Business Environment Report: Types, Functions, and Macro Influences

This report provides a comprehensive overview of the business environment, examining different types of organizations (for-profit, non-profit, SMEs) and their legal structures. It delves into the interrelationship of various organizational functions, including finance, human resources, marketing, and information management, highlighting their roles and interconnectedness, particularly in manufacturing operations. The report also explores the impact of the macro environment on businesses, focusing on political, economic, social, technological, legal, and environmental factors, and utilizes PESTLE analysis to assess these influences, with a specific focus on the UK manufacturing sector and the impact of Brexit. The report emphasizes the importance of understanding these factors for business success and sustainability.

Contents
Introduction................................................................................................................................2
Different types, size and scope of organisations........................................................................2
The interrelationship of the various functions within an organisation.......................................4
Macro environment influence in organizations..........................................................................6
Internal strengths and weaknesses interrelation with external factors.......................................9
Conclusion..................................................................................................................................9
References................................................................................................................................11
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Introduction
The business activities can take many forms and characteristics that are dependent on the
external environment of the business operations the market demands and efficacy and budget.
This is the main cause of there being various successful models of business operations that
are prevalent in the various parts of the world with different levels of success. Thus, the size
and scope of the operations of a business are based on the various business functions and
external environment all of which affect the operations of the business and in turn its success
to different degrees. The understanding of the various aspects of the businesses leads to the
understanding of the business operations in any market environment and the specific
characteristics of the businesses, along with its causation factor. Thus, this is the basic
objective of the assignment, which strives to develop a complete understanding of the various
business structures and models, their scope and potential, the various components of the
business operations and the impact of the various factors on said operations. This is the main
basis of the understanding for this assignment as this enables the understanding of the various
aspects of the business and the factors affecting a business in a market environment.
Different types, size and scope of organisations
For-profit, non-profit and non-governmental organizations
The for-profit organizations are the traditional business organizations that provide goods and
services to select customers and make a profit from the customer, which is then shared among
the people making up the organization (i.e. shareholders). These organizations' objectives are
solely centred on the profit and the potential customers of their products or services that mark
them as for-profit organizations.
The non-profit organizations are on the other hand are the type of entity set up by a group of
individuals under the condition that the organization serves the society in general instead of
the selected customer segment (Saunders & Lewis, 2012). Moreover, the profit or loss made
by the company is not shared among the specific members of the organization like the for-
profit model. The NGO is the similar type of organization that is based on the same operating
principles but are not subject to any business regulations set by the government and they
operate autonomously as a trust and not a corporation. Therefore, the scope of the NGO is
much broader as they concern with all aspect of the society like human rights, social rights
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and economic issue affecting the society as a whole while the NPO operates within a set
boundary in a previously outlined purpose (Sekaran & Bougie, 2016).
Small micro and medium-sized organizations
The size of the organization is another aspect of the operations that can be used to divide the
organizations into various categories, which are effective as an international standard for the
operations of the organizations. While the defining limits forte SME or SMDs are different
under different national and international organizations this is usually measured by the
number of employees in the organization and the overall profit and turnover in any economic
year. However, these limits are not especially important as the SMEs outnumber the large
corporations by a huge margin and thus affect the market to a huge degree through
competition and innovation in their respective sectors.
Legal structures
The legal structure of the business can also be used to classify the different businesses as the
sole trader, partnerships and the private limited enterprises as they each have different
registrations structures under the different legal authorities. The sole trader can be defined as
a company that is run by and owned by only one person. The partnerships are similar in
structure but the responsibility for running the business is handled by two or more persons. In
both cases, the business owners have unlimited liability (Zikmund et al., 2013).
A limited liability company, on the other hand, is recognised as a separate entity from the
owners or shareholders and thus the shareholders are not personally liable for any actions of
the business entity as a whole. Both the private limited and public limited companies fall
under structure despite their varying sizes (Johnson, 2016).
The franchise business is the way a person and buys into an existing business and they
operate as a part of the organizations in the business format which has been proven in the
market and this less risky but also less unique in their operations. Therefore, this has little to
do with the size of the business but the format and the business model applied.
Differences
The main difference between the small and large company organizations is the organizational
structure, which is invariably more complex in the larger organizations. The larger the
organization more bureaucratic their decision-making process is due to higher number of
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input with different values. On the other hand, the smaller companies have relatively flatter
organizational structure that is based on the small number of levels in the organizations. Thus
the quick decision-making and swifter adaptation to change in the market makes them more
sustainable based on the competency of the management (Dekker et al., 2013).
Joint venture and licensing
The joint venture and licensing are similar to the franchise model with some specific
differences where the two parties divide the operations and decision-making responsibility
and when the operating party is given the right to use the business name only, mark the
difference between the different business models.
