Business Environment Analysis: Types, Scope, and H&M Case Study

This report provides a comprehensive analysis of the business environment, focusing on H&M as a case study. It begins by defining the business environment and its impact on organizations. The report then explores different types of organizations, including private, public, and voluntary, along with their respective legal structures, purposes, and sizes. A key section examines the relationships between various organizational functions, such as R&D, production, HR, and finance, within the context of H&M. Furthermore, the report identifies and assesses the positive and negative impacts of macro-environmental factors, like political, economic, social, and technological influences, on H&M's operations. A SWOT analysis is conducted to identify H&M's internal strengths and weaknesses, as well as external opportunities and threats. Finally, the report discusses the strengths and weaknesses of external macro factors, providing a well-rounded overview of H&M's business environment.

Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
P1. Explain various types and purpose of organisations along with their legal structure...........1
P2. Explain size and scope of different organisations.................................................................3
P3 Explicate the relationship among organisational functions...................................................4
P4 Identification of positive and negative impact of macro environment on business
operations....................................................................................................................................4
P5 Conduct internal and external analysis of specific organisation to identify their strengths as
well as weaknesses......................................................................................................................6
P6 Explain strengths and weakness of external macro factors...................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Accumulation of internal as well as external factors which creates influence on the ways
organisation carry out their functions is known as business environment (Anıl and Ficici, 2017).
They comprises of customers, supply and demand, employees and business regulations. This
report is based on H&M which is a Swedish multinational organisation which is renowned for
their fashion clothing. This report includes different types of businesses along with their scope,
purpose, size and legal structure. Along with this, it includes relation among various departments
as well as macro factors are analysed.
P1. Explain various types and purpose of organisations along with their legal structure.
There are various types of organisations according to their functionalities and have
individual purpose for accomplishment of needs of customers by which they can earn profit.
These organisations are described below:
Private Organisation:
It is the part of economy of country's which is either executed by individuals or in
partnership with an aim to earn more profit. This assist the nation to intensify their GDP by
creation of enhanced job opportunities. With respect to H&M, it is a clothing retail store which is
involved in creation of fashion clothes.
Purpose: H&M is a leading fashion organisation which carry out their activities with a
purpose to attain sustainability as well as affirmative alterations by investing in innovative ideas,
people as well as communities to enhance living standards.
Legal Structure: There (private organisations) legal structure is shown below:
Sole Proprietorship: Organisation who operate in this structure are completely managed
and controlled by owner who is an individual, it is known as sole proprietor.
Partnership: It is formal written agreement among individuals who are operating their
business to earn profit. There can be either general or limited partnership.
Company: Organisations who are carrying out their functions carry out their business
activities with an aim to have more profit and they do not share it with general public by the
means of initial public offer (Botha, Kourie and Snyman, 2014).
Public Organisation:
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Organisations who are operating their services under public sector are funded by
government and they carry out their operations with an aim to serve people in effective way
rather than have more profits. Crown Prosecution Services is present in Wales and England
which is responsible for rendering legal advices to investigating agencies (Burayidi, 2013).
Purpose: CPS (Crown Prosecution Services) carry out their operations with purpose to
render impelling advice to investigating agencies as well as police to bring in appropriate
prospective with respect to criminal proceedings.
Legal Structure: Organisations operating their business functions within public sector are the
one who are owned and controlled by government. Basically, there are three types government
structure, they are mentioned below:
Local Government: In this sector organisations are administered as well as controlled by
local government authorities.
State Government: Organisations in this sector are controlled, managed and owned by
state government authority.
Central Government: In this structure, organisations are embarrassed and managed by
central government authority.
Voluntary Organisation:
The non-profit groups which carry out their operations to render welfare to individuals by
which they can serve impoverished people or section of society. Oxfam is non-governmental
organisation which works to accomplish welfare services within famine and drought prone area.
Purpose: Oxfam possess 20 independent charitable organisations who perform their
operations with an aim to eradicate poverty across the world and improvise the living standards
of individuals concurrently.
Legal Structure: These organisations carry out their operations by making use of three legal
structures, they are described below:
Unincorporated Association: An agreement among set of individuals as well as groups
occur who are willing to work together to accomplish an identical purpose to serve humanity
rather than earn profit (Charfeddine, 2016).
