innovations in the technologies that helps and aid a company in
increasing its sales and revenue (Helmold, Terry and Hummel, 2020). Online sales of ALDI has
improved altogether new stream of revenue for it and now counts as a separate segment.
Advantages – ALDI focuses a lot on ensuring that data of its customers is not breached
which makes the customers trusts the brand all the more.
Disadvantages – All the companies which deal in cyberspace are always worried about
cyber data threats and employing additional security for data costs a lot to the company.
Legal factors
These includes factors related to the business laws, environmental laws, etc. which
affects the operations of an organisation.
Advantages – ALDI has a professional team of legal experts which manages all its affairs
and check whether the company policies are in compliance with the local laws or not.
Disadvantages – Managing a legal team for every country is costly to the company and
still it faces many lawsuits which also have financial implications for the company.
Environmental factors
Businesses derive their resources from environment and it is their responsibility to
promote such practices which are environment friendly.
Advantages – ALDI provides good quality products and encourages environmental
friendly techniques such as reuse and recycle.
Disadvantages – Company has to incur additional cost to change its processes which are
not so-environment friendly.
Task 4
P5 Internal and external analysis of organisation
The SWOT analysis is the used to identify the internal and external factors which impacts
the performance of the organisation (Ryan, 2017). They need to analyse the factors which
impacts the long term business and its operations. The internal position of the organisation can
be analysed by SWOT analysis. The factors which impact the internal position are strength,
weaknesses, opportunities and threats.
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Strength- The strengths are the factors which make the businesses strong and the explain
competitive advantage of the organisation. The companies have successful strategies and it is
making them achieve profits (Li and et.al., 2016).
 ALDI has many products and services which are focussing on fulfilling the demand of
customers. The needs of customers are identified and have advanced technologies which
will make them competitive. They make their products according to customers and
focuses on satisfying them.
 They are the market leaders and it is helping ALDI to attract new customers and they do
not have invest in promotional activities. They make strategies which will help them
achieve the goal of an organisation.
 ALDI is a customer-centric organisation which focuses on understanding the behaviour
of customers. They take the complains of customers and provides them solution.
Weakness- The strategies of the organisation needs to be improved and they need to
make it effective by identifying the factors which are impacting their profits (Hansen, 2016).
 ALDI takes products from the suppliers and the credit rate is affecting profits and the
short term strategies of the organisation.
 They have to invest money in the research and development which is a cost for ALDI and
they have to understand the needs of customers.
Opportunities- There are many opportunities in the market which they have to analyse
which will help them in achieving success.
 ALDI is a large organisation and have operations in many countries but they can expand
their businesses where they have customers and they can make strategies to improve their
performance.
 They can make strategies to acquire small companies which will help them in expanding
their business and it will help them in increasing profits.
Threats- The factors which that will make the businesses at risk and can reduce profits of
the organisation.
 The competition is increasing in the retail sector and it is increasing as the market is
growing and they are making customers get the knowledge of competitors and their
strategies to promote the products. ALDI should focus on the strategies used by
competitors so that they can attract customers.
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ALDI has customers which get affected by the promotional strategies of the organisation. They
should identify the factors which affects decisions of customers.
P6 Inter-relation of strengths and weaknesses with external macro factors
The organisations should analyse the internal and external factors which helps them in
understanding the position and helps them in improving their strategies. There is an inter-relation
between the factors and they are important to achieve the goals of the organisation (Hoque and
et.al., 2018).
Political factors
 Strength- ALDI is successful because they have the strong foreign policies which are
helping them to operate in many countries. They do not have to invest and have good
relations with different countries.
 Weakness- There is corruption in many countries which are impacting profits because
they have to invest to make them expand in many countries.
Economic factors
 Strength- ALDI has made the strategies according to the disposable income of customers
and they focus on satisfying the needs. The economic conditions of the countries are
helping them to grow.
 Weakness- They have low cost model which is impacting profits of the organisations and
they have to make their businesses according to the competitors.
Social factors
 Strength- ASDA will identify the cultural factors which will impact profits and they
should focus on making strategies according to the social needs of customers.
 Weakness- They have customers in different countries and they have to understand the
factors which are affecting their customers and their culture.
Technological factors
 Strength – Regular improvements in technological process has created a competitive
edge for ALDI.
 Weakness – There is a constant pressure of improving technology which has increased
the cost of research and development.
Legal factors
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 Strength – Professional legal team helps ALDI reduce legal hassles in operating in so
many countries.
 Weakness – It has to deal with legalities of so many countries that it has to inadvertently
face many litigations.
Environmental factors
 Strength – ALDI encourages reuse and recycle which has earned it accolades from many
environmentalists.
 Weakness – Adapting eco-friendly processes has increased its cost structure.
Conclusion
It can be concluded from this report that there are various structures in which a business
can operate right from a sole-traders to multinational companies. They have different sizes and
scopes to cover their business operations. Business activities get influenced by different
stakeholders and have an impact over them equally. Various internal strengths and weaknesses
combined with macroscopic factors raise many opportunities and threats for the businesses.
Companies changes their policies to adapt themselves to dynamic changes in the business
environment and gain a competitive advantage over their competitors.
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