The interrelationship of the various functions within an organisation
There are various parts of the operations of any organization and they all are responsible for
the smooth operations of the organization to a degree. Thus, the various elements or
departments of the businesses are discussed in this point to achieve the business objective
discussed in the first part of the assignment where the purposes of the different organizations
according to the structure are defined.
Finance- the finance dos any business handled the financial matters like the various
transactions and keeping of the records of the financial information that would help in the
development of the future plans as well as develop funding requirements and production of
goods and services. Thus, their role in the organization can be outlined as the management of
the cash flow and keeping track of the organizational assets (Scheer, 2012)..
Human resource management is the part that deals with the human element of the
organization like the employees and their relative wellbeing payments and training and
development to align their skills with their relative responsibility in the organizational
structure. This not only keeps the employee satisfaction and remuneration but also the
development advancement in the hierarchy based on the proficiency and performance
(Kirchmer, 2012).
Procurement department is where the resources required for the operations of the
organizations are acquired. Thus, the sourcing of the materials and other outside components
needed for the operations of the organization are the responsibility of the outlined department
in the organizations.
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Marketing- the marketing department is concerned with the product or the service and the
acceptability of the product from the market fit. Thus, the marketing department helps in the
planning of the organizational steps from the development of the product and its presentation
by knowledge of the customer needs.
Information and knowledge management-the information and knowledge management is an
important part of the IT functions as the organization's knowledge base are managed and the
various information needed by the company to make the decision in the specific market is
based on the department. The department develops knowledge and facilitates the use of the
said knowledge in the organizational decision-making.
Control or higher management is the core of all organizational activity as the higher level
organization divisions outlining the course of the organization is done through the higher
management where the various aspects of the organizational management decision regarding
operations are judged based on their competency and achievements to determine the business
strategy for the company (Chang, 2016).
In the manufacturing operations, there is clear interrelations of the various departments and
their responsibilities in the operation of the organization as a whole. Therefore, the marketing
and the higher management functions are intrinsically related to the product design, which is
based on the research done by the marketing department, and the finance is required for the
manufacturing cost calculation and marketing cost and the estimation of the profit based on
sale price of the product. The procurement is responsible for sourcing the raw materials and
equipment needed for the production while the inventory department stores them
systematically in the warehouses. The product reaches the customer population through the
supply chain and the human resource exclusively management the human elements in the
organizations as a division of responsibility and remunerations. There are some operations
like the supply chain management and the inventory management that are unique to the
manufacturing operations as the service operations do not need these elements in the
organizations as their product is not tangible. Therefore, all part of the organization has a role
in the successful operations and each has their specific responsibility in the operations that
need to be maintained, this gives each part of the operation an unique and important role in
the organizational operations (Harmon, 2014).
While the departments are based on specialization in the organizations, the staff can be put in
groups in either a bureaucratic structure or a matrix structure. The bureaucratic structure is
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based on the inflexible position where the staffs work for a department exclusively and any
responsibility is handled by the department as a whole. On the other hand, the matrix
structure is much more flexible and this arranges and assigns staff from the different
department's collaboration to achieve collective objectives. Thus, both the structure has their
specific merits and demerits in different business situations.
Macro environment influence in organizations
The macro environment is the external environment that defines the characteristics of the
whole economy that the reorganizations are a part of and is influenced by. The use of the
macro environmental forces that affect the business area therefore away from developing the
understanding of the various factors affecting the business operations externally. The overall
political situation, economic condition, legal constraints affect the operations of different
businesses differently and thus the use of the environmental analysis is a common factor in
the determining the various forces affecting the businesses. The PESTLE analysis is probably
the most common and widely used analysis model used for the understanding the external
environment which outlines the political, economic, social, technological, legal and
environmental factors affecting the business environment which makes this cover all major
aspects of the external environment (Birnleitner, 2014). The simplicity of the analysis and its
span makes it most complete analysis of the external environment from a generalist
perspective and the various factor identified in the PESTLE are discussed below in light of
the manufacturing sector in the UK.
Political factors
The political factors and political decisions regarding the country are often significant
indicators of the stability of the business sector in the country as the various factors like
political stability, governmental institutions and policies regarding business promote business
growth. The impact of the Brexit is evident in the UK manufacturing as it was the political
decision of the UK leaving the European Union that affected the business sector so severely.
This is one example of the many aspects how the political stability can affect the stability of
the businesses as a macro-environmental factor. The various policies of the government
regarding regulation and aiding the various business sectors are also effective factors that
make the impact of the political leadership evident on the business operations and in turn on
their profitability.