Trust: It is a form of voluntary where formal agreement occurs among different parties
and trustee have the right to property.
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Company limited by guarantee: In this structure, there are restricted number individuals
and shares within organisation.
P2. Explain size and scope of different organisations.
Different types of organisations are mentioned above, there functions along with their
size as well as scope are presented below:
Private Organisation: In this structure organisations carries out their functions without high
interference from government (Hacioglu, Dincer and Celik, 2012). H&M is a multinational
fashion retailer within clothing.
Size: H&M was founded in 1947 and it is headquartered within Sockholm, Sweden.
Company render their services across the world and possess more than 148,000 employees.
Scope: H&M employ skilled as well as potential employees who possess competent skills
to take organisation towards great heights with respect to delivery of effectual services.
Employees can speak in around 50 different languages within H&M. Furthermore, they possess
ability to expand their services in areas where they cannot be reached.
Public Organisation: Organisation working in this sector are partially and wholly possessed by
governmental authorities. With respect to Crown Prosecution Services, they are non-ministerial
organisation which are involved within service providing legal advices to investigation agencies
in Wales and England.
Size: Crown Prosecution Services render their services with an organisational structure
which comprises of 14 regional teams which are directed by Chief Crown Prosecutor. They have
around 6000 employees.
Scope: By making use of digitalisation Crown Prosecution Services can enhance their
services as they furnish fast flow of information.
Voluntary Organisation: They are owned and managed by specific group of persons who
comes up with an aim to furnish services for the welfare of society. It comprises of 20 charitable
organisations with a reason to eliminate poverty from society (Hamilton and Webster, 2018).
Size: Oxfam carry out their activities in around 14 countries across the world with large
number of volunteers from different locations who aims to uplift the society.
Scope: Oxfam can enhance their scope by rendering services in society which cannot
reached by providing them with welfare services.
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P3 Explicate the relationship among organisational functions.
Every organisation has their own structure according to which they carry out their
functionalities and power is divided appropriately among individuals (Hussin and et. al., 2017).
Within H&M corporate culture prevails which is isolated into various departments like
Marketing, R&D, IT, etc. Relationship among these departments is shown below:
R&D and Production Department: Research and development department within
H&M is responsible to analyse the behaviour of customers and accordingly they analyse their
requirements. This assist them to attain knowledge about current trends and technologies present
within market. Organisation makes use of those trends to gain competitive edge within the
market. Moreover, it renders complete information to production department related with
expectations of customers. By this they can furnish enhanced products which are according to
needs of customers. This leads to high productivity as well as profitability.
Human Resource and Finance Department: Within H&M, HR is liable for recruitment
of competent and skilled employees who possess effective knowledge related with job they have
to carry out. Furthermore, it is necessary to render training to employees by which they can
acknowledge working environment. Apart from this, training is also rendered to employees on
the basis of latest techniques which prevails within market (Otoo and Drechsel, 2018). For this
HR department needs to have appropriate funds through which they can carry their operations.
Finance department provides them the funds which are necessary for HR department.
P4 Identification of positive and negative impact of macro environment on business operations.
Higher authorities of H&M needs to consider both macro as well as micro factors to carry
out their operations in appropriate manner. These factors create favourable impact on working of
organisation. These factors are illustrated below:
Political Factors: This factor illustrates interference of government within operations of
organisation. These interferences are in the form of policies, regulations and rules. There positive
and negative impact is shown below:
Positive: H&M is carrying out their operations in different countries which makes them
stable even after Brexit. By acknowledging these laws H&M can enhance their profitability as
well as productivity (Sood and Sukthankar, International Business Machines Corp, 2013).
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Negative: As powers are shifted among people it leads to alteration in rules, regulations
and policies. H&M need to formulate new policies according to those so that they can remain
sustain within market for longer time (Toedt, 2014).
Economic Factors: Economic conditions of country are influenced by this factor. This include
foreign exchange rates, inflation rate, interest rate.
Positive: Brexit has caused negative impact on currencies across Europe, as per H&M
their sales have been increased by 7% with respect to previous years. When currency was
changed into Krona (Swedish currency) then their profits have been grown to 10%. This means
that their sales have been improvised.
Negative: H&M is rendering their services in different countries for this they need to
have competitive pricing strategies. Swings in currency, interest and inflation rates leads to
difficulty in maintenance of pricing strategies.
Social Factors: These factors deals with trends within society as well as society. This comprises
of demographics such as salary, occupation, age and other elements.
Positive: H&M has appointed women to showcase their talent for this they have
appointed more number of women's in their offices. Along with International Labour
Organisation, they are providing hygienic working conditions as well as high salary to their
employees (Vasilcovschi and Georgescu, 2012).
Negative: Due to enhancement in trends, preferences and demands of customers are
altering. It is necessary that continuous interaction must occur with people but it takes time and
is important process.
Technological Factors: Technology is changing rapidly with respect to alterations in
requirements of customer. This means that they need to have latest technologies in their working
structure.
Positive: They have provided their customers with mobile applications. H&M have
provided their customer's with club functions in which they yield rewards to their customers
when they make purchase.
Negative: It becomes difficult of employees of H&M when technology is updated. This
will lead to decrease in productivity of organisation and management also need to give training
to them (Warkentin, Sugumaran and Sainsbury, 2012).
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P5 Conduct internal and external analysis of specific organisation to identify their strengths as
well as weaknesses.
SWOT analysis is effective tool through which internal environment of an organisation
can be analysed. It denotes strengths, weaknesses, opportunities and threats within H&M (in this
context). It is presented below:
Strengths Weaknesses
 One of the largest clothing retailer
with around 2300 stores.
 Delivery time is low and prices
offered by H&M are also affordable
by middle men.
 H&M invests a lot in maintenance and
capital of machines to produce clothes
for each target segment of society.
 They buy large volumes by which
overstocking is caused due to which
prices are lowered.
Opportunities Threats
 Emerging economies will support
expansion plans of H&M.
 Online shopping is at peak at present
time, they can opt for the same.
 Their new business (home ware) is not
able to gain more customers due to
which sales have been lowered.
 Competition is high as brands are
increasing like Burberry, Gucci and
Louis Vuitton.
P6 Explain strengths and weakness of external macro factors.
Macro factors are defined as external factors which creates significant impact on
functionalities and activities of entities. With reference to H&M, it is essential to analyse the
strengths as well as weaknesses of these factors which will assist them to make amendments in
their activities (Wetherly and Otter, 2014). Strengths and weaknesses of organisation are
associated with external macro factors as sometimes organisation is affected by outside factors.
These factors create either direct or indirect impact on decision making process of H&M. They
can be illustrated with the usage of external macro factor analysis. Macro factors are analysed
with the usage of PESTEL analysis such as political factors like government pressure, it leads to
decline in productivity of organisation. Social factors also creates a negative impact on business
such as CSR responsibilities of organisation, this implies that business is liable to social
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activities. Legal factors provides benefits to employees and by adhering to those laws
organisation can also gain profitability as it becomes easy for them to retain their employees. But
some laws are not healthy for organisation like employability work hours act as per this
employees can work for fixed hours which means that their productivity will be affected as after
completion of this time, they will not carry out their operations. Advancement in technology
provides enhanced benefits to H&M but it becomes costly for them in terms of implementation
and training but it acts as both strengths and weakness for an organisation.
CONCLUSION
From above report, it can be concluded that organisation is classified into different types,
they are private, public and voluntary. They varies from each other on the basis of size, scope
and legal structure. It depends on choices as well as preferences of individuals to select the type
of organisation where they are carrying out their operations. Furthermore, SWOT analysis has
been used by organisation to analyse their internal and PEST for external analysis.
REFERENCES
Books and Journals
Anıl, A. R. and Ficici, A., 2017. The Emerging Market Manufacturing Business Groups
(EMBGs) and the Interplay between Innovation in Environmental Sustainability,
Digitalization, Internationalization and Corporate Governance Structures: The Case of
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environment: Knowledge management and knowledge management technology.
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Routledge.
Charfeddine, O. B., 2016. Business environment-aware management of service-based business
processes (Doctoral dissertation, Université Paris-Saclay).
Hacioglu, U., Dincer, H. and Celik, I. E., 2012. Economic approach to conflict issue: Investment
in post-conflict situation for international business. International Journal of Business
Administration. 3(5). p.1.
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Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
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Hussin, N., and et. al., 2017. Strategic Information Use (SIU) for Strategy Formulation in
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metering of a provisioned application in a cloud computing environement. U.S. Patent
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