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Economic factors
The various economic factors like the GDP, inflation, interest rates, affect the business
environment of the country significantly as the various rates like the GDP and inflation affect
the availability of funding for the various business ventures and the growth of the operation
of the businesses. The unemployment rate, therefore, is an indicator of the availability of
skilled labour forces and the wage rate that affects the operations of the company (Mhlanga
& Steyn, 2017). It is also evident in the various multinational companies shifting their
manufacturing facilities to the developing countries because of the lower wage rates and the
availability of cheap labour. The various tax policies and the economic development facilities
that give specific benefits like the SEZs also affect the operations of the manufacturing
sectors in the developed countries like the UK.
Social factors
The social factors are also a large part of the business development potential in a country as
the various positions of the industry in the country are dependent on the society's perception
of the specific industries and their offerings. While the various companies and their offerings
need to be socially acceptable and popular to have business success, the related prestige and
prospect of working for a popular company or sector is also part of the social factor that
affects the success of the industry in a specific location. As the operations of the company are
determined by the social understanding of the role of the company and its impact on the
society or the overall development of the manufacturing sectors is deponent on the way the
society views the contribution of the sector on the country as a whole.
Technological factors
The technological factors like these of the technology or the development of industry-specific
equipment of the process modification are all part of this factor as the overall technological
development of the local determines all of these factors. The technology not only determines
the efficacy of the organizational operations but also the processes for manufacturing which
makes this cost efficient or in some cases an absolute necessity (Moro Visconti, 2016). While
the technological development is an indicator of economic prosperity, it is also true in reverse
as the technological development is the factor that prompts the economic development by
inflecting the efficient operations of the goods and service proves in the various industries.
The various international quality indicators like ISO, IEC and WSSN are also dependent on
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the technological development for their implementation in the relevant sector, which makes
the scope of export an effective part of the impact of the technological factor in the
manufacturing.
Therefore, the availability of infrastructure to support the growth of a business is very much
depend on the technological factors that make this one of the important factors of the external
environment for the business potential development in any country. This is also true for the
UK as the country has highly developed technology and this affects the infrastructure
development and business growth significantly.
Legal factors
The legal factor is also part of the macro environment and the most relevant is the change in
the corporate regulation law or the labour laws which have a higher level of business impact
of than any other legal developments (Sarwar, Ramachandran & Hosseinian-Far, 2017). The
taxations law is also a significant driver of business development as the low taxation rates
and the regulations attract international companies and investors in the economy, which
enrich the business environment significantly.
Environmental factors
The industrial waste has been recognized as one of the main sources of the pollution with a
myriad of health impacts which affects the operations of the various industries to different
degrees, this not only evident in the government environmental regulations and compliance
like the carbon trading but the public opinion regarding manufacturing process. Thus, the
waste disposal and production process development are forced upon the manufacturing
sectors by the government or public opinion that significantly affects the business growth
potential (Triguero, Moreno-Mondéjar & Davia, 2013).
From the overall role of the PESTLE analysis, therefore, can be deemed an effective tool to
determine the business potential for a specific country based on the various aspects of the
analysis that covers almost all macroeconomic factor that affects the business development
(Shatskaya, Samarina & Nekhorosheva, 2016). Therefore, the role of PESTLE analysis
understanding the business environment is established by this discussion.
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Internal strengths and weaknesses interrelation with external factors
The SWOT analysis is a significant tool that can be used for the development of the internal
competencies of an organization and this analysis covers almost all aspect of the operation
and gives a clear definition of the various characteristics of the internal operations and their
impact on the company.
Strengths- the strengths of the internal structure depend upon the various characteristics of
the organizations like the efficient use of resources sustainable operation and organizational
policies and procedures. This not only helps outline the reasons behind the organization
businesses success but also helps in the formation of strategies based on the strengths.
Weaknesses- the weaknesses of the organization is identified can be used to develop
strategies to enforce these areas which can have a significant impact on the organizational
development performance increase. Therefore, this is also a knowledge that can be used for
the rotational development which is the main purpose of the internal analysis (Laguna &
Marklund, 2013).
Opportunities- this part marks out the opportunities for development, which also factors in
the external factors that might create an opportunity for development of a specific
competency of the development of the whole organization through changing its structure or
operational procedures (Van der Aalst, 2013).
Threats - this part like the opportunities is also helpful as any change in the external
environment is bound to have an impact on the organizational operations which makes this
part of the external environment and its connection to the internal operations of the
organization (Van der Aalst, 2013). These threats are addressed by internal changes to
mitigate the negative impact of the external environment on the business. This helps in the
competitive positioning of the organization based on the external impact of the environment
on the organization and utilising positive changes to the fullest while mitigating the negative
ones through internal changes.
Conclusion
This assignment helps develop an understanding of the business structures and the various
external and internal factors that the business performance depends on. Thus, this is essential
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for the development of the understanding of the various business models and their
opportunities and function in the environment.
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References
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